Immunotherapy for cancer has been in the news quite a bit in recent years, with several drugs making an impact on the worst cancers and giving some real hope for future advancement — not a small thing for a basic medical strategy that’s been tested and tweaked for 125 years now by folks following in the footsteps of William Coley, the “father of Immunotherapy,” who went against the tide in the 19th century with his belief that post-surgical infection actually helped with cancer survival because it provoked an aggressive immune response that fought both the cancer and the surgical infection.
And that’s still the basic strategy of immunotherapy today — use the body’s immune response to fight a disease — though there are lots of different flavors of immunotherapy, from cancer “vaccines” to personalized T-cell boosters to others stuff that I can’t understand or explain very well without taking a lot more of both of our time (we’ve got a number of doctors and scientists in the readership here, so feel free to jump in with comments below to correct any mistakes or elucidate).
It’s also caught the attention of spiel-meisters over the last several years — biotech in general is a great area for newsletters to promote themselves and tease their ideas, because many of the stories lend themselves to magical headlines about cures… and this is one of the few industries where a single discovery can turn a tiny research lab into a billion-dollar titan over a few years, so biotech traders are always primed for the “next big thing”.
Not that there’s anything wrong with that. Capital chases innovation, which creates more innovation. We just have to remember that most of the ideas don’t work.
So along those lines, it was actually somewhat refreshing to hear Dr. David Eifrig, in his pitch for Retirement Millionaire, talk up first a BIG pharma stock that’s investing heavily in immunotherapy and actually making money. That’s the one that he says will be the “‘Apple’ of cancer therapy” … and we’ll get a solution to that one for you. He also teases a few of the smaller and riskier names in an add-on report from Frank Curzio (another Stansberry editor) that originally was given to Curzio’s Small Stock Specialist subscribers — so we’ll see if we can name those Curzio immunotherapy ideas for you, too.
First, the “‘Apple of cancer therapy” — what are our clues?
“In Retirement Millionaire, I told my readers to invest in a large pharmaceutical company that’s leading the way in immunotherapy. It’s a low-risk way to capture some nice financial gains as the immunotherapy tidal wave hits in the next few years.
“This company has put all its chips on the Living Cure – selling off other parts of the business to direct more research and acquisition dollars to this breakthrough trend.
“It owns the first – and by far, the largest – commercially available immunotherapy drug, with sales expected to reach $2 billion a year by 2018.
“A study released last September showed it is extending the lives of melanoma patients by up to 10 years. And the market for this drug could explode as the FDA approves it for other cancer types.
“This company also owns probably the single most promising cancer drug candidate that’s not yet on the market.”
Not bad, right? Do we get any more clues? He does tell us a bit more about this “not yet on the market” candidate:
“Cancer cells hide from the immune system by activating a receptor on immune cells that cause them to self-destruct.
“This cellular suicide is healthy. It’s part of the body’s natural process of regeneration. But cancer is cleverly exploiting it… using it to kill off every immune cell it encounters….
“Its promising drug candidate does something incredible. It takes away the ‘cloak’ some cancers use to hide from the immune system.
“It was just approved in Japan. And it could get the green light in the United States as early as 2015. (A similar drug was just approved by the FDA – and will carry a $150,000-a-year price tag.)
“And that’s only the beginning. This company has four more cancer immunotherapy drugs in its product pipeline. One of them just received the ‘Breakthrough Therapy Designation’ from the FDA….
“It’s way ahead of its peers when it comes to the Living Cure, and it’s spending plenty of money to make sure it stays that way. But it’s also an international giant, with a big portfolio of popular drugs – and plenty of cash.
“It’s going to be the “Apple” of cancer therapy in the next 20 years.”
So… hoodat? This is, sez the Mighty, Mighty Thinkolator, the gigantic Bristol-Myers Squibb (BMY). BMY is small compared to Novartis (NVS), Pfizer (PFE) or Merck (MRK) but quite huge compared to most of the rest of the investable universe, with a market cap of about $80 billion (comparable to AstraZeneca (AZN), if you’re curious). It’s also among the most expensive pharma stocks based on most conventional metrics (PE ratio, price/book, EV/EBITDA, etc.)… though it’s also got substantially higher growth expectations than many of the biggies.
Those growth expectations come in part because of their cancer immunotherapy drugs, though they have a couple dozen marketed drugs addressing lots of different diseases — the blockbuster cited by Eifrig with the potential of $2 billion in peak sales in 2018 is Yervoy, and they have five other “immuno-oncology” compounds in the pipeline. The other one hinted at by Eifrig is the PD-1 inhibitor Opdivo, which was recently approved in Japan for unresectable (not removable by surgery) melanoma and will probably end up being the second such drug to be approved in the US (Merck’s Keytruda was just approved by the FDA last month, also for melanoma — don’t know if it will go anywhere, but BMY has also sued MRK over the PD-1 patent owned by their Japanese partner Ono).
Will it pay off? I dunno. BMY is obviously a large and strong company, it does indeed have plenty of cash (about $7 billion) and is quite profitable, but it’s also at a pretty high valuation compared to most of the rest of big pharma — and the earnings growth from their new drugs is not really hitting next year. According to analysts, their earnings are projected as being flat in 2015 and then growing in the 20% range annually after that — which means BMY is currently trading at 20X 2017 earnings. That makes me a little nervous, but that could be because analysts are lowballing the potential of these new therapies or simply that I don’t know much about BMY’s business or prospects, so you can discuss it amongst yourselves and make that call on your own. They’ve also been a decent dividend grower over the last five years, so you would earn about a 2.7% yield at this point and they should be able to grow that dividend faster than the rate of inflation.
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How about those other immunotherapy names from Frank Curzio? Let’s see if we can get some quick answers for you:
“Immunotherapy Stocks that Could TRIPLE Your Money – and Radically Change How We Treat Cancer.
“Inside, they identify four stocks you can invest in now and potentially make hundreds of percent gains over the next few years as immunotherapy becomes the most important cancer treatment in the world.
“I doubt that 1 in 100 so-called ‘experts’ on Wall Street have done as much work as Frank and Mr. X digging into the science behind cancer immunotherapy developments… weeding out the ‘pretenders’… and picking the companies with some of the most astounding innovations.
“These are the small firms that are helping change cancer treatment right now. And any one of them could triple your money in the next few years.”
OK, so these are the little guys. Any clues?
“One of these companies, for example, is developing therapeutic vaccines for cervical cancer, head and neck cancers, and other cancers.
“Its technology uses a bacterium known for causing hard-to-kill infections… but in a harmless, form.
“The thing is, this harmless bacterium still has a lasting effect stimulating the immune system. And it’s been modified to spit out proteins associated with specific cancers.
“The immune system quickly learns to recognize and kill those cancers.”
This one is almost certainly Advaxis (ADXS), which is developing cancer “vaccines” using the listeria bacterium. I know nothing else about this one, but it’s tiny, with a market cap of about $60 million — discuss amongst yourselves. They and the larger immunotherapy/vaccine company Inovio (INO) are both focusing on cervical cancer first, both still in fairly early stage clinical trials, and also both talking about the possible efficacy of combination therapy with the PD-1 inhibitors (like from BMY and MRK). Their investor presentation is here if you’d like to get more of an overview of the business.
More from Curzio?
“Another company (founded by a Nobel Prize winner) is actually developing an individualized immunotherapy platform. The company takes genetic information from each patient’s tumor, and uses it to train the immune system to seek out and destroy the cancer.
“In Phase 2 trials, this approach doubled the survival of kidney cancer patients. The results were so impressive that the FDA actually reduced the final-stage requirements to bring the drug to market.”
This is Argos Therapeutics (ARGS), which is focused on personalized immunotherapy for cancers and infectious diseases (currently renal cell carcinoma and HIV are the two most advanced programs in clinical trials). From a scan of their website it appears that part of their goal is to simplify the process of manufacturing personalized compounds, which I imagine is a priority after the difficulties Dendreon had with building up their process. Don’t know much else about Argos, it’s got a market cap of roughly $200 million and their investor presentation is here.
Another? Of course!
“And one remarkable company owns proprietary technologies for building antibodies… those Y-shaped cell markers on immune cells that carry the instructions for which bad cells to hunt and latch onto.
“Antibody-based drugs are a $50 billion market. Top-sellers include AbbVie’s Humira ($10 billion per year), and Roche’s Avastin ($6 billion a year). But these drugs aren’t all immunotherapies. And even those pharmaceutical titans don’t have the technology to manipulate antibodies owned by this small company.
“This firm expects to have six proprietary drugs in clinical trials by the end of 2015. Mr. X says it owns ‘one of the deepest – and replenish-able – pipelines in biotech.’ Needless to say, he considers it ‘one of the best pure-play immunotherapy investments today.'”
This one is a company I’ve never heard of before, Macrogenics (MGNX), and it’s substantially larger with a $500 million market cap — it went public almost exactly a year ago in a very well-received IPO (it priced at $16 and shot up to $25 the first day, then got well into the $30s earlier this year), though the stock has been pretty flat at right around $20 a share for the last six months. Don’t know why, or what the timing is for their programs, but they are a monoclonal antibody firm and they match the teaser clues precisely — you can see their corporate fact sheet if you’d like more of the basic selling points they offer.
And… that’s all we get, so there’s one “big pharma” immuno-oncology play touted by Dr. Eifrig, and three smaller immunotherapy players teased as being in Frank Curzio’s special report. Any of them sound interesting to you? Have other immunotherapy stocks that you think are better? Let us know with a comment below.