by Travis Johnson, Stock Gumshoe | October 29, 2014 12:45 pm
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[1] 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[2], in his pitch for Retirement Millionaire[3], 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[4] (another Stansberry editor) that originally was given to Curzio’s Small Stock Specialist[5] 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[6] 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[7] 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[8]. 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)[9]. BMY is small compared to Novartis (NVS)[10], Pfizer (PFE)[11] or Merck (MRK)[12] 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)[13], 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[14]) 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[15] 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.
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)[16], 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[17] 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)[18], which is focused on personalized immunotherapy for cancers and infectious diseases (currently renal cell carcinoma and HIV[19] 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.[20]
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[21] (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 [22]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.
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Oh my gosh! Bristol Myers which was my late mother’s fave. I inherited her shares and of course kept them out of respect for my Mater. Mom was very keen on cancer therapy because her favorite sister (she had 4 and no brothers) died young of breast cancer and my dad (her only husband) died of colo-rectal cancer at age 80. But this is a buy-and-hold share likely to reassure investors that the Stanberry fellows are solid and serious. Not sure if the same applies to the others of course.
Sure, love to tell the folks about Peregrine ticker PPHM. http://www.peregrineinc.com/
You won’t hear it touted by any stock guru because it is the real deal.
Members and those on the hot list will have to do a little DD on their own to fully appreciate this Co. But let me give all a tad of general info re: PPHM and a point to star
begin.
Peregrine Pharmaceuticals, Inc., a biopharmaceutical company, is engaged in the research and development of novel monoclonal antibodies for the treatment and diagnosis of cancer in the United States. Its lead immunotherapy candidate, bavituximab, is in Phase III development for the treatment of second-line non-small cell lung cancer along with various investigator-sponsored trials evaluating other treatment combinations and additional oncology indications. The company is also evaluating its lead molecular imaging agent, 124I-PGN650, in an exploratory clinical trial for the imaging of various solid tumor types. In addition, it provides contract manufacturing services ranging from cell line development to commercial current good manufacturing practice biomanufacturing to third-party clients. The company has various license agreements with the University of Texas Southwestern Medical Center at Dallas; Genentech, Inc.; Avanir Pharmaceuticals, Inc.; Lonza Biologics; Affitech A/S; and Merck KGaA. Peregrine Pharmaceuticals, Inc. was founded in 1981 and is headquartered in Tustin, California.
GLTA.
Argos Therapeutics ticker is ARGS.
Web site http://ir.argostherapeutics.com/
Oops, did I typo a ticker again? Sorry, will fix.
Hmmm 20 X earnings isn’t so bad.. I see companies jumping off the charts will evaluations of 50 and more..
True, there are always expensive companies, but that’s 20X estimated earnings for 2017, 30 months into the future. BMY trades at 33X trailing earnings, 30X next year’s estimated earnings. May still be justifiable, but someone buying it at that price should have a good understanding of why it should grow dramatically faster than most of its big pharma peers — maybe it’s Yervoy, maybe something else, I don’t know it well enough to guess, but there’s some story driving the stock. $80 billion companies that aren’t expected to grow year over year don’t trade for 30X earnings unless someone expects something dramatically better than that going out a little further in time… or unless the market is just ebullient, which it isn’t for GlaxoSmithKline (GSK) or Merck (MRK), for example, but perhaps is for Astrazeneca (AZN) and BMY.
My main point is that it’s important to dig into these to understand why they’re getting a premium valuation, and if you think it’s worth the premium and have confidence in those future growth drivers. Looking at it superficially, it worries me that BMY is getting a pricier valuation (based on anticipated or trailing earnings) than Biogen Idec (BIIB), which is growing much faster. Maybe it’s just some combination of widespread approval of their strategy and excitement about their drugs combined with a fondness for good and growing dividends that give big pharma a “flight to safety” profile (which BIIB and GILD and the other growth darlings in big biotech generally don’t pay, though biotech grandaddy Amgen does… and is also cheaper, even after a huge jump this month, and growing faster than BMY), but BMY stands out as being substantially more expensive than many of their similarly huge competitors and I think it behooves BMY investors to think about why that is. That doesn’t single out just BMY, there are a huge variety of valuations in big pharma, with $100 billion companies that look both very cheap and very expensive based on the financials and forecasts.
That’s part of the reason I’ve pulled back and let other people make my investments for me in big pharma, despite my confidence that the sector will generally be a good long-term and noncyclical area to allocate some funds to. I just don’t have a good handle on the ebb and flow of products and profits and I suspect it would take more time than it’s worth for me to build that understanding. Personally, I like the low-cost and historically very well (and pretty conservatively) managed Vanguard Health Care mutual fund, but the big Pharma ETFs are certainly similar in performance over time and there are lots of people that are better at pharma than I am.
With a lifelong interest in the biological sciences, I can usually understand what a developing drug is supposed to be doing and how it is supposed to be doing it. That said, it is difficult for me to translate the science into business prospects, so I, too, give way to a fund rather than spend every waking hour digging out information. Somewhat weighted toward the risky but with over 150 holdings to dampen out individual disasters, the T. Rowe Price Health Sciences Fund (PRHSX), which holds Gilead, PUMA, and quite a few other biotechnology companies, has been doing well for me over recent years. I’m not qualified to make any recommendations, but one might check it out if looking for a large health sciences fund with a good measure of biotech.
Exactly a year after Teva fired Jeremy Levin as CEO the axe struck Chris Viehbacher at Sanofi. Both CEOs at these country drug champions wanted to cut manning levels, a nono is lefty countries like Israel and France. And both are foreigners which made them more vulnerable. Viehbacher is a German Canadian and Levin a South African Briton.
Since some army officer CPA took over at Teva the share having first fallen has done well and today TEVA beat with its Q3 earnings.
So the question is: will SNY do as well? Do Hallowe’en firings lead to stock recovery?
I have no idea. But I would rather invesst myself than leave it to mutual funds.
Moreover Travis is omitting the fact that he runs not one but two columns from supposed medical experts on this site, and presumably he invests in their ideas as well as with Vanguard.
Stay well and healthy
Presumptions are not always correct. I do own a small position in one biotech stock, which is down quite a bit, but generally have decided that I don’t like to trade in that sector and I’m not
Good at it. Our two contributing columnists in health/medicine are Michael Jorrin, who doesn’t really write about stocks, and Dr.KSS, who I know you’ve had plenty of pissing matches with that I much prefer to ignore — I do hold some shares of Benitec that I bought over the Winter when Dr. KSS and several readers discussed it early on, but don’t routinely invest in the stocks he (or anyone else) writes about. None of our columnists are here to make stock picks, and we don’t talk them up as stock pickers, they’re here to share interesting ideas and perspectives.
Ms. Lewis,
Being an avid investor of TEVA before Jeremy and now w/Mr. Vigodman, I’d say the stock price speaks for itself. The stock languished under Jeremy Levin in the low $30’s for too long. Your reference to the “lefty” I find unnecessary but I just like to invest in solid biotech’s and TEVA was very clearly capable of more. Enter Vigodman who had a strong reputation that many hoped he would fail but I am enjoying my near $70/PPS w/a nice yield to boot & see no reason TEVA won’t pass $100. I always wondered why this incredible company didn’t yield the results comparable to much smaller operations & now we all know, Mr. Vigodman is very good at his job & TEVA, I hope will better reward those investors that stood by while the going was tough.
Carl May: I highly suggest your join us in the “Irregulars” group. You will find yourself right at home with your background and I am fairly confident you will enjoy yourself as well as find it very educational, even with your bioscience background! Not your typical finance blog site. It’s the best thing going for bio stocks. Especially at $49 a year. Hope to see at Dr KSS latest thread…. http://www.stockgumshoe.com/2014/10/microblog-ebola-to-parse-perchance-to-parlay/#comment-2881074
Travis will hook you right up!
good day mr. travis,i usually dont post but only read your articles.theres one alex koyfman,i am not sure if i got the name correct,and he is touting about a small biotech company that will replace the syringe,the dreaded injection.the needle obsolete.his newsletter,penny stock millionaire,offer price at the moment,299 per year and he is telling it will go up.maybe you could help out here and get us irregulars the ticker symbol.sorry guys this request is unrelated to the above article and i seldom log in into this section.have a great day.thanks
For diabetes? I think you mean this one: http://www.stockgumshoe.com/reviews/biotech-breakthrough-report/triple-digit-profits-from-the-diabetic-patch-company-going-to-1-billion/
$NAVB, Navidea Biopharmaceuticals may be a break through candidate. It’s FDA, approved targeting platform is starting to break barriers and unlock potentials in the imuno oncology space. It will not be long before it gets on the radar. Definitely a top candidate in my opinion.