With hundreds of billions at stake, it’s not surprising that there is often a tulipomania effect on companies that report significant scientific advances in the treatment of cancer.  Many investors recall the meteoric rise and subsequent plummet of EntreMed, Inc.’s (ENMD) stock following reports of the company’s breakthrough in disrupting the growth of blood vessels [angiogenesis] to kill cancer in mice back in 1998.

As spring is around the corner, it seemed an appropriate time to examine Wall Street’s latest tulip obsession, which relates to the potential of targeting cancer stem cells [CSCs] as a novel approach to eradicating the disease.  Stem cells are unique due to their ability to self-renew and/or mature into another type of cell with a more specialized function, such as a muscle cell, a red blood cell, or a brain cell[3].  Accordingly, stem cells hold great promise to potentially replace or repair damaged cells or tissues for a wide range of diseases.  Genetic mutations or other factors may give rise to CSCs that possess the same capacity for self-renewal and can mature into cancer cells that comprise the tumor.

For example, normal hematopoietic [blood-forming] stem cells have the potential for self-renewal, a property that enables life-long blood production.  These particular stem cells give rise to all of the types of red and white blood cells as well as some other types of cells[4].  Underscoring the importance of hematopoietic stem cells, red blood cells only have a lifespan of approximately 120 days and therefore must be completely replaced every four months[5].

Genetic mutations or other factors, however, may cause hematopoietic stem cells or their progeny to go awry.  In 1994, researchers identified a rare population of stem-like cells in the blood of patients with acute myeloid leukemia [AML][6].  These unique cells represented less than 1% of the total AML cell population found in the blood.  When transplanted into mice with impaired immune systems, these rare cells could recapitulate the entire cellular diversity of human AML in the animals.  This was the first time that researchers isolated CSCs.

Traditional cancer treatments, such as chemotherapy and radiation, have limited selectivity.  They exert their killing effect on rapidly dividing cells and do not discriminate between normal and cancerous targets.  In view of the fact that stem cells as a class tend to be relatively dormant[7], CSCs are unlikely to be destroyed by such therapeutic approaches.  In other words, the “seeds” of the tumor may remain intact – able to grow and spread.  Eradicating CSCs in addition to other cancerous cells may hold great promise for the treatment of cancer.

Enthusiasm for targeting CSC’s was recently bolstered by the March 1^st announcement that Dainippon Sumitomo Pharma Co., Ltd. would acquire privately-held Boston Biomedical, Inc. for up to $2.63 billion.  The deal included $200 million upfront, up to $540 million in development milestone payments, and up to $1.89 billion in sales milestone payments.  Boston Biomedical’s lead program for inhibiting CSCs in addition to other cancer cells, BBI608, is entering Phase 3 trials in patients with colorectal cancer.

In addition to Boston Biomedical and other programs currently in development by large pharmaceutical companies, the following is a partial list of emerging public companies with programs also targeting the destruction of CSCs for the treatment of cancer:

Geron Corporation (GERN)

After announcing that the company would discontinue development of its human embryonic stem cell programs, Geron is focusing on novel cancer programs, including lead program Imetelstat [GRN163L], a telomerase inhibitor that has been shown to effectively inhibit CSCs from a broad range of tumors.  Imetelstat is in Phase 2 trials for non-small cell lung cancer, metastatic breast cancer, essential thrombocythemia and multiple myeloma.

ImmunoCellular Therapeutics Ltd. (IMUC.OB)

ImmunoCellular is developing active immunotherapies that target not only regular tumor cells, but also CSCs.  The company’s most advanced product candidate, ICT-107, is a dendritic cell-based vaccine in Phase 2 development for the treatment of glioblastoma multiforme [GBM].  Underscoring interest in therapeutic approaches targeting CSCs, shares of ImmunoCellular are up more than 67% since the start of the year.

Verastem, Inc. (VSTM)

While unusual for a biotechnology company to pursue an initial public offering [IPO] without having a product candidate in human clinical trials, Verastem successfully priced its IPO at $10 in January 2012 and currently has a market capitalization greater than $236 million.  According to the prospectus, Verastem has identified a pipeline of small molecule compounds with the potential to target CSCs.  The company’s most advanced product candidates are VS-507, VS-4718 and VS-5095.  In late 2012, Verastem expect to file an investigational new drug application [IND] with the U.S. Food and Drug Administration [FDA] to initiate a Phase 1 clinical trial of VS-507.

Private companies also working in the area of CSCs include:

Eclipse Therapeutics, Inc.

Eclipse has developed a CSC discovery platform to identify antibody therapeutics that inhibit the growth of cancer stem cells.  Eclipse’s lead program is ET-101, a novel therapeutic antibody designed to target CSCs.  ET-101 is expected to advance towards human clinical trials by 2013.

Formula Pharmaceuticals

Formula’s lead product candidate, FPI-01, is an active immunotherapy in Phase 2 clinical development for the maintenance of first-remission in AML and other cancers that originated at Memorial-Sloan Kettering Cancer Center.  The vaccine targets Wilms Tumor 1 [WT1], an antigen ranked first in a list of 75 cancer vaccine target antigens by the National Cancer Institute [NCI] prioritization project.  Stem cell expression was among the criteria used to rank the antigens.

KaloBios Pharmaceuticals, Inc.

KaloBios has initiated a Phase 1 dose-escalating clinical trial for KB004, its first-in-class Humaneered™ monoclonal antibody, in EphA3-expressing hematologic malignancies, including chronic myelogenous leukemia, AML, acute lymphocytic leukemia, and myelodysplastic syndromes, who are refractory to, have failed, or have not received standard-of-care treatment. EphA3 is an onco-fetal protein that is expressed in a range of cancers, including hematologic malignancies and possibly on leukemic stem cells. Studies have shown that expression of EphA3, a receptor tyrosine kinase, is associated with B, T and myeloid neoplasms and certain solid tumors. EphA3 appears to be upregulated on tumor cells, including stem cells, tumor stromal cells, and tumor neovasculature. A biomarker assay is being developed to identify EphA3 expression.

OncoMed Pharmaceuticals

OncoMed’s lead CSC therapeutic, OMP-21M18, is a monoclonal antibody designed to block Delta-like ligand 4 [DLL4], an activator of Notch signaling, which is a pathway known to be important in CSCs and cancer.  OMP-21M18 has demonstrated single-agent activity in a Phase 1 study in heavily-pretreated solid tumor patients, and is currently advancing into combination studies with standard chemotherapy in advanced non-small cell lung and pancreatic cancers.

Stemica LLC

Stemica was founded in 2011 to focus on late-breaking cancer biology discoveries pinpointing cancer stem cells as the reason for not being able to currently cure cancer.  Stemica is currently developing novel molecules that inhibit these “cancer sleeper cells” in hopes of providing long-term survival for cancer patients.

Stemline Therapeutics

Lead programs SL-401, which targets IL-3R, and SL-701, which targets multiple defined epitopes, are in Phase 1 and Phase 2 development for the treatment of AML and glioma, respectively.  According to the company’s website, Stemline also possesses a landmark portfolio of intellectual property that includes the earliest filings in the CSC field covering CSC-directed therapeutics, diagnostics, and drug discovery.

In conclusion, targeting CSCs may hold great promise for the treatment of cancer following their initial discovery in 1994.  Enthusiasm for the approach has been bolstered by the recent $2.3 billion acquisition of Boston Biomedical, which may prove that targeting CSCs is more than a passing phase.  Using the breakthrough with anti-angiogenesis approaches to treat cancer as a model, however, it may be too early to determine which programs will ultimately succeed [e.g., Avastin®, bevacizumab] versus those that fail [e.g., endostatin and angiostatin].

References

* MD Becker Partners reporting live from the JP Morgan Healthcare Conference

This week, nearly 6,500 registrants gathered in San Francisco, California for the JP Morgan Healthcare Conference to hear 25-minute presentations from 338 life science companies.  For industry executives and investors, the annual event serves as a good barometer for the rest of the year.

We roamed the familiar halls of the Westin St. Francis Hotel to assess the mood among participants and also monitored online media commentaries throughout the event.  In general, there was a flurry of activity, the plane flights and networking receptions were crowded as usual, and several industry observers “Tweeted” a sense of optimism for 2010.  However, we sought to construct a less subjective assessment by analyzing year-over-year statistics from the conference.

Accordingly, we extensively reviewed company press releases issued during the JP Morgan Healthcare Conference in both 2009 and 2010, with a particular focus on identifying the number of merger & acquisitions, licensing & partnering transactions, and financing deals announced each year during the four day event.

Merger and Acquisitions

In contrast to the absence of any significant M&A deals announced during the JP Morgan Healthcare Conference in 2010, several large M&A transactions with an aggregate value of $702 million were disclosed during the first two days of the event in 2009 [January 12-15, 2009].  The largest deal went to Cephalon, Inc. (CEPH), which announced an agreement providing the company with an option to purchase all outstanding capital stock of Ception Therapeutics, Inc., a privately held biopharmaceutical company.  Under the terms of the option agreement, Cephalon paid Ception $100 million upfront for the option.  If Cephalon exercises its option, the company will purchase all of the outstanding capital stock of Ception for $250 million along with additional payments related to clinical and regulatory milestones.  Other transactions announced that year included:

• Medtronic, Inc.’s (MDT) acquisition of privately held Ablation Frontiers, Inc. for an initial payment of $225 million plus potential additional payments contingent upon achievement of certain clinical milestones
• The Medicines Company’s (MDCO) merger agreement with Targanta Therapeutics Corporation for $42 million in cash and additional regulatory and commercial milestone payments
• NuVasive, Inc.’s (NUVA) option to acquire Progentix Orthobiology BV, a Netherlands based company focused on developing novel orthobiologics, consisting of an upfront investment of $15 million along with the obligation to purchase the remaining equity of Progentix for $45 million upon accomplishment of certain development milestones [with additional potential payments of up to $25 million upon the achievement of additional milestones and based upon NuVasive's sales success]

Licensing and Partnering

Kicking off the JP Morgan Healthcare Conference in 2010, privately held KaloBios Pharmaceuticals, Inc. announced a $290 million agreement with Sanofi Pasteur, the vaccines division of the sanofi-aventis Group (SNY), for the development and commercialization of KB001, an investigational new biologic for the treatment or prevention of Pseudomonas aeruginosa [Pa] infections.  KaloBios, which is developing first-in-class human antibody therapeutics that offer advantages over other methods of human antibody creation in terms of immunogenicity, potency, and manufacturing yields, will receive an upfront payment of $35 million, plus development, regulatory and commercial milestones for a potential further $255 million, as well as royalties on eventual product sales.

While other licensing and partnering transactions were announced during the JP Morgan Healthcare Conference in 2010, they were substantially smaller or specific financial terms were not disclosed.  These include:

• Proteus Biomedical Inc. announced an exclusive worldwide license and collaboration agreement with Novartis AG (NVS) to develop and commercialize pharmaceutical products that incorporate Proteus’ novel sensor-based technologies in the field of organ transplantation along with certain option rights in cardiovascular and oncology product applications.  Under the terms of the agreement, Novartis will make upfront cash and equity investments in Proteus totaling $24 million and Proteus will also receive royalties on worldwide net sales of any Novartis products incorporating its sensor-based technology.
• Trillium Therapeutics, Inc., a biopharmaceutical company developing innovative immune-based biologics, announced that it has entered into a definitive license agreement with Biogen Idec, Inc. (BIIB), granting the latter exclusive worldwide rights to one of Trillium’s development programs.  Under the terms of the agreement, Trillium will receive an upfront payment and is eligible to receive milestone payments based on achievements of specified clinical, regulatory and commercial accomplishments.  Trillium will also receive royalties on global product sales.  Biogen Idec will be solely responsible for clinical development, regulatory approvals, manufacturing and commercialization.
• MedGenesis Therapeutix Inc., a biopharmaceutical company developing and commercializing innovative treatments for patients with serious central nervous system [CNS] diseases, announced an agreement with Amgen, Inc. (AMGN) that provides MedGenesis with an exclusive, worldwide license for glial cell line-derived neurotrophic factor [GDNF] protein in CNS and non-CNS indications.  As part of the license agreement, Amgen now holds a small equity stake in MedGenesis.  In parallel, Biovail Corporation (BVF) and MedGenesis concluded an agreement to collaborate on the development of GDNF in Parkinson’s disease and potentially other CNS indications.  GDNF is a naturally-occurring growth factor capable of protecting and promoting the survival of dopamine producing nerve cells.
• AstraZeneca Plc (AZN) and CrystalGenomics announced a research collaboration to discover and develop a novel anti-infective for use as a potential antibacterial agent.  Under the terms of this agreement, Korea-based CrystalGenomics will receive research funding from AstraZeneca for two years.  CrystalGenomics will also be eligible to receive future milestones and royalty payments associated with development and commercialisation of a drug candidate.
• AnaptysBio, Inc., a privately-held therapeutic antibody platform and product company, announced it has signed an agreement with Roche (RHHBY) for the development of novel antibody therapeutics.  Under the terms of the agreement, AnaptysBio will be responsible for generating novel antibodies using its proprietary somatic hypermutation platform and Roche will receive a worldwide license to develop and commercialize antibodies optimized by AnaptysBio.  In addition to a signing fee paid by Roche, AnaptysBio will be eligible to receive milestone payments and royalties upon product sales.

The six transactions announced during the JP Morgan Healthcare Conference in 2010 with reported financial terms totaling $314 million pale in comparison to the ten deals reported at the meeting during 2009 worth more than $2.4 billion in aggregate value.  These included a $1.1 billion deal between ZymoGenetics, Inc. (ZGEN) and Bristol-Myers Squibb Company (BMY), a $500 million deal between Peptimmune, Inc. and Novartis AG, a $396 million deal between Micromet, Inc. (MITI) and Bayer AG (BAYZF.PK), and a $200 million deal between FORMA Therapeutics the Novartis Option Fund to develop inhibitors for an undisclosed protein-protein interaction target in the field of oncology, among others.

Financing

The quantity and aggregate dollar value of public and private financing transactions announced during the JP Morgan Healthcare Conference were essentially flat in 2010 compared with the prior year as reflected in the table below.

Outlook

At the start of 2009, we provided a positive outlook for biotechnology, citing the sector’s defensive characteristics, favorable technical aspects, and improving fundamentals, such as the number of new product approvals, products in clinical trials and the brisk pace of industry consolidation and licensing transactions.  The latter was quickly reinforced by M&A transactions with an aggregate value of $702 million and licensing & partnering deals worth more than $2.4 billion in aggregate value announced January 12-15, 2009, during the JP Morgan Healthcare Conference. 

While we believe that a positive outlook for 2010 is once again warranted, and the first two weeks of the year don’t necessary indicate a trend, hopefully the paucity of M&A activity coupled with the decline in both the quantity and value of licensing & partnering transactions announced during the JP Morgan Healthcare Conference in 2010 is simply the pause that refreshes and the action improves throughout the year.