Table 1. Old Versus New Paradigm in Biotechnology Collaborations

In addition, the negative considerations from large pharmaceutical partnerships are often overlooked, which begs the question: is it better to partner, or go alone?  To help address the topic, this article focuses on the oncology segment of the life science industry – one of the most popular therapeutic areas for partnering and merger & acquisition [M&A] activity.

Luck Vs Skill

Prior to addressing the question of whether or not a small biotechnology company should collaborate with a larger pharmaceutical organization, we solicited investor views regarding the process of corporate partnering.  Some of the feedback indicates there is a lack of transparency.

“As an investor, partnering activity is the most opaque part of our companies’ business,” said David Sable, portfolio manager, Special Situations Life Sciences Fund.  “Every small biotech CEO tries to create an image of limitless interest on the part of big pharma in each of the company’s projects, a dynamic that will inevitably result in a value-maximizing transaction.  Many management teams deliver on these promises; in retrospect, however, at least as many seem to have parked their molecule in the front yard with a ‘For Sale’ sign and hoped for the best.  While we can validate the importance of a molecular pathway, double-check market size predictions, run our own statistics and reality-check pricing assumptions, we have no way to identify talent in business development.”

Left at the Altar

One of the most important negative considerations for biotechnology companies looking to partner is that large pharmaceutical companies often shift resources and the focus of their pipeline development candidates over time, which may put their collaborators at risk.  Although sometimes done for strategic reasons rather than due to new clinical insight, the sudden departure of a large pharmaceutical partner can reflect poorly on an otherwise promising product candidate.

For example, Celldex Therapeutics, Inc. (CLDX) announced in September 2010 that the company would regain full worldwide rights to develop and commercialize rindopepimut [CDX-110] from Pfizer, Inc. (PFE).  The companies had entered into a global development and commercialization agreement in April 2008 for rindopepimut, an experimental therapeutic cancer vaccine that targets the tumor-specific molecule epidermal growth factor receptor variant III in patients with glioblastoma multiforme.  Pfizer informed Celldex that the rindopepimut program was no longer a strategic priority of Pfizer and terminated the agreement despite the fact that the product candidate met or exceeded all pre-determined safety and efficacy objectives across three clinical studies.  Shares of Celldex, which traded as high as $9.49 during 2010, reached a 52-week low of $2.91 on the news.

More recently, Transgene (TNG.PA) announced on February 22, 2011, that Roche Holding (ROG.VX) terminated their 2007 agreement under which Roche had been granted exclusive global development and commercialization rights to TG4001/RG3484, a therapeutic vaccine candidate currently in a 200 patient Phase IIb study to treat notably high grade cervical intraepithelial neoplasia [CIN] lesions [CIN2/3] caused by human papilloma virus [HPV] infection.  While Transgene stated that Roche’s decision to terminate the license agreement was based on strategic reasons and wasn’t data driven, the company’s shares reached a 52-week low on the news.

Hopes and Dreams Vs Revenue Streams

Another potential negative is that by partnering a product candidate, the “hope and dream” multiple of a potential partnership or acquisition may be replaced by the realities of a “revenue stream,” such as milestone payments and future product royalties.  By discounting the economics of a partnership deal for certain risk factors, investors can assign a net present value to the company that may be quite different than the speculative valuation in the absence of a partnership.  Representing a unique opportunity to review the effect of partnering on market capitalization, three separate deals were announced for late-stage product candidates aimed at treating prostate cancer during 2009, while two companies have remained independent [see Table 2].

As the first transaction announced that year, Johnson & Johnson’s (JNJ) acquisition of Cougar Biotechnology for nearly $1 billion in cash in May 2009 initially looked attractive.  However, following approval of Provenge® [sipuleucel-T] in April 2010, the market capitalization of Dendreon Corporation (DNDN) exceeded $7 billion, which demonstrates the potential benefit of remaining independent or retaining worldwide rights.  In contrast, more than a year after partnering their late-stage programs, the market valuations of two other companies, Medivation, Inc. (MDVN) and OncoGenex Pharmaceuticals, Inc. (OGXI), are $605 million and $150 million, respectively.

Using Dendreon’s valuation as an example, it isn’t surprising that Bavarian Nordic A/S (BAVA.CO) announced earlier today that the company is reviewing alternate options to maximize value for shareholders and fund the pivotal Phase 3 trial of its “off-the-shelf” therapeutic vaccine product candidate Prostvac® on its own.  Keeping its options open, however, Bavarian Nordic is exploring opportunities to pursue independent development in parallel with continuing partnership discussions.

Table 2. Late-stage Prostate Cancer Programs

A Means to an End

The biggest argument against partnering is the fact that some of the most successful biotechnology companies to date are those that have commercialized their own products, such as Amgen, Inc. (AMGN), Celgene Corporation (CELG), and several others.

“Celgene is a unique example of success by taking a slightly different approach,” said Charles Duncan, managing director and senior biotech analyst at JMP Securities LLC.  “The company built a pipeline and worldwide infrastructure for Revlimid® [lenalidomide] that was funded and supported through its early sales of Thalomid® [thalidomide].”

“We viewed partnering our lead product as a critical strategic decision that would shape the company and significantly impact our vision,” said Sol J. Barer, Ph.D., Executive Chairman of Celgene Corporation.  “We felt that our pursuing the development of Revlimid worldwide alone was the best option consistent with our vision a of becoming a major global biopharmaceutical company over the next few years.  We clearly recognized the short versus long term trade-offs in the decision; nevertheless, our belief in the product and in our ability to manage the product globally was important in our decision not to partner.”

Some companies have also partnered a specific program in certain geographies or disease settings and use the validation and resulting economics to help advance their own pipeline – sometimes even in competitive areas.  For example, Amgen originally developed Epogen® [epoetin alfa], which the company commercialized as a treatment for anemia in dialysis patients and partnered non-dialysis rights with Johnson & Johnson [sold as Procrit®].  Amgen later developed and commercialized Aranesp® [darbepoetin alfa], an erythropoiesis stimulating protein with a longer half-life and increased biologic activity that was not partnered.

Similarly, Oncothyreon, Inc. (ONTY) has granted a license to Merck KGaA of Darmstadt, Germany for the clinical development, manufacturing, and marketing of Stimuvax®.  Oncothyreon is eligible for cash payments based on the achievement of certain process transfer events, regulatory submissions in first and second cancer indications, regulatory approval for first and second cancer indications, and for sales milestones.  Oncothyreon will also receive a royalty based on net sales.  If successful in the clinic, Stimuvax could also help validate another Oncothyreon product candidate, ONT-10, which is a completely synthetic MUC1-based liposomal glycolipopeptide cancer vaccine that could compete with Stimuvax.  Merck KGaA has a right of first negotiation with respect to ONT-10.

Geographically Undesirable

Although selective encumbered assets can still attract buyers, partnering a product candidate in certain geographies with one large pharmaceutical company may preclude an acquisition by another that is only interested in worldwide rights or control of key markets.  On the other hand, some partnerships can later lead to an acquisition – a strategy employed by Bristol-Myers Squibb Company (BMY) on more than one occasion.

For example, Bristol-Myers Squibb and Medarex, Inc. formed a worldwide collaboration in 2004 valued at more than $530 million to develop and commercialize Yervoy® [ipilimumab, MDX-010], which was in Phase III clinical development at the time for the treatment of metastatic melanoma and multiple Phase II clinical trials in other oncology indications.  In 2009, Bristol-Myers Squibb acquired Medarex for $16.00 per share, a 90% premium over the prior day’s closing price of $8.40 per share, for an aggregate purchase price of approximately $2.4 billion.

What started as a lawsuit for infringement of its patents related to fusion protein technology in 2006, ZymoGenetics, Inc. signed a deal with Bristol-Myers Squibb in 2009 worth more than $1.1 billion for PEG-Interferon lambda, a novel type 3 interferon in Phase Ib development for the treatment of Hepatitis C, and its related development program.  The following year, Bristol-Myers Squibb acquired ZymoGenetics for $9.75 per share in cash [an 84% premium to the prior day close] in a transaction valued at approximately $885 million.

While ultimately thwarted by Eli Lilly & Co.’s (LLY) superior offer in October 2008, Bristol-Myers also attempted to acquire its partner ImClone Systems.  Back in September 2001, Bristol-Myers had entered into an agreement with ImClone to co-develop and co-promote Erbitux® [cetuximab, IMC-C225] in the United States, Canada and Japan.

All that Glitters is not Gold

Maintaining worldwide rights and commercializing a product without a partner doesn’t necessarily translate into a lofty market valuation.  Several companies have struggled to commercialize oncology products on their own.

Allos Therapeutics, Inc. (ALTH) developed Folotyn® [pralatrexate injection], a folate analogue metabolic inhibitor, and began commercializing the product in the U.S. for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma [PTCL] in October 2009.  Since the product’s launch, Folotyn sales have been below Wall Street analyst’s expectations and shares of Allos recently reached a 52-week low of $2.64.

Despite an inauspicious launch in the U.S., some analysts believe that Allos may finally be executing on a regional strategy with the recent filing of a Marketing Authorisation Application for European approval and the potential for a partner in Asia as highlighted during the company’s recent quarterly teleconference with investors.

“If Allos gets traction with an ex-U.S. approval and partnership, investor sentiment will most certainly improve as this will provide some external validation on the viability of a regulatory path and market opportunity in PTCL, despite it being a rare disease and there being emerging potential competition from Celgene’s Istodax® [romidepsin],” said Charles Duncan.  “At this point, all but the most patient, value-oriented investors have extricated themselves from the Allos story due to what we believe to be a lack of confidence in senior management, and having another company to shoulder the risk ex-U.S. will provide a much-needed boost to the capabilities and capital needed to profitably market Folotyn.  Perhaps this too could be an example where a collaboration discussion turns into an acquisition, although we anticipate that should such a scenario materialize, it would likely involve contingent-value rights [CVR’s] given the uninspiring early revenue trajectory.”

Summary

Looking ahead, the trade-off between equity dilution and asset dilution represents an important crossroad that many late-stage biotechnology companies will face in the near future [see Table 3 for a select list].  While one size doesn’t fit all, the fact that Dendreon has achieved the largest market valuation of any company in the late-stage prostate cancer segment of the market by commercializing its product without a partner helps support the notion that going alone may provide the highest value to stakeholders.  Such a strategy requires that the company can access resources and capital to develop and launch its product globally.  If not, a selective or global partnership may be the next best options – provided the terms are attractive and that there is a remaining pipeline to be leveraged in the future.  In the end, whether a company proceeds alone or with a partner, there is an attractive landscape of motivated buyers for late-stage and marketed products that may ultimately lead to M&A.

NEW – Click here to view this article in PDF format.

Table 3. Select Companies with Phase III Oncology Programs Not Yet Partnered

With 2009 officially on the books, it appears an appropriate time to review the sector’s performance along with some of the themes highlighted in our previous articles.

Big Versus Small

The twenty-member NYSE Arca Biotechnology Index (BTK) was up 46% in 2009, while the broader NASDAQ Biotech Index (NBI) was only up 16%, underperforming the Dow Jones Industrial Average (INDU), S&P 500 (SPX), and NASDAQ Composite (COMP), which were up 19%, 24%, and 44%, respectively.  Why the huge discrepancy in returns between these two major biotechnology indices?  Unlike the equal-weighted NYSE Arca Biotechnology Index, the NASDAQ Biotech Index is market value-weighted, taking into account the total market capitalization of the companies it tracks and not just their share prices.  Accordingly, companies with the largest market capitalizations, or the greatest values, will have the highest weighting in the index.

During 2009, large capitalization biotechnology companies [greater than $10 billion] dramatically underperformed their smaller peers.  For example, Celgene Corporation (CELG) was essentially flat, Amgen, Inc. (AMGN) was down 2%, Gilead Sciences, Inc. (GILD) declined by 15%, and Genzyme Corporation (GENZ) dropped 26% [earning Henri Termeer the coveted Nance Trophy for worst biotech CEO of 2009 by TheStreet.com’s Adam Feuerstein].  Some of the reasons for this poor performance include concerns over generic competition and pipeline progress – ironically some of the same issues that have plagued big pharma.

Accordingly, the relative underperformance of large capitalization biotechnology companies in 2009 masked the fact that many smaller, innovative companies performed well, with 20 of the 125 companies comprising the NASDAQ Biotech Index producing triple-digit returns during the period.  In fact, two biotechnology companies were among the largest percentage gainers in the NASDAQ Composite with their staggering quadruple-digit returns: Vanda Pharmaceuticals, Inc. (VNDA) +2,150% and Human Genome Sciences, Inc. (HGSI) +1,342%.  See Table 1 for a list of the top ten gainers from the NASDAQ Biotech Index in 2009.

Table 1. Top ten gainers from NASDAQ Biotech Index (NBI) in 2009

Oncology: Prostate Cancer Spotlight

Driven by positive Phase 3 results from Dendreon Corporation (DNDN) regarding its prostate cancer vaccine study, investors gravitated towards biotechnology companies working in the field of prostate cancer treatment as noted in our May 2009 article.  This enthusiasm only increased when Johnson & Johnson (JNJ) announced in May 2009 that it would acquire Cougar Biotechnology, Inc., a development stage company with an oral prostate cancer treatment being studied in two Phase 3 clinical trials, for approximately $1 billion. 

While not a member of either major biotechnology index, shares of Oncogenex Pharmaceuticals, Inc. (OGXI) started the year around $3.00 and ended above $22 for a 643% return.  Oncogenex is developing OGX-011, which is designed to inhibit the production of clusterin, a protein that is associated with cancer treatment resistance, and has completed Phase 2 clinical trials in prostate, lung and breast cancer.  OGX-011 received Fast Track designation from the FDA for the treatment of progressive metastatic prostate cancer in combination with docetaxel.  Shares of Oncogenex had traded higher than $42 in August 2009, but the stock price declined following a license agreement with Teva Pharmaceutical Industries (TEVA) for OGX-011 that apparently did not meet investor’s expectations.

Not all biotechnology companies working in the area of prostate cancer were as fortunate as Dendreon, Cougar, and Oncogenex.  Shares of GTx, Inc. (GTXI) were the second largest industry decliner for 2009 due to a complete response letter from the Food and Drug Administration [FDA] that cited clinical deficiencies regarding the company’s New Drug Application [NDA] for toremifene 80 mg to reduce fractures in men with prostate cancer receiving androgen deprivation therapy.  See Table 2 for a list of the top ten decliners from the NASDAQ Biotech Index in 2009.

Shareholder Activist Wins

In view of past major coups with MedImmune and ImClone, in August 2009 we reviewed Carl Icahn’s biotechnology holdings as reported in SEC filings and identified three companies that significantly underperformed the NASDAQ Biotechnology Index over the past five years, but with recent successful shareholder activist outcomes that could positively impact future performance.  In particular, we noted that Alexander Denner, who has served as Managing Director of entities affiliated with Carl Icahn and as a director of ImClone, had recently been elected as a director at each company.

During 2009, those three companies, Biogen Idec, Inc. (BIIB), Amylin Pharmaceuticals, Inc. (AMLN), and Enzon Pharmaceuticals, Inc. (ENZN) produced positive returns of 12%, 31% and 81%, respectively.  While Biogen Idec underperformed the sector, it notched the highest return among large capitalization biotechnology companies.

In other shareholder activist news, holders of Vanda Pharmaceuticals (VNDA) are likely pleased that the company’s Board of Directors spurned a request by Tang Capital Partners, LP to liquidate the company in February 2009.  Shares of Vanda were up 2,150% for the year [see Table 1] following FDA approval in May 2009 to market the company’s Fanapt™ [iloperidone], a novel antipsychotic for the acute treatment of adult patients with schizophrenia, and a subsequent marketing agreement for the product with Novartis AG (NVS).

CNS: Developments for Parkinson’s Disease

Vanda Pharmaceuticals wasn’t the only company working in the area of central nervous system [CNS] disorders to make news.  Shares of Impax Laboratories, Inc. (IPXL), which were trading around $7.50 at the time we published our August 2009 article titled “Treating Parkinson’s Disease: Investment Opportunities and Challenges,” continued to reach new 52-week highs and ended up 172% for the year [see Table 1].  Impax recently initiated the second of two Phase 3 studies designed to support marketing approval of its IPX066 product candidate for the treatment of Parkinson’s disease.  IPX066 is an investigational extended release carbidopa-levodopa product intended to rapidly achieve and then sustain effective blood concentrations of levodopa, potentially improving clinical symptom management.

Gastrointestinal Disease: 3 Hits, 3 Misses

First, the good:

Both Salix Pharmaceuticals, Inc. (SLXP) and Santarus, Inc. (SNTS) appear in the list of top ten biotechnology gainers for 2009 with triple-digit returns due to favorable regulatory progress reported during the year [see Table 1].  In September, Salix announced the successful outcome of two Phase 3 trials to evaluate the efficacy and safety of Xifaxan® [rifaximin] for the treatment of non-constipation irritable bowel syndrome.  Salix is planning an NDA submission for the first half of 2010.  In December, Santarus announced that the FDA approved the company’s New Drug Application [NDA] for its prescription tablet product for all of the indications being sought, including for the treatment of heartburn and other symptoms associated with gastroesophageal reflux disease. 

While not a member of either major biotechnology index, shares of Soligenix, Inc. (SNGX.OB) increased 317% during 2009.  In January, the company reached agreement with the FDA on the design of a confirmatory, pivotal Phase 3 clinical trial evaluating its lead product orBec® for the treatment of acute gastrointestinal Graft-versus-Host Disease [GVHD].  The following month, Soligenix announced a potential $30 million North American partnership agreement with Sigma-Tau Pharmaceuticals for orBec and in October 2009 initiated patient enrollment in the confirmatory Phase 3 trial that is expected to complete with clinical data available in the first half of 2011.

Next, the bad:

As discussed in our December 2009 article “Graft Versus Host Disease: Failures and Future Opportunities,” Osiris Therapeutics, Inc. (OSIR) recently reported preliminary results from two Phase 3 trials evaluating its Prochymal product candidate for the treatment of acute GVHD.  Unfortunately, neither trial reached its primary endpoint, sending shares from $14 to a 52-week low of $5.35 by November 2009, earning the company a spot in the top ten decliners for the year [see Table 2]. 

The other two casualties working in the area of gastrointestinal disease and appearing in the top ten decliners for 2009 are:

• Progenics Pharmaceuticals, Inc. (PGNX), which announced in October 2009 that the company regained worldwide rights to Relistor® [methylnaltrexone bromide] for the treatment of opioid-induced constipation from Wyeth Pharmaceuticals.  Global net sales of Relistor for the third quarter of 2009 were a mere $3.3 million, as compared to $3.2 million in sales for the previous quarter.
• In the absence of any negative clinical or regulatory news, NPS Pharmaceuticals, Inc. (NPSP) stated it remains on track to reach full patient enrollment before the end of the first quarter of 2010 for a confirmatory Phase 3 trial with Gattex™ (teduglutide), the company’s proprietary analog of naturally occurring human glucagon-like peptide 2 [GLP-2], for the treatment of short bowel syndrome [SBS].  NPS believes that positive results from the trial, expected to complete in October 2010 according to ClinicalTrials.gov, will enable the company to seek U.S. marketing approval for Gattex.

Table 2. Top ten decliners from NASDAQ Biotech Index (NBI) in 2009

2010 Outlook

The capital markets remain turbulent and there may be casualties along the way among undercapitalized companies, but many of the biotechnology industry’s fundamentals, such as the number of products in clinical trials, new product approvals, profitable biotech companies and industry mergers & acquisitions remain favorable for 2010. Similar to 2009, small capitalization companies with clinical or regulatory catalysts should continue to outperform their larger industry peers in the year ahead.

What is your outlook for the biotechnology industry in 2010?  Take a moment to complete our survey, which is only ten questions long and will take just minutes to complete.  The results of this important survey along with our industry outlook will be communicated in early 2010 through a future article.  Take the survey now by clicking here.

As noted in our May 31, 2009 article, investors appear to be gravitating towards biotechnology companies working in the field of prostate cancer. Consider the following:

• Shares of Dendreon Corporation (DNDN), which traded in the low single-digits earlier this year, currently trade above $25 following positive Phase 3 results for the company’s prostate cancer vaccine study in April 2009
• Shares of Cougar Biotechnology, Inc. (CGRB), a development stage company with an oral prostate cancer treatment being studied in two Phase 3 clinical trials, traded as low as $16.35 over the prior 12-months before the company received a $43.00 tender offer from Johnson & Johnson (JNJ) in May 2009
• Shares of OncoGenex Pharmaceuticals, Inc. (OGXI), which were trading around $6.00 at the end of April 2009, recently reached a 52-week high as $27.00 following the presentation of positive Phase 2 trial results for the company’s prostate cancer treatment at the Annual Meeting of the American Society of Clinical Oncology (ASCO)
• Shares of Poniard Pharmaceuticals, Inc. (PARD), which traded as low as $1.00 in December 2008, recently reached a 52-week high of $5.50 following the presentation of positive Phase 2 data for the company’s picoplatin product candidate in patients with metastatic hormone-refractory prostate cancer at ASCO

Therefore, it may not be surprising that shares of Molecular Insight Pharmaceuticals, Inc. (MIPI) nearly doubled over the past month following the presentation of data demonstrating that the company’s investigational imaging agents can rapidly detect the spread of prostate cancer to soft tissues and bone at the recent annual meeting of the Society of Nuclear Medicine. Shares of Molecular Insight Pharmaceuticals, which traded as low as $1.15 in March 2009, nearly reached $8.00 this month on heavy volume.

Currently, simple blood tests to determine the amount of prostate-specific antigen (PSA), a protein produced by the cells of the prostate gland, are used to help initially detect prostate cancer and to monitor patients with a history of prostate cancer to see if the cancer has come back, or recurred. Unfortunately, PSA levels cannot directly identify the extent or location of disease.

Molecular Insight’s two product candidates (MIP-1072 and MIP-1095) are small molecules that target prostate-specific membrane antigen (PSMA), a protein abundantly expressed on the surface of prostate cancer cells. An imaging radioisotope (Iodine-123) is linked to the small molecules, which are administered intravenously into the patient. The small molecules travel through the bloodstream and bind to PSMA. The radioactivity from the isotope that has been attached to the small molecules can be detected from outside the body by camera equipment found in the nuclear medicine departments of most hospitals. The image captured by the camera assists in the identification of the location of the radiolabeled molecules, thus identifying the sites of tumors.

The first commercial molecular imaging agent targeting PSMA was cleared for marketing by the Food and Drug Administration (FDA) in 1996. Unlike Molecular Insight’s small molecule approach, Eusa Pharma’s ProstaScint® (capromab pendetide) consists of a monoclonal antibody directed against PSMA that is linked to the imaging radioisotope Indium-111. Publicly-reported sales of ProstaScint were $9.6 million for the year ended December 31, 2007.

Theoretically, Molecular Insight’s small molecule approach to targeting PSMA represents an advantage over monoclonal antibodies, as the imaging session can be done in a single day. In fact, the company’s compounds were able to detect metastases within one to two hours after injection. This is not possible with current monoclonal antibody approaches, which require that the patient make a second visit for imaging between 72 and 120 hours after infusion.

Molecular Insight’s product candidates may also have the potential to treat metastatic prostate cancer. The company is conducting preclinical studies for product candidates using the same small molecules attached to a therapeutic (as opposed to imaging) radioactive substance called Iodine-131.

Although investors are enthusiastic about biotech companies working in the field of prostate cancer right now, it is worth reminding readers that drug development is a long and expensive process and Molecular Insight’s prostate cancer compounds are in the early stages. According to the company, the plan for 2009 is to complete a proof of concept and dosimetry trial for imaging prostate cancer. Fortunately, Molecular Insight also has later-stage programs in development, including a molecular imaging product candidate for the diagnosis of cardiac ischemia, or insufficient blood flow to the heart.

# # #

About MD Becker Partners LLC

MD Becker Partners is a boutique management and strategy consulting firm focusing on both public and private companies in emerging growth industries, such as pharmaceuticals, biotechnology, medical devices, and cleantech. The firm’s mission is to bring experience-based insights gleaned from the three independent disciplines of investor relations, strategic advisory and operational improvement together and apply them to carefully conceived and expertly enacted strategies that help companies increase visibility, unlock value and access resources to grow their business. For more information, visit the website: http://www.mdbpartners.com/

Disclaimer: This article contains the author’s own opinions, and none of the information contained therein constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in the article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

It is no wonder that ASCO is closely watched by biotechnology industry observers. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), there are 633 medicines and vaccines developed through biotechnology in human clinical trials – the majority of them (254) for the treatment of cancer. Even more impressive, all of these products are either in human clinical trials or under review by the Food and Drug Administration (FDA).

The need for new cancer treatments and diagnostics is compelling. This year alone, the American Cancer Society estimates nearly 1.5 million new cases of cancer will be diagnosed with more than 562,000 Americans expected to die from the disease. Not only is cancer the second leading cause of death in the US (exceeded only by heart disease), the economic impact is massive. University of Chicago economists Kevin Murphy and Robert Topel reported that a permanent one percent reduction in mortality from cancer alone has a present value to current and future generations of Americans of nearly $500 billion and that a cure would be worth about $50 trillion.

For biotechnology companies working in the field of cancer, double or triple-digit stock price increases from the end of April through the ASCO meeting (usually held in late May or early June) are not unprecedented. I first dubbed this the “ASCO-effect” in May 2000 while presenting a review of the top five performing stocks from companies issuing ASCO-related news from 1996 through 1999. Ironically, more than a decade has passed, but some of the same companies are once again benefiting from the ASCO-effect.

For example, Peregrine Pharmaceuticals, Inc. (PPHM), known as Techniclone Corporation at the time, saw its stock price nearly triple as a result of the ASCO-effect back in 1998. The stock, which was trading below $0.40 at the end of April 2009, recently traded as high as $1.13 on news that preliminary data from a Phase 2 clinical trial evaluating the company’s bavituximab in combination with docetaxel in advanced breast cancer patients would be the subject of an oral presentation at ASCO.

In addition, the stock of Poniard Pharmaceuticals (PARD), known as NeoRx Corporation at the time, nearly doubled as a result of the ASCO-effect in 1998. The stock, which was trading around $3.00 at the end of April 2009, recently traded as high as $5.19 on news that data from two Phase 2 clinical trials evaluating the company’s picoplatin in metastatic prostate and colorectal cancer would be presented at ASCO.

Since there are over 4,000 scientific abstracts being presented during ASCO 2009, it would be impossible to detail all of them in this setting. However, following recent positive Phase 3 results from Dendreon Corporation (DNDN) regarding its prostate cancer vaccine study; it is not surprising that investors appear to be gravitating towards companies working in the field of prostate cancer treatment. This enthusiasm only increased when Johnson & Johnson (JNJ) announced that it would acquire Cougar Biotechnology, Inc. (CGRB), a development stage company with an oral prostate cancer treatment being studied in two Phase 3 clinical trials, for approximately $1.0 billion.

With this in mind, OncoGenex Pharmaceuticals, Inc. (OGXI) appears to be one of the early beneficiaries of the ASCO-effect in 2009. The company’s stock, which was trading around $6.00 at the end of April 2009, recently traded as high as $22.00 on news that the company will be presenting final results of a Phase 2 trial of its prostate cancer treatment at ASCO. On Monday, investors will react to the data presented over the weekend.

At the start of the year I provided a positive outlook for the biotechnology industry in 2009, 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. With these fundamental and technical characteristics intact, it is possible that this year’s ASCO meeting could be the spark that reignites investor enthusiasm for the sector.

About MD Becker Partners LLC

MD Becker Partners is a boutique management and strategy consulting firm focusing on both public and private companies in emerging growth industries, such as pharmaceuticals, biotechnology, medical devices, and cleantech. The firm’s mission is to bring experience-based insights gleaned from the three independent disciplines of investor relations, strategic advisory and operational improvement together and apply them to carefully conceived and expertly enacted strategies that help companies increase visibility, unlock value and access resources to grow their business. For more information, visit the website: http://www.mdbpartners.com

Disclaimer: This article contains the author’s own opinions, and none of the information contained therein constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in the article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.