Here's a bit of good news. With millions of Americans now taking
anticholesterol drugs (known as statins), heart disease may soon
lose its status as the leading cause of deaths in the United
States. In 2009 (the year for which the most recent data is
available), 598,000 Americans died of heart disease, down from
616,000 in 2007 and 636,000 in 2006. That's the first time the
figure has moved below 600,000 in a number of decades, according to
the Centers for Disease Control (CDC).
But if the trend continues, then cancer may move into the top
. About 568,000 Americans died of cancer in 2009, not far below the
number of people who died of heart disease. Then again, cancer
researchers aim to stop that from happening by leading a
commensurate drop in cancer-related mortality. Indeed, a wide
number of biotech companies appear to be making solid progress in
their bid to stop cancer in its tracks.
For investors, there's another bit of good news. These
oncology-focused firms have seen their
clobbered in the recent
rout. Here are three newly-discounted oncology stocks that you
should be researching right now. The first two are small and quite
risky, so owning a basket of them may be wiser than just holding
one or two, as not all drugs make it to the clinical finish line.
1. Celsion (Nasdaq:
This firm's scientists discovered that delivering cancer-fighting
drugs at an elevated temperature (40° C), the drug is more likely
to permeate the walls of cancer cells. Best of all, this technique
-- known as ThermDox -- leaves nearby healthy tissue relatively
Clesion's ThermoDox is currently being tested in Phase III clinical
trials using patients in 11 countries. Though this study focuses on
liver cancer (which has been spreading in many countries thanks to
a spike in cases of Hepatitis B and C), the technology has
applications for other cancers as well. Colorectal cancer appears
to be the next area of focus.
Yet it's the liver-cancer trial, known as HEAT, which remains the
for shares. The company has taken longer than expected to enroll at
least 600 patients in the trial. Now that the process is complete,
interim data should be reported by year-end, and the final results
of the study by next summer. Celsion raised cash earlier this
summer, which will probably tide it over until the final data are
released in 2012, at which time the company will likely need to
pursue a strategic investor to help it launch the drug.
This, of course, assumes further testing data are as robust as the
data we've seen thus far. If so, then this could be a potential
blockbuster opportunity because liver cancer is expected to be the
leading form of cancer by 2020, as the ranks of Hepatitis-infected
patients continues to swell. Meanwhile, this summer's market rout
has taken this stock down from $4 in early July to a recent $2.40.
2. Threshold Pharma (Nasdaq:
A key problem in treating cancer tumors is that they emerge from
areas that have little oxygen, or are in "hypoxic" environments.
These hypoxic regions of the tumor are thought to provide the
cancer stem cells that proliferate upon withdrawal of chemotherapy
and are a factor in disease recurrence. Threshold's key drug,
TH-302, is inactive until it reaches hypoxic regions of tumors,
where it then releases its cancer-fighting molecules. As is the
case with Celsion's approach, nearby healthy tissue is unaffected.
Threshold's Phase II trials targeting pancreatic cancer have
yielded strong results, so the company aims to start Phase III
trials in 2012. If all goes well, TH-302 could hit the market by
2014. The company has also embarked on Phase I trials using TH-302
to fight leukemia and expects to report top-line results by the end
of this year. More than likely, Threshold will need to raise money
in 2012 -- its cash will run out by next summer at current burn
rates. Threshold's $70 million
sharply discounts the size of the potential for TH-302, which could
represent a $300 million to $500 million market opportunity if
3. Medivation (Nasdaq:
This had been a well-known biotech stock looking to establish a
strong presence in the market for the treatment of Alzheimer's
Disease with it's treatment, known as Dimebon. Unfortunately, it
proved to be fairly ineffectual in clinical trials, and when tepid
Phase III data were released on March 13, 2010, shares quickly
plunged from $40 to $13 in just one day. (Shares trade today under
At that point, management had no choice but to shift its focus to a
prostate cancer drug that had been in clinical development, known
as MDV3100. Lucky for Medivation, it had brought in large sums of
and Japan's Astellas, which wanted a piece of the Alzheimer's drug.
(Medivation currently has $182 million in net cash.)
MDV 3100 appears to be fairly effective in clinical trials, and
unlike many biotech stocks, investors may not have to wait much
longer to get a sense of whether this stock will turn out to be a
home run or a dud. Some time before the end of this year,
Medivation is expected to release interim results from its AFFIRM
study. "If the results are positive over the pre-specified hurdle
and safety is not an issue," Medivation can move quickly to file a
New Drug Application (NDA) with the Food & Drug Administration,
according to analysts at Citigroup. (The hurdle that they describe
entails a complex calculus that measures safety and efficacy in
various time frames, relative to a placebo.)
They assign the likelihood of a positive outcome at 75% to 80%, and
figure shares would move up to the $30-$35 range. On the other
hand, if the interim trial results don't
favorable data -- a 20% to 25% probability -- then shares would
quickly move down to the low teens, according to the analysts.
Risks to consider:
Beyond the obvious risk that clinical trials fail to yield
robust measures of efficacy and safety, Celsion and Threshold also
risk. Each firm will likely need to refill its coffers in 2012 with
another equity raise. And if shares remain at currently-depressed
levels, then the
could be significant.
Action to Take -->
Even though biotechs represent considerable risk, and investors are
quite risk-averse right now, many of these stocks are trading at
absurdly low valuations in terms of the potential market
opportunity they face. Few stocks represent as much significant
upside as biotech stocks, assuming their drugs continue to deliver
on the promises they hold.
If you can stomach it, then you might want to take a flier on one
of these stocks with a small chunk of cash sitting around.
Otherwise, if you're still interested, you could always take a
basket approach and buy a few shares of each stock. Sometimes, as
my friend Andy Obermueller, editor of
, likes to say: "All it takes is one home-run to make it
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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