Biotechnology stocks don't appear to be slowing down their pace
at all this year, with the Nasdaq Biotech Index ETF (IBB) making
new highs again this week while the S&P gets back to 1820. So
it pays to keep digging for biotech gold to find the next
While we missed FURX before they announced positive Phase III
clinical trial results for a key digestion drug, and we only caught
a piece of the great run in JAZZ, my FTM portfolio is very happy
with our returns in MDVN.
My latest pick is
(ECYT), a $460 million biopharma company engaged in the development
of therapies for the treatment of cancer and inflammatory diseases.
They create novel small molecule drug conjugates (SMDCs) and
companion imaging diagnostics for personalized targeted therapies.
The company employs its proprietary targeting technology to develop
novel combination therapies that have an effect on cells that
express characteristics specific to certain conditions and
functions like the folate receptor in cancer cells. The
underpinnings of the company's intellectual property come from
research conducted at Purdue University, thus their base in West
European Approval Expected
According to analysts at Roth Capital Partners, "The folate
receptor (FR) is an attractive target because it is frequently
highly over-expressed in some of the most prevalent solid tumors,
including ovarian, non-small cell lung, breast, colorectal, kidney,
endometrial, among others. Cancers that over-express folate
receptors affect more than 1 million people in the U.S., Japan and
By linking active cancer-fighting drugs to Endocyte's FR targeting
mechanism, this approach can deliver more drug to FR
"over-expressing" tumors with fewer toxicities.
Endocyte's initial folate-receptor program, vintafolide (the drug)
and etarfolatide (the diagnostic) for the treatment of ovarian
cancer, are currently being evaluated by the European Medicines
Agency's (EMA) Committee for Medicinal Products for Human Use
Though some clinical trials are still in progress, the company and
most Wall Street analysts believe the pending EU conditional
marketing authorization will be approved sometime in the first
Big Brother Merck
Developmental-stage biopharma companies often wouldn't make it
through years of cash-draining clinical trials if it weren't for
partnerships with established drug companies who provide R&D
support, regulatory experience, and mountains of cash.
In 2012, Endocyte entered into a worldwide partnership with Merck
for vintafolide. In addition to $120 million upfront and potential
additional milestones of $880 million for development of six cancer
indications, Endocyte will share equally in US profits and receive
a 15-20% royalty in other countries.
Wall Street Views
Analysts at Baird Equity Research believe that the Endocyte "unique
small molecule drug conjugate technology makes for a bona fide
platform story... with a companion diagnostic approach regulators
seem to like." They see vintafolide as "just the first of what we
think could be numerous novel therapies born of ECYT's proprietary
drug conjugate, folate receptor (FR) targeting development
And analysts at Wedbush, Cowen and Co., RBC Capital Markets, Piper
Jaffray, and Chardan all seem to agree that Endocyte's technology
has great promise that will soon get a foothold in Europe. Wedbush,
with a great biotech team that was recommending
(PCYC) back in 2012 at $25, has the highest price target for ECYT
shares at $23.
Again from Roth, "Despite important questions, as the overall
survival (OS) data were inconclusive, we believe the ovarian PFS
data is enough to gain conditional EU approval in 2013, as further
analysis appears to point to a cause (platinum-free interval), EU
therapies have been conditionally approved without OS benefits
previously, and data for the diagnostic in patients that heavily
overexpress the folate receptor (FR++ patients) is solid."
Not Risk Free
The other thing developmental-stage biopharma companies have in
addition to "big brothers" is big risk. While peak sales for
vintafolide are estimated to be over $1 billion, these revenues
still may not turn the company profitable in the next two years.
And those sales are assuming all goes smoothly in the clinical
trial and regulatory arenas. For now, the stars seem to be lining
up for Endocyte. Just make sure you can see through the risk if the
clouds roll in.
Disclosure: I own ECYT, MDVN, and PCYC for the Zacks Follow the
Kevin Cook is a Senior Stock Strategist for Zacks where he runs
Follow The Money
ENDOCYTE INC (ECYT): Free Stock Analysis Report
FURIEX PHARMACT (FURX): Free Stock Analysis
JAZZ PHARMACEUT (JAZZ): Free Stock Analysis
MEDIVATION INC (MDVN): Free Stock Analysis
PHARMACYCLICS (PCYC): Free Stock Analysis
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