Vaccine Therapies Hold Promise for Investors: Stephen
Source: George S. Mack of
The Life Sciences Report
Developing vaccines to treat and/or prevent disease promises
life-changing benefits for patients and unique opportunities for
investors. In this interview with
The Life Sciences Report
, LifeTech Capital Senior Managing Director and President Stephen
Dunn discusses the roadblocks encountered by some developers of
immune therapies and how other companies are working around those
obstacles, producing investment opportunities in the process.
The Life Sciences Report:
I'd like to talk about preventive and therapeutic immunization.
How large is the preventive vaccine market?
According to the World Health Organization, over 12 million (
) people are reported to die from infectious diseases annually,
with the unreported figures much higher. In addition, the number
of people afflicted with nonfatal infectious diseases is likely
near 1 billion (
), which also represents significant global healthcare and
economic costs. While difficult to calculate precisely in dollar
terms, the global vaccine market is roughly $30B or more, with
the U.S. representing $20B or more. We expect this to grow
significantly as there are over 300 infectious diseases and only
about 15% of them have an effective prophylactic therapy.
We know that governments have to be involved in preventive
vaccines. Foundations, such as BIO Ventures for Global Health,
the Bill and Melinda Gates Foundation, Wellcome Trust, etc., are
also involved. Development costs may be subsidized, but margins
will be thin for sure. What's the bottom line? How thin will
margins be, and can prophylactic vaccines be profitable to
companies and their shareholders?
We expect margins on the basic routine immunizations with low
incidence to be around 5%, which investors should treat more like
an annuity than a growth vehicle. However, vaccines in new
indications, especially those in highly contagious or fatal
indications, can command significantly higher margins and
represent significant investment opportunities. Examples of this
Merck & Co. Inc.'s (MRK:NYSE)
Gardasil and GlaxoSmithKline's (
) Cervarix, prophylactic vaccines for human papillomavirus (HPV),
which causes cervical cancer. These have solid profit
Shifting to therapeutic immunization, one high-profile major
development project that has come to fruition is
Dendreon Corp.'s (DNDN:NASDAQ)
Provenge. Uptake has been disappointing, and the company has had
a very rough year. Does this bode poorly for other therapeutic
Dendreon's Q411 results were $77M in Provenge sales, with a 26%
gross margin. While this looks like a high margin compared to
prophylactic vaccines, it is not enough for a therapeutic
vaccine. The patient volume is much lower, with only 250,000
(250K) prostate cancer patients who can be treated versus many
millions of people receiving prophylactic vaccines. Provenge is
patient-specific and must be custom manufactured, so the cost of
production, requiring multiple production centers, is
significant. The limitations are certainly a concern for
patient-specific vaccines, but there are alternative vaccine
approaches for investors.
Will therapeutic vaccines developed in the future be less
expensive than Dendreon's, which costs $93K/year to treat a
I think the entire therapeutic vaccine industry has taken notice
of Dendreon's struggle to cover its costs of manufacturing a
patient-specific therapeutic vaccine. The pricing issue is driven
by the drug's modest effect on prostate cancer survival, and the
fact that a number of new, competing therapeutic options are half
the cost. Overall, pricing is always a function of benefit versus
alternative therapies, the same as for any drug.
Bristol-Myers Squibb Co.'s (BMY:NYSE)
Yervoy, for melanoma, is an immunotherapy that inhibits CTLA-4,
augmenting T-cell activation and proliferation. Because there are
very few options for these melanoma patients, the pricing of
Yervoy at $30K per dose, or $120K for four cycles, is not out of
line. In addition, this is an "off-the-shelf" therapeutic,
meaning it does not require custom manufacturing for each
patient, and the gross margins are significantly higher.
Is Provenge the classic first-generation prototype, leading the
way while those that follow benefit by being able to produce a
product that is cheaper and better?
Provenge is a classic first-generation example of a
patient-specific vaccine, and illustrates the high manufacturing
costs of that approach. One company addressing the manufacturing
ImmunoCellular Therapeutics Ltd. (IMUC:OTCBB)
, which is developing a patient-specific cancer therapeutic
vaccine called ICT-107. The difference is that it can manufacture
around 20 doses at once for the patient, versus Dendreon, which
can only produce a single patient-specific dose at a time. This
should result in significantly better economics.
Another vaccine approach is being used by
Immunovaccine Inc. (IMV:TSX.V)
. This company combines seven antigens found in breast, ovarian
and prostate cancers in a sustained-release formulation, rather
than manufacturing patient-specific vaccines.
Other manufacturing processes, such as those used in DNA
vaccines, can design and produce "off-the-shelf" vaccines faster.
These represent third-generation technologies. While no
therapeutic DNA vaccine has yet been approved, both
Inovio Pharmaceuticals Inc. (INO:NYSE.A)
currently have therapeutic DNA vaccines in various cancer
How much can an adjuvant be worth to companies engaged in immune
system modification-either therapeutic or preventive?
Competing immunotherapies tend to converge on the same antigens
in a specific indication, so the differentiator may lie with the
adjuvant. Some research has shown that adjuvants may even be more
important than the antigen, resulting in them being called
"immunology's dirty little secret." In fact, some suggest that
Dendreon's Provenge results may not have been a result of the
prostate antigen but rather the adjuvant, because it used a
placebo control arm. An interesting pure-play in this space is
Stellar Biotechnologies Inc. (SBOTF:OTCPK;
, which is the world leader in keyhole limpet hemocyanin (KLH)
production for use as an adjuvant and protein carrier. KLH is
currently being used as either an adjuvant or protein carrier in
over 20 active human clinical trials in various indications. One
might think of Stellar as an "arms-merchant" to immunotherapy
Thanks for your time, Stephen.
LifeTech Capital Senior Managing Director and President
was previously the managing director of Life Sciences Research at
Jesup & Lamont, as well as director of research for Dawson
James Securities and director of Life Sciences at Cabot Adams
venture capital group. He has held management positions in
business development, finance and operations having worked in
over 25 countries in North America, Europe and the Far East with
biomedical companies including Beckman Coulter, Coulter, Cordis
(Johnson & Johnson), Telectronics (St. Jude Medical) as well
as several smaller companies. With over 25 years within the
global biomedical industry, Dunn has negotiated numerous
intellectual property licenses, product development agreements,
venture funding, mergers and aquisitons and joint ventures. Dunn
is a five-star biotechnology analyst on StarMine and has appeared
in both the financial and scientific media such as
The Wall Street Journal, Newsweek, Forbes, Nature Biotechnology,
CNN, Nightly Business Report, BioWorld and many other media
outlets. He is also a frequent speaker and panel member for many
financial, medical and venture capital events.
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1) George Mack conducted this interview. He personally and/or his
family own shares of the following companies mentioned in this
2) Stephen Dunn: I personally and/or my family own shares of the
following companies mentioned in this interview: None. I
personally and/or my family am paid by the following companies
mentioned in this interview: None. Stellar Biotechnologies is
currently an advisory client of LifeTech Capital.
3) The following companies mentioned in the interview are
The Life Sciences Report:
Stellar Biotechnologies Inc.; ImmunoCellular Therapeutics Ltd.
Merck & Co. Inc. is not affiliated with Streetwise Reports.
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