GenVac: Biotech Bet

03/18/2005 12:00 am EST

Focus:

John McCamant

Editor, Medical Technology Stock Letter

Small cap biotechs come with high risk. But for speculative investors, they can also offer high rewards. Here, biotech expert John McCamant looks at a low-priced play on cancer treatment, with appeal for both traders and long-term investors.

"GenVec (GNVC NASDAQ) is developing gene-based products for the treatment of major diseases, including cancer and cardiovascular and ophthalmologic diseases. Its lead compound is TNFerade, a gene therapy approach to cancer treatment that works in combination with radiation therapy. TNFerade has produced encouraging data in both the pancreatic and esophageal cancer settings. However, the FDA put the treatment on clinical hold last year when one patient in the Phase II trial for esophageal cancer suffered a pulmonary embolism.

"We recently raised our buy limit to $2.50 a share, and added to our position in our Trader’s Portfolio in anticipation of the lifting of the clinical hold. And indeed, it was just announced that the FDA has lifted the hold and the firm has received permission to go forward with the randomized, controlled portion of the Phase II trial for TNFerade in patients with locally advanced pancreatic cancer. This is a good sign, and hopefully this positive development will spill over into the two remaining indications that are still on hold, esophageal and rectal cancer.

"Behind TNFerade is GNVC's promising ophthalmic program, AdPEDF, currently being evaluated as a potential treatment for age-related macular degeneration. Its potential advantages over competing treatments include less of a need for repeat dosing, as well as the fact that it not only inhibits blood vessel formation in the eye, but also causes abnormal blood vessels to regress. The preliminary data already look good, and while still in the early stage, this is a very intriguing program.

"In other GNVC-related news, the company reported positive news from its hearing loss program. Specifically, encouraging preclinical data from this program were published in the March issue of Nature Medicine, noting how the firm’s delivery of the Atoh1 gene generated new hair cells—a critical feature for normal hearing—in the inner ears of mature deaf guinea pigs. This is the first ever evidence of hearing restoration in deaf mammals. And although this program is many years away from commercialization, it does involve a lot of techniques that could carry over into the human clinical testing setting.

"Overall, while GNVC has been in the process of climbing out of FDA limbo, it is nice to see further evidence of progress from their other promising, earlier-stage programs. We like this stock for both our trading and core long-term portfolio. Although we caution that the recent good news might be met with a sell-on-the-news attitude by investors, we strongly urge you to have a longer-term holding in GNVC. Its market cap of under $100 million certainly does not do justice to the value of their pipeline, and the stock should provide nice returns to investors over the next 18 to 24 months."

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