Either way we slice it, it likely boils down to a statement from Powell that suggests growth risks a...
Biotech and Brain Cancer
07/15/2005 12:00 am EST
The latest buy recommendation from John McCamant is a company that targets one of the more difficult research areas within biotech arena—brain cancer. For those aware of the high risks, he offers these insights into a firm on the cutting edge of this research.
"The causes of brain tumors are still not understood. However, there are risk factors, which have been identified that make a person more likely to develop a brain tumor. The most common brain tumors are gliomas, and glioblastoma multiforme (GBM), is currently receiving the most attention from drug developers. These are very aggressive tumors that have 'tentacles' that spread and mix in with normal, healthy brain tissue, and in the process, damaging this surrounding healthy tissue as they grow uncontrollably in the brain.
"Despite aggressive surgery, radiation,
and chemotherapy, most patients live less than one year after diagnosis. Part of
the problem has been that the tentacle feature of the GBM makes it almost
impossible for the surgeon to remove all of the tumor. They just can’t get it all.
And, while radiation has been the most effective adjuvant therapy, the
inherent resistance to the radiation and the risk of damaging adjacent normal
tissue limits its overall efficacy. Furthermore, GBMs are inherently resistant to
most chemotherapies, and very few drugs cross the blood-brain barrier, which
means that very few drugs can even reach the tumor. Given these obstacles, it is
of little wonder why the GBM patient has such a dire prognosis.
"The key value driver for NeoPharm (NEOL NASDAQ) is IL13-PE38QQR, a protein-based fusion cytotoxic drug candidate currently in a Phase III trial for GBM. This drug utilizes a unique delivery system, which represents a technological advance that allows the drug candidate to selectively target tumor cells while sparing the healthy brain tissue. This represents a significant step forward in delivering efficacious compounds to the brain. The delivery system also allows for direct micro infusion into the brain, bypasses the blood-brain barrier. While seemingly intrusive, this delivery allows patients to remain ambulatory and is a minor inconvenience considering the dire prognosis of the vast majority of GBM patients.
"Overall, brain cancer, and specifically GBM, represents a large and significantly underserved patient population. The overall ineffectiveness of currently available treatments has lowered the approval bar for new treatments. Given the tremendous need for new treatments for brain cancer patients and the positive data produced to date by IL13-PE38QQR, we believe that this drug candidate has an excellent chance to meet its primary endpoint, and subsequently receive FDA approval. The drug candidate has been granted both Fast Track status and Orphan Drug status by the FDA, which could lead to approval and launch by the end of 2007.
"NeoPharm's small market cap compared to its brethren provides an attractive entry point for investors looking to invest in undervalued biotech companies with products in late-stage development. The company’s market cap is currently $235 million, which represents a steep discount to other biotech companies. The primary reason for the valuation disparity has been the significant turnover of senior management. We believe that recent changes on the board level will address these concerns, which would allow investors to re-focus on NEOL’s exciting late-stage cancer drug candidates. NEOL is a buy under $11 with a target of $20."
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