Nano Profits in Cancer Detection
11/18/2005 12:00 am EST
When it comes to the highly specialized area of nanotechnology, Josh Wolfe stands head and shoulders above the rest, largely due to his understanding of the sector both from a scientific standpoint as well as for its investment implications. Here's his latest.
"Ever since I started this newsletter in 2002, subscribers have been asking me if there were any funds devoted to nanotechnology. Finally there is a new nanotech-focused ETF designed especially for individual investors. It was created by PowerShares and my affiliated institutional research firm, Lux Research. The Lux Nanotech Index (PXN ASE) is designed to track the performance of 26 securities involved with nanotechnology. Given that I am an investor in Lux Research, I am of course biased and hope that this new Nanotech ETF is a big success.
"Meanwhile, longtime readers of my newsletter know that I strongly believe that you need to be a stock picker in the relatively risky market for nanotech stocks, and therefore, my focus on extensive due diligence and finding specific holdings for our Nanosphere portfolio. One such holding among our current buys is Immunicon (IMMC NASDAQ). For a company that was founded more than two decades ago in 1983, the story of Immunicon is still in the early chapters.
"Immunicon sells instruments and kits that use magnetic nanoparticles to provide rare cell analysis for novel clinical diagnostics and disease management tools. Its primary focus has been on cancer diagnostics. Early detection of cancer is critical since it can spread quickly if malignant cells break away from a tumor and enter the lymphatic system or the bloodstream. These so-called circulating tumor cells (CTCs) can then lodge in other organs or tissues, causing new tumors to form. More established diagnostic methods, including conventional blood tests and diagnostic imaging modalities (CAT, MRI and PET scans) provide limited information and do not efficiently track disease progression and response to therapy.
"Immunicon's CellTracks system offers the potential for a faster and more complete diagnosis, enabling improved staging and selection of primary therapy. At the core of its technology platform are 25-100 nanometer magnetic particles called ferrofluids. These particles bond with cancer cells in a blood sample and separate the cells for detection with the help of a magnetic field. In trials, Immunicon's technology demonstrated it could detect one cancer cell among billions of blood cells.
"Immunicon has focused on detecting metastatic breast cancer and, to a smaller degree, endothelial cells, which play a key role in the development of cardiovascular disease. Immunicon has help from some very big friends. The company signed a development, license, and supply agreement with Veridex, a diagnostics subsidiary ofJohnson & Johnson, and also landed an exclusive reference lab marketing agreement with Quest Diagnostics in the US. It established a similar relationship with SRL in Japan. If the company achieves even marginal success in its market, it could establish a valuable foothold in a high growth industry.
"Despite the value of Immunicon's technology and partnerships, the performance of its stock has been abysmal. The shares debuted in April 2004 at $8 and have fallen steadily. In short, the technology hasn't dovetailed yet into clinical practice. Its performance illustrates the disconnect between those who invest in nanotechnology and businesses that apply it. By recent estimates, the firm's solutions address a market of $205-$215 million annually and future applications may approach $300-$305 million. With a market cap not much more than $100 million, a half-billion dollar market potential is still a great opportunity.The stock is a buy in our portfolio."