November 1, 2012 (www.investorideas.com newswire) Typically there are two ways small biotech companies can stand out: 1. Create a new effective drug that a major can scoop up and distribute, 2. Improve upon a previously successful drug that has come off-patent and redevelop it for other uses. In my article "Pharma Boom: The Return of Canadian Healthcare Investment and M&As," I pointed out four companies using a variety of either of these two strategies. Since the article’s release, iCo Therapeutics [ICO:CA][ICOTF:PK] has stood out among the pack, and is turning heads by using the create-your-own-drug strategy and delivering promising results. Since that article’s publishing date on Valentine’s day, the company has exactly doubled its share price, in only two fiscal quarters.
In the article I pointed out four companies that I saw had the potential to make some solid gains in 2012. Between the four, there have been multiple successful fundraising campaigns for a combined total north of $13 million. Share prices of three out of the four have gone up by at least 47% or more, including the doubling of iCo from $0.35 to $0.70. Other winners in that grouping were Tekmira Pharmaceuticals [TKM:CA] (up 81% from $2.27 to $4.11), and biOasis Technologies [BTI:CA] (up 47% from $1.29 to $1.90.
But the biggest winner of the group was indeed iCo. The company's shareholders and the market in general has taken notice of iCo's efforts to improve the lives of diabetics which sadly is one of the fastest growing health concerns in the world.
According to the US Center for Disease Control (or the 'CDC'), 10% of the United States population is diabetic (and 27% in the senior population). Even scarier are the rapidly increasing rates in children. And even with its high rates of Type II Diabetes, the US isn't the only country experiencing this epidemic. Globally dominant population sizes such as China and India are also reporting skyrocketing rates of diabetes.
With this global rise in diabetes, comes a rise of diabetic related blindness (also called Diabetic Macular Edema or DME). Until recently, this highly detrimental condition had no approved treatments available.
Unsuccessful previous attempts for patients' relief included steroid injections and lasers, which sometimes introduced severe complications such as retinal damage and glaucoma.
More recent attempts utilize Genentech's drug, Lucentis (an anti-VEGF drug); which was initially intended for macular degeneration and is now approved for DME. However, the $20k-per-patient-per-year price tag for Lucentis is quite restrictive and requires an unpleasant monthly injection directly into the eye with a large number of treatment non-responders.
Enter iCo-007. iCo's phase 1 trial recruited 15 patients for whom all other treatments failed. Enrollment criteria allowed "end stage" patients with vision as low as 20/500 (legally blind).
The company was only looking for safety data but the efficacy results were astounding. Through a single injection of iCo-007, patients were reporting encouraging post-treatment improvements including in some cases drastically reduced retinal swelling, and improved vision as time rolled on. Again remember these patients were the worst of the worst that had failed all other treatments including laser, steroids and even injections of anti-VEGF drugs.-.
As positive as the results were, the sample size was not large enough for statistical significance. However, this didn't hinder iCo, which still garnered significant attention worldwide from big pharma and organizations such as the Juvenile Diabetes Research Foundation (JDRF), which had previously supported the trials of Lucentis. With the JDRF's support, iCo was poised to fund a much larger phase 2 trial in 26 of the largest, most prestigious eye centers in the US.
Phase 2 will include up to 208 patients, with recruitment already having started earlier this year. According to iCo's CEO Andrew Rae, full recruitment and interim data are expected by year-end. The iCo-007 storyline has definitely sparked the interest of the market, and is the leading reason behind the recent run-up of the stock price.
We were able to catch up with Andrew Rae to get his take on the sector and on his company's plans going forward:
VantageWire - As a former Health Care analyst what's your take on the current state of the sector and how relevant is iCo in today's environment?
Andrew Rae - The biotechnology sector overall is in great shape, particularly in the United States which provides a favourable drug reimbursement/payment climate relative to other jurisdictions.
Biotechnology firms now are the lead generator of new drugs, not the major pharmaceutical firms. This has resulted in many positive 'upside' stories, such as the recent Pharmasset acquisition. Gilead acquired Pharmasset for $11BN (US) in late 2011, while it was still in a development stage without an approved product. The trickledown effect is that many of those newly minted millionaires and investing funds are buoyed by such 'wins,' taking some of that money in the hope of finding the next Pharmasset.
I believe iCo offers that kind of 'blue sky' potential to investors, assuming positive clinical outcomes. Diabetes is a global epidemic, with over 20% of diabetics suffering from visual impairment. Competition is limited and we believe iCo-007 targets some key issues: reduced dose frequency, lower manufacturing costs, enhanced safety profile potential, and a broader impact on many unique factors implicated in this terrible disease.
VW - What are some comparables and how have they performed recently?
AR - Companies developing eye drugs--and more specifically the back-of-the-eye--are gaining significant investor and partnering interest. Novel drugs that address these issues effecting the expanding aging and diabetic populations (wet macular degeneration or 'wAMD', and DME), have good reimbursement characteristics, and require a modest sales force because there are roughly 1800 retinal specialists in the US. These are in great demand, commanding impressive valuations particularly as they head into later staged clinical trials.
Two weeks ago Thrombogenics received FDA approval for a drug for vitreomacular adhesion--arguably a much smaller market than the DME market. Alcon paid almost €75 million to gain non-US rights to the drug, and owes another €90 million in near term payments. Thrombogenics is now valued at €1.35 BN prior to established sales of JETREA®.
Regeneron recently gained approval for Eylea® for wAMD, establishing once every two month injections, versus Genentech's Lucentis® (the best selling eye drug on the planet). Both target the same factor and have the same efficacy, but less frequent dosing led to Regeneron projecting $700M-$750M (US) in the first year of sales (an extraordinary launch!). Today Regeneron commands a $15 BN (US) market capitalization.
At an earlier stage we have seen acquisitions of Phase 2 staged companies such as Fovea (by Sanofi) and ESBATech (by Alcon). In the ESBATech case $150M (US) was paid to shareholders at closing and contingent payments of up to $439M (US) based may be earned on certain development milestones. In the Fovea case 370 million euros was committed in upfront and contingent milestones.
VW - Your partner on 008, Immune Pharmaceuticals, stated they are planning on doing a large raise in the US - how do you see this benefiting iCo, given your 6% stake in Immune and 008 being their lead candidate?
AR - We manage our pipeline like any good portfolio manager would and our second asset (008), acquired from the global pharmaceutical firm AstraZeneca, or "MedImmune," is primarily financed by our Israeli partner Immune.
While we retain global rights to eye disease they have acquired systemic (rest of body) rights by paying us US$500K upfront, up to $32M in future milestone payments and granted iCo 6% ownership in their company. They pay the full clinical trial and manufacturing costs, and hopefully sometime next year we will hear about the outcome of their planned Phase 2 clinical trial in gastrointestinal disease.
So there is opportunity to monetize our share position and get paid on hefty milestones that are well in excess of the US$7M we owe AstraZeneca MedImmune for these indications. This kind of leverage we see as one of the pillars of our business model. With iCo-008 as Immune's lead pipeline candidate, it's the proverbial 'icing on the cake,' because they've tethered reputational capital and investor capital to its success.
VW - What are some of the catalysts for iCo on its various assets over the next 4-6 months?
AR - We are entering an exciting phase in the Company's history as all three assets gain further traction.
Clearly our lead asset iCo-007 is front and center as we commence what we believe is the largest current US Phase 2 study in diabetic blindness, with our partner JDRF (the largest funder of Type I diabetes research in the world and also the co-sponsor of Genentech's Lucentis® studies for DME).
Over the coming months we expect to provide progress updates on phase 2 and the study's conclusion in 2013. We also continue to be in a number of regional partnering discussions for the iCo-007 asset, perhaps to convert significant interest into a bona fide partnership. Further deal flow related to new eye drugs in development continues unabated, which bodes well for iCo, particularly if we show differentiated and solid data.
Our iCo-008 asset (and the biological target of the drug) has been gaining profile in key journals such as Nature. Our Israeli partner--which owes iCo up to $32M (US) in milestone payments through development and commercialization--will hopefully sometime next year provide the outcome of their planned Phase 2 clinical trial in gastrointestinal disease.
We collectively hope that will provide additional "proof of concept" support for further development for any candidate that has already been safely administered to 126 patients in previous studies. And this comes at almost no cost to iCo!
Finally, our third candidate is an oral version of a well-known drug called Amphotericin B. We already know the drug works, but it is limited by its intravenous administration. We recently garnered the largest seven-figure grant of its class from the Canadian government and Gates Foundation and hope to further leverage development through early-stage clinical trials using these resources and hopefully garnering third parties interested in partnerships. Our hope is for clinical trials some time next year.
VW - As a founder and large shareholder of iCo what's your exit strategy and how does this align with the average shareholder right now?
AR - Our interests are well-aligned as Management has made significant investments in iCo throughout its history, at both low and high valuations and various share prices. Dilution affects us all and as large shareholders we seek to minimize it. We carefully manage the Treasury, take low salaries which are well below industry average and seek multiple forms of non- or less-dilutive financing, such as grants and partnerships, and drawing inbound capital (e.g. our Immune Pharmaceuticals deal). Along with our fellow shareholders we seek significant capital gains and collectively we'll have a clear sense of when we've been able to truly maximize shareholder value.
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