This past week, one of our contacts in the biotechnology sector reached out with some pressing information and recent research.
The information we received relates to a new line of drugs in development… and quite possibly the next biotech blockbuster.
Investor hype surrounding this research is just beginning to stir, and we’re expecting the storm to hit in 2014.
If you have any intention to profit from these developments, now is the time to get in on the ground floor.
I’d like to share this information with you today.
But we’ll need to go over a few biological concepts first. While you certainly don’t need to be a doctor to profit from the biotechnology sector, it is incredibly important that you understand the fundamentals of the products you’re investing in — as well as the diseases they treat.
Some of this information can get pretty complex, but we’re going to look at it in simple terms that’ll be easy enough to digest.
Specifically, we’ll be glancing at the basic biology of cancer cells and how they defend against the human immune system.
Once we get that down, I’ll show you how a new model of cancer treatment can bypass these defenses and open the gates for an all out assault.
Oncology 101
As you’re probably aware, our bodies are made up of trillions of living cells. Most of these cells are healthy, helpful, and harmless. They grow, divide, and die in a methodical fashion.
Occasionally, though, these cells break away from their orderly routines. They continue to grow and divide without boundaries, invading surrounding tissue and creating a mass of abnormal cells we know as a tumor.
Our immune system does a good job of recognizing these kinds of abnormalities, but many cancer cells are well-equipped to shut down any attacks.
For the last century, there have been countless attempts to enhance the human immune system as a way of fighting cancer in a process called immunotherapy. But time and time again, these efforts have failed.
Here’s why…
Our bodies use T-cells, a type of white blood cell, to recognize and attack cancer. T-cells detect abnormal proteins on the surface of cancer cells and then recruit other white blood cells to join in the fight.
Unfortunately, cancer cells have learned to defend against this attack by using decoy proteins and receptors we call PD-L1, PD-L2, and PD-1. When these decoy proteins and receptors interact, they render T-cells virtually useless and shut down their ability to attack or notify other cells.
We call this process an immune checkpoint.
When the checkpoints are shut down, the cancer cell can grow uncontrollably and continue to invade surrounding tissue.
In recent years, there has been a heavy focus in oncology on finding a way to bypass this defense system with immune checkpoint blockers, or immune checkpoint inhibitors.
Fortunately, 2013 was marked with exceptionally positive data coming from early clinical studies as three big pharma companies developed these drugs.
Let’s take a look at the key players…
The Offensive Line
Bristol-Myers Squibb (NYSE: BMY) is developing an anti-PD-1 agent known as nuvolumab. So far, it has shown an extremely strong and prolonged response (61% survival rate) in advanced melanoma, making it one of the most highly valued cancer projects of the year.
Merck (NYSE: MRK) is also working on an anti-PD-1 agent under the current label MK-3475. The results are early, but so far they have been strikingly impressive…
MK-3475 has shown an estimated 81% one-year survival rate in patients with advanced melanoma tumors unable to be removed by surgery. To put things into perspective, that’s double the typical 40% survival rate of patients in this category.
Roche (OTC: RHHBY) is taking a slightly different approach by using its RG7446 drug to block PD-L1. Roche believes it can achieve similar results to Bristol and Merck with this method, because PD-L1 connects directly to PD-1.
While Roche is simply working on the opposite side of the interaction, that doesn’t ensure success. In regards to melanoma, results so far have been less promising than with PD-1 inhibitors. Roche has seen response rates only about half that of Merck and Bristol.
This shouldn’t be too surprising, considering only 40% of melanoma cancers express PD-L1. In cancers with higher PD-L1 expression, Roche’s approach has been performing as well as Merck’s and Bristol’s. In the case of lung cancer, Roche has been able to avoid lung toxicity tied to PD-1 inhibitors, possibly giving it a significant advantage in this space.
Slipping Through the Gaps
While it’s interesting enough to debate which of these pharma giants will come out on top, it actually doesn’t matter too much in the end — because the fact is none of these companies are pure plays.
There are better ways to play this race for the next blockbuster drug.
Ultimately, each of these companies will need a sidearm in this battle, and they’re all looking in the same place…
Earlier, we mentioned that attempts to jump-start the immune system have failed time and time again when it comes to treating cancer. While this is true, the recent success of checkpoint blockers has left the door wide open for immunotherapies and cancer vaccines — especially those that were already beginning to show promise on their own.
The three leaders mentioned above are now looking to combine their checkpoint blockers with new and existing immunotherapies. Some are seeking out smaller biotech firms with experience in that arena, which opens up the opportunity for new partnerships, acquisitions, and of course big investor gains.
Bristol, for example, is participating in combination studies with immunotherapy developer Innate Pharma (OTC: IPHYF). Other potential benefactors could include Bavarian Nordic (OTC: BVNKF), Prima Biomed (NASDAQ: PBMD), and Transgene (OTC: TRGNF). But that’s mere speculation.
For something a bit more solid, we’re looking at a small biotech firm that’s found a way to bypass cancer’s defense systems even without the use of checkpoint blockers.
On its own, this company and its pipeline are undeniably valuable. In combination with all the positive data surrounding checkpoint inhibitors, it’s one of my favorite stocks for 2014.
Turning progress to profits,
Jason Stutman
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