Small Cancer Biotech Space In Focus, 3 Stocks Up 100% & More

The oncology space has always been keenly watched by investors interested in the pharma/biotech sector. Cancer is the second most common cause of death in the U.S. preceded only by heart disease. According to a report by the American Cancer Society, almost 1.7 million cancer cases are expected to be diagnosed in 2017, which creates significant need for effective cancer medication. While there are various types of cancer treatments including surgery, radiation, targeted therapy and chemotherapy, immuno-oncology or immunotherapy is presently a hot therapeutic area with huge commercial potential.

Immuno-oncology or immunotherapy is a new class of cancer therapies that utilize certain parts of the immune system to fight the disease. This can be done by stimulating the immune system to attack cancer cells or by introducing immune system components into the body. Immuno-oncology drugs and their combinations are in great demand

With big pharma and biotech companies like Merck & Co, Inc. (NYSE:MRK) , Pfizer, Inc. (NYSE:PFE) , Amgen, Inc. (NASDAQ:AMGN) and others in trouble due to generic competition for their key drugs, drug pricing issues and rising competition, focus is gradually shifting to smaller innovative biotechs, mainly the ones making cancer drugs. These companies are in the limelight on account of important advances in clinical studies of their experimental cancer drugs and are fast approaching the path to FDA/EU approval. These stocks are also hot targets for acquisitions.

Let’s discuss three of these smaller companies making cancer drugs whose shares are up 100% and more so far this year. All the three companies have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kite Pharma, Inc. (NASDAQ:KITE)

Santa Monica, CA based Kite Pharma, focused on the development of immuno-oncology treatments, has a market cap of $5.05 billion. Shares of the company are up 103.4% so far this year.

Kite Pharma’s lead drug axicabtagene ciloleucel (previously KTE-C19) is an anti-CD19 CAR-based therapy currently under priority review in the U.S. for treating aggressive non-Hodgkin lymphoma (NHL) with a FDA decision expected on Nov 29. The Biologics License Application (BLA) filing was based on data from the ZUMA-1 study. In Europe, a regulatory application is expected to be filed in the third quarter of this year. We believe that the solid efficacy profile demonstrated by the pivotal ZUMA-1 study should support the drug’s approval this year.

Meanwhile other studies with axicabtagene ciloleucel and additional candidates including KITE-585 and KITE-718 are also advancing. A number of key data readouts are expected in 2017, which should keep investors glued to the stock.

Clovis Oncology, Inc. (NASDAQ:CLVS)

Boulder, CO-based Clovis Oncology develops treatments targeting specific subsets of cancer population. The company has a market cap of $3.93 billion. Shares of the company are up 99.6% so far this year.

Clovis got a huge boost with the FDA granting accelerated approval to its advanced ovarian cancer treatment, Rubraca last December. Rubraca has bright prospects, given the tremendous demand for PARP inhibitors. Successful commercialization will significantly boost Clovis’ sales. Rubraca is also under review in the EU for a comparable ovarian cancer indication.

Importantly, the stock shot up this week after it announced promising progression-free survival and safety results from the pivotal maintenance study, ARIEL3, earlier this week. The study data showed that Rubraca has a meaningful impact in delaying disease recurrence in advanced ovarian cancer patients. Overall, the study results suggest that advanced ovarian cancer patients can stay on Rubraca treatment for a longer time while gaining benefit, irrespective of their tumor genetics. The positive results may expand Rubraca’s label, which could improve the commercial uptake of the drug.

Several studies on Rubraca, targeting different types of ovarian cancer patients, are currently underway. Also, Clovis is also looking to expand Rubraca’s label into additional indications like prostrate, breast and pancreatic cancers, among others, either as monotherapy or in combination with other agents.

Puma Biotechnology, Inc. (NASDAQ:PBYI)

This Los Angeles, CA-based cancer focused company has a market cap of $2.97 billion. Shares of the company are up 155.9% so far this year.

Puma got a huge boost last month after an FDA advisory committee recommended the approval of its lead pipeline candidate, neratinib for the extended adjuvant treatment of HER2-positive early-stage breast cancer as a single agent. The recommendation was mainly based on a favourable benefit demonstrated by neratinib in reducing the risk of disease recurrence in a phase III two-year ExteNET study.

The positive vote significantly raised the chances of neratinib gaining FDA approval. While it is not mandatory for the FDA to go by the suggestions of its advisory panels, it usually does so. With Puma being a development-stage company, neratinib’s approval would be a major milestone for the stock.

Neratinib is also under review in the EU for the same indication. Meanwhile, several additional studies on neratinib targeting different types of breast cancer patient populations are currently underway

A couple of other cancer focused companies like Bluebird Bio, Inc. (NASDAQ:BLUE) and Incyte Corporation (NASDAQ:INCY) also deserve a mention.

Earlier this month at ASCO, Bluebird Bio presented promising results from an early-stage refractory multiple myeloma study on its investigational anti-BCMA CAR T-cell therapy, bb2121, which it is developing in collaboration with Celgene Corporation (NASDAQ:CELG) . Data from the study showed that 100% of the 15 evaluable patients in active dose cohorts achieved an objective response. Overall response rate (ORR) across all cohorts (n=18) is 89%. The investment community believes that the data, though early stage, bodes well for the candidate’s future development. While shares of the company are up 83.2% this year so far, the stock has gained more than 150% since Jun 5, when the data were presented.

Coming to Incyte, a promising immune therapy in its pipeline is epacadostat – a novel, potent and selective inhibitor of the enzyme IDO1. The candidate is being studied in combination with other immuno-oncology agents. Incyte has collaboration agreements with Merck, Bristol-Myers, AstraZeneca/MedImmune and Roche/Genentech to evaluate epacadostat with their respective anti-PD-1 and anti-PD-L1 agents. At ASCO, Incyte also presented encouraging data from several combination studies. Shares of the company are up 24.2% this year.

Conclusion

Mounting competition in the cancer market, mainly in immuno-oncology, is a significant concern. Several bigwigs are looking to develop and bring cancer treatments to market. Merck is conducting numerous studies to evaluate its anti-PD-1 therapy, Keytruda for more than 30 types of cancer in 500 trials. Almost half of these trials are in combination with other cancer drugs. Recently approved cancer drugs like AstraZeneca’s Imfinzi (durvalumab) and Pfizer’s Bavencio/avelumab are being evaluated for multiple cancers (either alone or in combination with other regimens) and have bright long-term prospects. Meanwhile, many cancer drugs, already approved for quite a few indications like J&J and AbbVie’s Imbruvica, Pfizer’s Ibrance, Bristol Myers’ Opdivo, Celgene’s Revlimid are being evaluated in several studies for label expansion. Several of these pharma/biotech giants have significant financial resources at their disposal and have even collaborated with each other to pool their resources and technology. This makes it all the more difficult for smaller biotechs to match up to them.

However, these smaller companies can give their bigger counterparts a tough run as there is ample scope for growth in the immuno-oncology space, be it in terms of revenues or patient outcomes. Any breakthroughs achieved by them will take the stocks to new highs.

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