Talon Therapeutics Looks Undervalued Following FDA Approval

After the announcement of a three month delay of the FDA decision for Marqibo’s New Drug Application, shares of Talon Therapeutics (OTC: TLON) initially suffered steep losses. These were reversed in the last couple of months as investors began to look forward to the FDA decision (now set for August 12th), supported by the announced start of a phase III confirmatory study (HALLMARQ) conducted under SPA.

As the FDA decision approaches once again, it seems that investors are even more optimistic about Marqibo’s chances of success. The shares have recently hit a 52-week high of $1.75 apiece, and the company’s market cap sits at $37.43 million.

Marqibo (vincristine sulfate liposomes injection, OPTISOME) is a treatment for the rare cancer known as Acute Lymphoblastic Leukemia (ALL) in patients that test negative for the Philadelphia Chromosome. ALL only affects about 4,000 new patients and year, with two thirds of cases being in younger children. As you would expect the low incidence of ALL grants Marqibo orphan drug designation and seven years of exclusivity on the drug market.

Competing drugs for Acute Lymphoblastic Leukemia include a large number of candidates, but two that are mentioned in an overview of the disease at the Mayo Clinic website are Novartis’ (NYSE:NVS) Gleevec and Bristol-Meyers’ (NYSE:BMY) Sprycel, both of which are used for other types of cancer as well. Talon’s Marqibo is special, however, since it was developed for use in older adults (aged 60 or older). This demographic has been difficult for conventional ALL therapies, which include radiation and chemotherapy which can cause complications quite easily in older patients.

In addition, the current line of ALL treatments is only approved for patients that have the Philadelphia chromosome positive form of the cancer. Marqibo targets patients with relapsed Ph-.

Even with the Oncologic Drugs Advisory Committee (ODAC) vote back in March 2012 of 7-4 (with 2 abstained), which doesn’t imply a very high chance of approval on August 12th, I think the severity of ALL and the ability for Marqibo to make a difference in Ph- patients should ultimately tip the balance in favor of approval. This seems to be the expectation of the market, which is sending shares of TLON rapidly higher as we wait for the decision on August 12th.

There are virtually no shares being shorted relative to the total number of floated shares, so new buyers may want to be cautious about chasing this rally too high for short-term trading. Having said that, Marqibo is being developed for other treatments that could expand its revenue-generating potential a lot more down the line. This includes front-line treatment for aggressive non-Hodgkin’s Lymphoma and front-line treatment for elderly patients with Ph-.