[This article was updated after market close to reflect news that Millennium has renamed MLN-341 "Velcade" and moved it to Phase 3 trials for multiple myeloma.]
To the tune of "Row, Row, Row Your Boat":
Fast, fast, fast track your drug
Swiftly down the pipeline.
Merrily, merrily, merrily, merrily
Cash is a biotech's lifeline!
Last week brought yet another reason why the Rule Breaker Portfolio is happy to own shares of biopharmaceutical company Millennium Pharmaceuticals (Nasdaq: MLNM). After the smart move to buy COR Therapeutics and its prized cardiovascular drug Integrilin, Millennium last week delivered the terrific news that the Food and Drug Administration has granted fast-track status to two of its drugs in development.
Yes, not one, but two: Millennium's exciting MLN-341, the first drug of its kind being tested in humans anywhere, and MLN-518. The former drug has shown very promising results in cancer patients; just today, after market close, the company announced that it had moved the drug, renamed Velcade, into pivotal Phase 3 trials for multiple myeloma, a blood cancer. The latter drug delivered great results in preclinical studies and is now in Phase 1 trials.
To market a drug in the U.S., a drug maker must submit an application presenting data gleaned from years of human and animal trials, sucking up on average 10-15 years and $500 million to $800 million per approved drug. Fast-track designation can save a drug maker precious time and money, though of course it does not promise approval. The FDA awards fast-track designation to drugs that "are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet needs."
This means the FDA considers the drug approval application -- on a rolling basis -- rather than only at the end of pivotal trials when the application is complete. This means that the FDA can (emphasis on "can," not "must") make its final approval decision as much as a year or more earlier than through the normal process. And if the decision is approved, that means revenues come sooner, more years of patent protection, and happier investors.
Why Velcade is special
A recent Forbes profile of the drug's inventor, Julian Adams, provides this explanation for why the proteasome inhibitor Velcade is such a breakthrough:
"The proteasome is a cellular maid that breaks down proteins that are no longer needed. When the enzyme complex stops functioning, cellular clutter builds up in ways that prevents basic tasks like cell division from getting done, sometimes causing the cell to kill itself. Early on, Adams and his colleagues thought that a drug that would slow the proteasome would hurt cancer cells much more than healthy ones. They just needed to find it."
Find it they did, and after Millennium acquired Adams, his employer, LeukoSite, and the drug, Millennium pulled out the R&D stops. Last month, it announced the drug's dramatic Phase 2 results in multiple myeloma (a blood cancer) at the American Society of Clinical Oncologists' annual meeting. In a patient population that failed all other treatments and had a life expectancy of 3-6 months, Velcade gave 77% a reduction or stabilization of disease and 20% a 90% or greater reduction. After 6.2 months, the majority of patients survived with no progress. This makes the cancer world pay attention.
On our Biotechnology discussion board, cliff shows some excellent reasons that Velcade has the potential to benefit both patients and shareholders. These figures reveal the multiple myeloma market versus other familiar cancer types:
Cancer Type New Cases/Year Deaths/Year Breast 203,500 40,000 Prostate 189,000 30,200 Lung 169,400 154,900 Colorectal 107,300 48,100 Pancreas 30,300 29,700 Multiple Myeloma 14,000 11,200 Chron. Lympho. Leukemia 7,000 4,500 Acute Myeloid Leukemia 10,600 7,400 Source: Am. Cancer Soc.
While the multiple myeloma market is important, it is relatively small. But Velcade is in testing for chronic lymphocytic leukemia and other blood cancers, as well as in solid tumors (breast, prostate, colorectal, lung, pancreatic, etc.) in combination with chemotherapy. Early success suggests blockbuster potential.
The other fast-track designee, MLN-518 (picked up in the COR merger), has just entered Phase 1 human trials, so it's too early to tell what other markets it may attack.
Not so fast
Many investors are dancing in the streets over the fast-track news, but a few know it is far from a guarantee of approval. Bristol-Myers Squibb (NYSE: BMY) inked a $2 billion deal with ImClone Systems (Nasdaq: IMCL) for its colorectal treatment Erbitux based largely on Erbitux's fast-track status, yet the FDA turned down the first part of ImClone's rolling application for review in Dec. 2001 due to problems with ImClone's data. Investors have seen Erbitux's potential all but disappear, ImClone's stock price collapse, and the possibility that a leaked FDA decision may have led to stock sales by the company's former CEO, his relatives, and friend Martha Stewart several days before.
That's the worst that can happen, but it's a lesson that drug making is risky and the best laid plans can go awry. Fast track can be a quicker route to failure, too.
Now that many companies employing biotechnology to develop drugs sell at close to cash per share, expect Millennium to make more deals. Management will retain investor confidence as long as it makes the right purchases and keeps dilution and debt low. So far, management's purchases of LeukoSite and COR show an astonishingly good nose for the right biotechnology at the right price.
What do you make of Millennium's stock at current prices? Thwart the sell-side analysts and trumpet your buy, sell, or hold on our Millennium discussion board!
Have a most Foolish week! Updated portfolio returns appear below.
Tom Jacobs (TMF Tom9) thinks the inventor of the ceiling fan deserves a Nobel. At press time, he owned shares of Millennium Pharmaceuticals. To see his stock holdings, view his profile, and check out The Motley Fool's disclosure policy.
Rule Breaker Portfolio Returns as of 6/10/02 Market Close:
RB S&P S&P 500 Port 500 DA* Nasdaq Week -4.07%** -0.96% -- -2.04% Month -6.89%** -3.41% -- -5.26% Year -23.28%** -10.22% -- -21.52% CAGR*** since 8/4/94 22.62% 10.87% 10.07% 12.74%
**Please keep in mind that these figures will be distorted for the RB Port once a quarter when we deposit $12,500 in new cash. See next note!
***Compound Annual Growth Rate using Internal Rate of Return. This performance measure accounts for the periodic deposits. Total return wouldn't be meaningful, because we started adding cash to the portfolio in July 2001. In a total return calculation, or (Current Value - All Cash Deposited)/All Cash Deposited, cash added shows up as returns.