Over the past year, Exelixis' (EXEL 0.22%) stock has more than doubled in value because of the successful commercial launch of advanced kidney cancer drug Cabometyx. Of course, it wasn't that long ago that investors left this high-flying cancer company for dead following this same drug's late-stage miss in advanced prostate cancer.
With this compelling turnaround story in mind, we asked three of our contributors which biotech stocks they think might be about to follow in Exelixis' footsteps. They suggested Agenus (AGEN -14.29%), ImmunoGen (IMGN), and Omeros Corporation (OMER -2.62%). Here's why.
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An underappreciated opportunity in immuno-oncology
George Budwell (Agenus): Agenus is a small-cap immuno-oncology company shrouded in doubt, and for good reason. Like Exelixis before its breakthrough in advanced kidney cancer with Cabometyx, Agenus is currently treading water in terms of its value proposition to investors. Despite having multiple checkpoint modulators under development in both partnered and unpartnered trials, for instance, the company has yet to identify a single drug candidate and indication that can bring home the bacon, so to speak. The catch, however, is that this mystery is probably by design.
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The core issue to understand is that the anti-cancer checkpoint modulator field has attracted numerous competitors that are all jockeying for position in an increasingly crowded marketplace. Agenus and its partners, Incyte Corp. and Merck, therefore seem content to apply broad labels such as "solid tumors" to their ongoing clinical studies in an attempt to hide their real intent from potential competitors.
What we do know is that Agenus has a highly diversified portfolio of checkpoint antibodies that include a CTLA-4, a PD-1, a GITR, and an OX-40 antagonist, among others in pre-clinical development. More to the point, Agenus arguably only needs to hit on perhaps one of its various anti-cancer checkpoint antibodies to be a straight steal at current levels. This biotech, after all, sports a market cap of a mere $340 million at present, meaning that even a checkpoint inhibitor approved as later-line therapy in a crowded field is probably going to generate enough revenue to be a major win for the company's shareholders.
An ADC of opportunity
Sean Williams (ImmunoGen): When I think of Exelixis, I think of a company that initially struggled with its lead drug but wound up turning things around in a big way. One company that comes to mind with a similar profile -- initial drug failures and cash concerns, but plenty of label expansion opportunities -- is antibody-drug conjugate (ADC) developer ImmunoGen. ADCs are drugs that link a chemotherapy toxin to an antibody to more precisely target cancer cells.
ImmunoGen looked as if it was on the fast track to success after the Food and Drug Administration approved Kadcyla for advanced stages of HER2+ breast cancer. Kadcyla is currently licensed to drug giant Roche. However, Kadcyla subsequently failed to live up to the hype in a first-line HER2+ breast cancer trial, and it also failed a pivotal gastric-cancer study.
Now, ImmunoGen's hopes rest with mirvetuximab soravtansine, an in-house ADC, as well as multiple pipeline partnerships.
Mirvetuximab soravtansine is going to be a complete wild card for ImmunoGen, considering that the company completely altered its FORWARD I study last May. Instead of sticking with its original dual phase 2 trial design, the company is now targeting a single phase 3 trial for folate receptor alpha-positive ovarian-cancer patients based on the success of its lead drug in a phase 1 subset of these patients. It's a risky proposition, considering it was only a small subset in early-stage studies. But if ImmunoGen's gamble pays off and the ovarian cancer therapy meets its primary endpoint of a statistically significant improvement in progression-free survival, then a path could be cleared for label expansion, as well as new funding. Considering that Kadcyla is FDA-approved, the company has previously demonstrated that its ADC platform can be effective.
ImmunoGen also has a bountiful early- and mid-stage pipeline that currently lists nine partners, some of which are industry giants. Success in late-stage studies for isatuximab, a Sanofi-partnered CD38-targeting antibody designed to treat multiple myeloma, would be a good start. If ImmunoGen can demonstrate to its peers that its ADCs have clinical promise, it'll be more liable to find partners that could alleviate its cash concerns.
ImmunoGen poses plenty of risk, just as Exelixis once did, but if the cards land just right, ImmunoGen could have significant upside.
This compound holds big potential
Brian Feroldi (Omeros Corporation): Omeros Corporation has already crossed the finish line of FDA approval with a pupil-dilating drug called Omidria, which helps eye surgeons perform cataract removal and lens replacement procedures. While the initial ramp-up was slow, Omidria's sales growth exploded by 212% last year to $41.4 million -- and that could be just the beginning. Since millions of eye surgeries are performed every year, it's possible that Omeros could have a blockbuster on its hands. If true, then Omeros could easily turn profitable from Omidra sales alone.
However, the real reason I think investors should pay attention to Omeros is a compound drug called OMS721. This product candidate is being researched as a treatment option for a number of disorders that includes atypical hemolytic-uremic syndrome (aHUS). There is currently only one treatment option for this ultra-rare condition: Alexion Pharmaceuticals' Soliris. Alexion rang up more than $2.8 billion in total Soliris sales last year in part because of its aHUS monopoly. That hints that OMS721 could potentially ring up nine figures in sales on its aHUS opportunity alone. That number could easily cross into blockbuster status if it proves to be helpful in treating other rare disorders, too.
Omeros offers investors profit potential with Omidra and the chance at lottery ticket-type winnings from OMS721. That's an interesting combination for a company with a sub-$700 million market cap, which is why I think this stock should appeal to any risk-loving biotech investor.
