The Nasdaq biotechnology index has fallen a frightening 14% in October. Market beatings for a handful of cancer drug developers that presented disappointing clinical trial results for experimental cancer therapies are partly to blame.
Has the market-beating gone too far and created bargain opportunities for intrepid investors? Let's have a look.
|Company (Symbol)||One-Month Loss||Market Capitalization|
|Adaptimmune Therapeutics plc (NASDAQ:ADAP)||50%||$734 million|
|Aduro BioTech, Inc. (NASDAQ:ADRO)||39%||$346 million|
|Kura Oncology, Inc. (NASDAQ:KURA)||36%||$377 million|
Adaptimmune Therapeutics plc: Higher dose needed?
Shares of this clinical-stage biotech fell hard after investigators provided an update from early studies with two novel T-cell therapies aimed at solid tumors. Training immune cells to seek out targets common to blood-based cancers has been incredibly successful, but solid tumors are another story.
Investors looking for early signs of success for Adaptimmune's proprietary T-cell candidates were deeply disappointed. MAGE-A10 didn't halt disease progression for any of the 11 lung cancer patients treated. MAGE-A4 performed slightly better; among six ovarian cancer patients treated, three had stable disease.
The case for Adaptimmune's MAGE-A10 and MAGE-A4 candidates doesn't look so good, but it's not over yet. In August, the company received a green light to dose cohorts with between 1.2 billion to 6 billion cells. There's a chance a higher dose will allow at least one of Adaptimmune's solid tumor candidates to succeed where others have failed. Without any particularly encouraging signs from the 1 billion cell cohorts, though, it doesn't seem likely.
GlaxoSmithKline picked up full development and commercialization rights to Adaptimmune's lead candidate, GSK-794 earlier this year for just $27.5 million upfront. Adaptimmune is entitled to additional milestone payments and a royalty percentage that tops out in the low double-digits. If Glaxo drags its feet, this company's $734 million market cap could fall much further.
Aduro BioTech, Inc.: Stung from a distance
This biotech is developing ADU-S100, an experimental treatment that activates stimulator of interferon genes (STING) receptors, which are supposed to incite the immune system to attack cancer. Unfortunately for Aduro, Merck & Co. (NYSE:MRK) recently reported results from its own STING agonist, and they weren't pretty. As a monotherapy for patients with solid tumors and lymphomas, MK-1454 didn't shrink tumors for anyone.
Aduro BioTech, Inc. lost Johnson & Johnson (NYSE:JNJ) as a collaboration partner in early October, when the conglomerate returned rights to ADU-214, ADU-741, and GVAX Prostate. Johnson & Johnson's departure put a lot more pressure on ADU-S100, which it might not be able to handle. Aduro's collaboration partner, Novartis, is running a phase 1 study with a variety of cancer patients, and it won't take the partnership any further if results resemble Merck's failed candidate.
At recent prices, Aduro sports a minuscule $346 million market cap that could explode higher in the unlikely event that MK-1454's flop wasn't a class-wide problem. Beyond ADU-S100, Aduro has three more experimental therapies in phase 1 trials. I wouldn't call this stock a bargain until we see some encouraging proof-of-concept data from at least one of them.
Kura Oncology Inc.: Great for some
Kura Oncology presented phase 2 results for its lead candidate, tipifarnib, that weren't necessarily bad, but still led to big losses. That's partly because some investors still remember the FDA refused to approve it for treatment of acute myeloid leukemia in 2005.
Kura licensed tipifarnib from Johnson & Johnson a few years ago in the hope that it would work especially well as a treatment for patients with head and neck cancer that also harbor a specific genetic mutation that wasn't as well understood 13 years ago as it is today. Kura excited investors when five out of the first six evaluable patients showed signs of tumor shrinkage after receiving tipifarnib.
Kura has since discovered that the treatment only seems to work well for patients with exceptionally high HRAS mutant allele frequency. Unfortunately, only around 5% of head and neck cancer patients have tumors that fit the profile.
We'll learn more about tipifarnib's potential in this limited population when the company provides additional data from the ongoing phase 2 study next year. While there's a chance that Kura can find more patients with tumors that respond to tipifarnib, it's the only candidate Kura has in clinical-stage testing at the moment. This stock might need to get beaten down even further before it looks like any kind of bargain.
No favorites here
With a well-understood drug that appears headed for an approval, Kura Oncology is probably the best of the bunch. That said, it's hard to imagine the company's investment in a pivotal study ever generating significant returns for investors.