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3 Top Stocks After #ASH18

By Todd Campbell - Dec 6, 2018 at 1:48PM

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Positive trial data unveiled at the American Society of Hematology conference makes these top stocks to watch in 2019.

The 60th annual American Society of Hematology (ASH) conference just wrapped up in San Diego, and the high-profile event didn't disappoint. Many studies caught our eye at the conference, but data from three trials in particular stood out for their potential to ignite investor optimism. In this episode of The Motley Fool's Industry Focus: Healthcare, host Shannon Jones is joined by Motley Fool contributor Todd Campbell to discuss:

  • How Celgene (CELG) can profit from pivoting its CAR-T program;
  • Why bispecific antibodies could be the next big thing in cancer treatment;
  • What was behind Global Blood Therapeutics' (GBT 7.92%) skyrocketing postpresentation share price.

A full transcript follows the video.

This video was recorded on Dec. 5, 2018.

Shannon Jones: Welcome to Industry Focus, the show that dives into a different sector of the stock market every day. Today is Wednesday, December 5th, and we're talking Healthcare. I'm your host, Shannon Jones, and I'm joined via Skype by healthcare guru Todd Campbell. Todd, how are you?

Todd Campbell: I'm doing well, Shannon! I'm excited about today's show. We're going to talk about one of the most highly anticipated events of the year in healthcare. I think we're going to have some good takeaways here for our listeners.

Jones: I agree. I am equally as excited. For our listeners that are new to the healthcare space, there are several big major medical conferences that both the scientific community and investors watch anxiously. This one in particular is ASH, the American Society of Hematology annual conference, happening this year in San Diego. 

Todd, I don't know about you, this is actually one of my favorites. If you think about between ASH, you've also got the JP Morgan Healthcare Conference that happens in January. You've also got ASCO, American Society of Clinical Oncology. That one happens around mid-year. Of the three, I love the big medical conferences the most. JPM to me is more of a horse and pony show. You get some interesting presentations on the business end of things. But for me, I love the science that comes out of conferences, just like ASH.

Campbell: Yeah, at JPM, there's a lot of rah-rah presentations. "Look how great we're doing!" But you really oftentimes get some big news breaking like mergers and acquisitions, sometimes they'll update their forecasts for the year, you might get preliminary earnings data. Shannon, I'm sure you and I will be covering that in a lot of detail because that happens relatively soon, in the first week of January.

The American Society Hematology conference, that is the study of things associated with the blood, hematology. Usually, what ends up happening, these companies with clinical stage and commercial stage drugs, they're running studies for blood cancers, bone marrow cancers, hemophilia studies, sickle cell disease studies. And as they get interesting trial data, they want to, of course, present that information out to all the industry participants. Not just reporters, but we're talking actual scientists and doctors who are taking care of these patients. 

So, yes, you're right, this is a really fascinating event to watch. Oftentimes, you'll get data that is quite remarkable. Over the course of the last few years, blood cancers especially have seen remarkable advances. We've talked on the past on the show about CAR-Ts. We're going to talk about one in a few minutes. This is a great show. I'm looking forward to diving into some of these companies and explaining some of our key takeaways. 

Jones: We're going to run down our top three notable stories coming out of ASH. This is certainly not an exhaustive list. Certainly check out to stay up to date on all the coverage related to ASH. We chose what we consider our top three. 

Todd, let's dive into the first one. This is probably a household name for many healthcare investors. The first company that reported out results is Celgene, ticker CELG. Celgene, never disappoints, had a slew of data readouts at ASH. There was actually one presentation in particular that caught many investors' eyes. Todd, what can you tell us about that?

Campbell: Possibly one of the most prolific presenters here. Celgene is just a dominant force in multiple myeloma, and as a result, oftentimes makes a lot of presentations here at ASH every year. This year was no exception. They had the poll position presentation on Saturday for the drug that they developed with Acceleron, which is Luspatercept. We talked about that on the show in the past for beta thalassemia and myelodysplastic syndrome. I figure, we've already covered that one. It's not as exciting as this other data that they released.

The one that really stood out to me was the information they divulged on liso-cel, which is a CAR-T gene therapy that is best known for its development for non-Hodgkin lymphomas.

Jones: Let's just talk about CAR-T a little bit. I know we've talked about it quite a bit on Industry Focus. For anyone who's new, CAR-T is really taking the healthcare world by storm. On the simplest level, it's basically a treatment in which a patient's T cells from their immune system are taken out, they are transformed -- supercharged, if you will -- and then put back into the patient's body via infusion. The idea is, now, you've got a supercharged immune system that can go out and fight cancer. 

Liso-cel is another type of CAR-T. It's definitely not the first. For those that have been following, Gilead and Kite put out their own CAR-T, and Novartis was first to market. But liso-cel, many investors will more readily recognize it as JCAR017. Celgene actually purchased Juno Therapeutics earlier in the year, I believe it was about a $9 billion acquisition, it got this asset, and now, it's turning some heads at ASH this year.

Campbell: Up until this point, we've thought of liso-cel as being a potential best in class because of some potential safety advantages vs. the first two that made it to market -- Gilead's Yescarta and Kymriah from Novartis. That changes a little bit today, though. At ASH, they presented data from a very small trial for its use in chronic lymphocytic leukemia, or CLL. That's the most common leukemia that gets diagnosed in adults. It starts off in the cells of the bone marrow in the cells that become white blood cells. 

What this trial did is, it evaluated liso-cel in chronic CLL, which is a form wherein the cells only partially mature. They don't completely mature. Over time, those non-completely matured cells crowd out normal white cells, spill out into the blood, go into other parts of the body. There are about 20,000 newly diagnosed cases of CLL every year. What this study was trying to figure out is, could liso-cel provide a new treatment for patients who have taken the standard of care, which is Imbruvica, and seen their disease return, they've relapsed, or they were refractory, they didn't respond to Imbruvica. 

And in this -- again, small -- trial, the results were pretty remarkable. 81% of patients responded. 43% of patients had a complete response.

Jones: And these are patients that were truly sick. These are patients that had failed, at least five other therapies just getting to this point. These were very sick patients. Another thing in CLL is, right now, there's not a CAR-T therapy that's indicated for CLL, which I think is very smart strategically. This particular drug initially and still is going after the lymphomas, just like the other CAR-T therapies, but you see Celgene actually pivoting, and I think it's very smart, because this could potentially be the first CAR-T in CLL.

Campbell: Right. If you look at the commercial performance so far of Yescarta and Kymriah, it's been a little bit of an anemic launch so far since they've rolled out. Combined sales between those two CAR-Ts last quarter was less than $100 million. People have been worried about this all year. They've been saying, jeez, even if you get this on the market for non-Hodgkin's, how much of the sales will they really capture? Does that justify that big price that they paid to buy Juno earlier this year? This walks back some of that worry. Now, you can look at it and say, ah, OK. Imbruvica does nearly $1 billion per quarter in sales. It's the most widely used drug in CLL right now. So, there is an opportunity, where you could now say, yes, the first approval may come in non-Hodgkin lymphoma for this gene therapy, but in the future, if you could get this approval in CLL, now I can begin to see why Celgene is forecasting that this could be a $3 billion per year drug in peak sales. 

Jones: And $3 billion is one range. I've heard some analysts say it could even go as high as $5 billion. I think that's a little bit more aggressive. But it really underscores the fact, and we've talked about this in a lot of shows, that Celgene needs a more diverse revenue stream. Celgene, up until this point right now, has got about 63% of its revenue tied in one drug, Revlimid. Listen to last week's show if you want to hear more about that. But this could be a huge, huge revenue driver for the company if it works. Again, this was a very small study, early, Phase I study. 

The key issue that I'll be watching for this drug, let's assume that it gets approved in CLL. They key is, can Celgene figure out how to get CAR-T from the very expensive inpatient setting to potentially having this drug in the less expensive outpatient setting? CAR-T therapy right now, Todd, you talked about just how low those sales launch numbers are. Pretty disappointing. I think, really, it's because of the list price. You're talking about $375,000, upwards of $475,000 for treatment, and that doesn't even include the supportive care that goes along with infusing patients with CAR-T. So, not only do they need to get to the finish line of getting this drug approved, they also really need to think about, how do we make this commercially viable?

Campbell: Yeah, $500 million price tags. The other thing to recognize is that the current ones that are on the market right now are for very late line use in patients, small patient populations that have gone through multiple treatments and failed to respond to them. Not only do you have to figure out how to reduce the cost of these things so that you overcome insurers' and other payers' objections to them, but also figure out how to make them safe enough to be able to be used earlier in the treatment paradigm. If you have a safe drug that can generate very high response rates, then you could actually start to see, maybe there's a way to use this alongside Imbruvica. I think a trial might be planned for that, actually, in the future. Or, maybe even compete against it in the earlier lines of setting.

To rein back little enthusiasm for it, as we said, most likely scenario here is for an approval in 2020, and that will be for non-Hodgkin lymphoma. CLL would have to be supplemental, most likely, and that probably wouldn't come until after that. So, we're still talking a few years away in CLL. 

Jones: Yeah. But, definitely a key storyline to watch here for Celgene moving forward. 

We've talked about CAR-T cell therapy. Many investors are familiar with that. I think a good segue is actually talking about the second company making headlines, potentially something even more interesting than CAR-T. The company that is driving this is Regeneron (REGN 1.47%), ticker REGN, which many investors will be familiar with. They're actually going after a new-ish type of cell therapy, something called bispecific antibodies. It's certainly made some splashy headlines here at ASH, Todd. I must say, I was quite impressed when I saw the data on this one.

Campbell: Very small sample size. We'll get to that. But, yeah, incredibly impressive. Investors, what you really have to recognize, we're always trying to figure out, what's the next big thing as far as mechanism of action that people are going to be talking about. I think bispecific antibody therapies could very well be what you're going to want to be focusing on in 2019. You're going to hear more and more about these as we go. 

Essentially, what we're talking about is an evolution of the tried-and-true, well-established monoclonal antibody programs that have been around for a long time. They're bispecific because they can hit two or more cell service targets at the same time, using the same drug, not using two separate monoclonals but having it together in one therapy. 

What's really interesting about this, and we were just talking about CAR-Ts. One of the risks associated with that is getting them safe enough to be able to use in the majority of patients' early line therapy. REGN1979 and other bispecifics potentially could be safer to use in patients than CAR-Ts because they don't cause cytokine release syndrome, which is a life-threatening event that's been oftentimes seen in some of the use of some of these CAR-Ts. The drug that Regeneron's developing, REGN1979 -- great year, right Shannon? [laughs] 

Jones: [laughs] Wonderful year!

Campbell: That binds to CD3, which is on the T cell of the immune system, and CD20, which is expressed on B cell tumor cells. The idea here is, by binding to the T cell and binding to the CD20 on the tumor cell, you're able to basically alert that immune cell to go target and destroy that B cell cancer easier, better, more effectively.

Jones: Yeah, and it could potentially have a lower cost. We talked about the cost of CAR-T. Bispecifics could have a much lower manufacturing cost associated with it, in addition to the potential better safety profile. Let's talk about efficacy, Todd. Granted, this is a very small study. We should always caveat that. But they were actually able to have a 100% overall response rate in a particular type of lymphoma. What can you tell us about that, Todd?

Campbell: That's just stupid good, right? It's amazing! It's crazy! They were evaluating in non-Hodgkin lymphoma, specifically two different types. Follicular lymphoma was the one that saw that 100% response rate. Follicular lymphoma is not necessarily incredibly common. There are about 15,000 new cases per year in the United States. Typically, patients respond pretty well to the existing therapies that are out there right now. I think the five-year survival for follicular is right around 88%. But for those patients that don't respond well to the existing therapies, there still is a very big need for new treatment approaches. Maybe, maybe, this will be that new treatment approach. 

We had 10 patients that were studied in this early stage trial. As you mentioned, 100% of them responded to the treatment. 80% of them, Shannon, were complete responders. That's just remarkable.

Jones: I think the key here will be looking at durability of response moving forward. These were pretty heavily pretreated patients. Another thing to watch is, most people will know, Regeneron just got FDA approval. Kind of late to the checkpoint race, but they did just get approval for the checkpoint Libtayo. It'll be interesting to see Regeneron potentially partner their PD-1 checkpoint inhibitor with this drug, and what the results could be. For those that aren't familiar, checkpoint inhibitors have ushered in this new wave of immunotherapy, and have had some impressive results, but they don't work in everyone. Two, looking at the durability of response and who responds to that, has been a big question mark. If you could pair these two together and get durable responses, I think this makes Regeneron certainly a stock to watch.

Campbell: I think that's what Regeneron's goal is. Now, they've got this PD-1 drug. The way they're looking at it is saying, "Hmm, what indications are PD-1s approved for yet? Maybe we can develop other drugs internally, partner those two drugs up, and be able to outmaneuver some of the other competitors out there and establish a foothold in these big markets." I think a trial actually started already that matches these two drugs up. We're going to want to watch that very closely. 

We're also going to watch 2019, Shannon, because Regeneron says that they are going to kick off what they think could be a registration-ready trial, a Phase II trial, so they're going to go after an accelerated approval, in follicular lymphoma. We're going to want to keep a really close eye on that, as well.

Jones: You've also got some other bispecifics out there. Amgen also has a bispecific, as well as Pfizer. I think 2019, as you mentioned, Todd, will definitely be the year of the bispecifics. CAR-T, old news, 2018. 2019, definitely bispecifics. 

Let's turn our attention to the last notable headline, certainly not the least. Todd, a wise person once said, "If at first you don't succeed, try, try again." I don't know who said that, but I think they were talking about Global Blood Therapeutics, ticker GBT. When you talk just talk about the share price reaction to news that happens at these medical conferences, this company saw shares skyrocket almost 50% on one day. I think they closed right around $46 a share, based on a Phase III study and a regulatory update on a product that has had mixed results. 

Campbell: The drug that we're talking about here with Global Blood Therapeutics -- and you're right, we saved the best for last. $30 to $47 from Friday to where we are this morning. That's just a crazy move in this company's stock. The drug is Voxelotor -- easy for me to say. We'll just call it Vox. 

Jones: It's Vox. [laughs] 

Campbell: All right, we're calling that Vox. It sounds like something out of the Jurassic era. [laughs] Anyways, that's a once-daily oral therapy for sickle cell disease. Sickle cell disease is a life-threatening, chronic disease, onset typically in childhood. Over time, it can starve organs of blood, it can cause stroke. Unfortunately, patients have a shortened lifespan with sickle cell disease, and they can also suffer from extremely painful vaso occlusive crises that land them in the hospital and force them to rely on opiates to manage their pain. There is a massive need for new treatments for sickle cell disease. And, based on the data we saw at ASH and news that came out of the FDA at the same time, it appears that this drug may be on the fast track for helping out these patients.

Jones: Absolutely. On the regulatory front, the FDA, according to the company, has agreed to accept the company's request to put Vox on this accelerated approval pathway as a treatment for sickle cell disease. For those that have been following this particular company, it's quite fascinating, because sickle cell disease, huge unmet need. There have been multiple attempts to stop and inhibit what the FDA considers the benchmark of approval, which is these pain crises that happen. That's really what most drug companies try to go after. 

GBT, I mentioned, had some mixed results. But what they have finally gotten to at this point is now potentially an endpoint that the FDA likes. With that, you've got now the FDA saying, "OK, let's move forward with this on an accelerated basis." The key here is, can Vox actually have long-term clinical benefit? Even though the stock certainly responded tremendously to the data that came out of this conference, the risk associated with this stock is probably the highest of these stories, just because you want to see long-term clinical benefit. As I understand it, Vox is actually now going after an endpoint that may have not as much clinical benefit for patients.

Campbell: You have to understand, too, that if they are successful in getting this drug across the finish line, theoretically, it's disease-modifying. What it would do is, it helps prevent the sickle-ing of those cells by reoxygenating those cells so that they don't form that inflexible sickle shape. That part of this drug is fascinating to me. 

The trial that we saw data from at ASH was really a dose escalation study. It wasn't meant to serve as a registration-ready trial. However, in June, they reported preliminary data from a part A of this trial. That part A trial data was that 58% of Vox patients who got a 1,500-milligram daily dose of it saw an increase of one gram per deciliter in their hemoglobin at week 12. Only 9% of patients that were given a placebo saw such an improvement. So, the thinking here is, if we are able to produce more red blood cells that work right, work correctly, then perhaps, perhaps, we then reduce the potential for those vaso occlusive crises. We also maybe delay disease progression and these patients can live longer. Like you said, that's not proven yet. This is all still theoretical.

At ASH, they updated the data from Part A. Now, 65% of patients who took that 1,500-milligram dose saw at least a one gram per deciliter improvement at 24 weeks. That was vs. 10% on placebo. They also reported some data from Part B, which was also looking at the 1,500-milligram dose. 55% of patients saw that one-gram improvement, as well. So, it definitely seems that this works better than placebo, as far as being able to get healthier red blood cells for patients. Whether or not that actually improves quality of life and reduces the risk of early death remains to be seen.

Jones: Yeah. So, this is definitely a stock to watch moving forward. Again, the assumption is, if you can increase the capacity of blood to deliver more oxygen to tissues, you could theoretically protect organ function and reduce the risk of stroke in patients with sickle cell disease. 

It's not necessarily a new scientific paradigm. There was a study done back in the late 90s that I pulled up that did demonstrate that blood transfusions, at least, were increasing hemoglobin levels and reducing stroke frequency in children with sickle cell disease. So, it certainly could be a follow-up to that. We'll have to wait and see on Global Blood therapeutics. Certainly keep your eyes on that, but definitely some uncertainty. 

All in all, ASH has proven to be a great idea generator, at least for me. Todd, I don't know about you. But, that does take us right into JPM coming up in a few weeks. It'll be really interesting to see what other ideas we get out of that, too.

Campbell: Absolutely. I'm looking forward to talking with you more about that in a few weeks.

Jones: Can't wait! That's it for this week's Industry Focus: Healthcare show. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. This show is produced by Austin Morgan. For Todd Campbell, I'm Shannon Jones. Thanks for listening and Fool on!

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Stocks Mentioned

Celgene Corporation Stock Quote
Celgene Corporation
Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
$655.01 (1.47%) $9.49
Global Blood Therapeutics, Inc. Stock Quote
Global Blood Therapeutics, Inc.
$27.66 (7.92%) $2.03

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