Believe it or not, most professionals in the weird world of drug development would rather be lucky than smart. That's because 99.99% of potential new drugs that look great in a petri dish lose their luster before earning a nickel.
Every time an attempt to develop a new revenue source fails, it costs something. The biotech industry is especially cruel, because each step toward success is exponentially more expensive than the one before it.
These three start-ups have gotten close more than once, but they still don't have any products to sell. What they have created, though, is a trail of disappointed investors who have watched at least $1 billion go up in flames.
|Company (Symbol)||Market Capitalization||Year of Incorporation||Accumulated Deficit, Sept. 30, 2018||Focus|
|Novavax (NASDAQ:NVAX)||$269 million||1987||$1.25 billion||Vaccines|
|Geron (NASDAQ:GERN)||$285 million||1990||$1.00 billion||Oncology|
|Agenus (NASDAQ:AGEN)||$405 million||1994||$1.13 billion||Vaccines/oncology|
There are biopharma companies that have been around longer and burned through more of their investors' cash, but those stocks have been beaten into the dirt in less time. Here's what you need to know about three struggling biotechs that still have a long way to fall.
Novavax: Vaccine math is hard
Proving that a new experimental vaccine will provide a meaningful benefit in the real world isn't easy. Respiratory syncytial virus (RSV) is a relatively common infection, but it only sends around 2% of infants, and their distraught parents, to seek treatment for severe pneumonia.
To convince regulators that an RSV vaccine provides a meaningful level of protection for a slim number of potentially susceptible patients requires one of two things to happen. Your vaccine needs to protect nearly everyone from infection, or else you need to test enough patients to fill a football stadium.
While there are signs that ResVax prevents severe RSV infections, the company will almost certainly have to run a much larger study to persuade the FDA to consider approval. After burning through $1 billion with hardly a thing to show for it, Novavax could have a hard time persuading investors to back another attempt.
Geron: What good's a clock without a calendar?
Telomerases that connect chromosomes are supposed to get shorter each time a cell divides, but malignant cells usually find a way to extend theirs. Geron's been trying to prove that it can control these molecular clocks, which would also make it tough for cancer to progress.
While Geron's been trying to control tiny molecular clocks, it hasn't been keeping an eye on the calendar. The company switched gears to intravenously administered imetelstat after an autologous cellular vaccine candidate fizzled out more than a decade ago. Over the years, Geron's tried imetelstat as a treatment for lung cancer, brain cancer, breast cancer, and a handful of blood cancers without much luck.
Imetelstat's most recent flop was with myelofibrosis patients who relapse after standard care. This group needs a new treatment option, but it doesn't look as if Geron's going to provide it. in September, Johnson & Johnson (NYSE:JNJ) walked away from an important imetelstat licensing deal after just 10% of patients receiving the high dosage during a mid-stage study achieved the trial's main goal -- a 35% smaller spleen.
Geron's going to keep swinging with imetelstat. After J&J walked away, the company decided to begin the phase 3 portion of an ongoing phase 2 study for low to intermediate risk patients with myelodysplastic syndromes (MDS) or failing bone marrow. MDS patients rely on red blood cell transfusions that are expensive and painful, plus one in three develop an aggressive form of leukemia.
An impressive 26% of patients treated with imetelstat were able to go at least 24 weeks without a transfusion, and 71% became measurably less dependent. The phase 3 portion will finally include a placebo group for comparison, and a significant improvement could bring a potential partner back to the table. After a couple of decades without a win, though, it probably isn't worth the risk.
Agenus: Shotgun approach
In stark contrast to Geron, Agenus is guilty of running more programs than it can afford. The company's vaccine booster is a component of GlaxoSmithKline's (NYSE:GSK) new shingles vaccine, Shingrix. Agenus was entitled to a single-digit percentage of blockbuster Shingrix sales, but it sold all rights to those royalties last year in return for $190 million up front.
The company's lead candidate is a PD-1 checkpoint inhibitor that already has plenty of well-established competitors that work the same way. That means clinical trial results that are anything less than spectacular will end any chance of significant sales. Agenus recently launched a blockchain-based "coin" that entitles investors to a portion of U.S. net sales, if there are any. Those intrigued by this interesting concept should probably wait until it's applied to a potential new drug that isn't trying to become the 19th member of its class to reach a limited market.
In December, Agenus received $150 million from Gilead Sciences (NASDAQ:GILD) in return for exclusive rights to an oncology candidate that hadn't even entered clinical trials, plus an option to license two more pre-clinical stage candidates. The cash injection came at a good time. The company finished September with just $46 million in cash after burning through $112 million during the first nine months of 2018.
Equity is more expensive than it seems
Some biopharmaceutical companies can marinate for two decades before they start to sizzle, but raising equity by offering shares can make it impossible for long-term investors to realize a satisfactory return on their investment.
In the past decade alone, Geron shareholders have seen their share of any future profits cut in half, which isn't nearly as bad as Agenus and Novavax. Secondary offerings have boosted Novavax's share count 456% over the same time frame, and Agenus' has risen tenfold.
While there's always a slim chance of success with these aging start-ups, it isn't hard to find better options.