Cinderella stories aren't common in investing, but they do happen.
Perhaps the best recent example is Axsome Therapeutics (AXSM +1.31%). The company's market cap dipped to just $60 million in the final days of 2018, but promising results from a drug candidate aimed at treating depressive disorders propelled the stock onto Wall Street's radar weeks later. After a string of positive regulatory developments and promising late-stage clinical results over the course of last year, the pharma company ended 2019 with a market cap of $3.8 billion.
Investors will find it difficult to replicate those returns, but there are still a handful of small-cap stocks with big-cap potential. Two biopharma stocks that come to mind are TG Therapeutics (TGTX 0.17%) and Forty Seven (FTSV +0.00%). Both are developing promising treatments for blood cancers. Here's why investors may want to keep an eye on the duo in 2020.
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An overall response rate of 100%
The overall response rate (ORR) measures the percentage of patients in a clinical trial who respond to treatment at any point during the study. It says nothing about the duration of response (DOR) or if tumors disappeared completely, but ORR is the first metric researchers and investors seek out when trying to understand whether a treatment could be effective. By that measure, TG Therapeutics might have two very effective drug candidates in early stage development.
The small-cap biopharma presented data for two separate triple-combination therapies at the annual meeting of the American Society of Hematology (ASH) in early December. Both combinations included a proprietary duo of ublituximab, a monoclonal antibody, and umbralisib, a small-molecule inhibitor of cellular growth proteins. The pair is often just referred to as U2.
In a triple-combination of U2 and the approved cancer drug venetoclax, TG Therapeutics reported that all 23 individuals with relapsed/refractory chronic lymphocytic leukemia (CLL) responded to treatment. That gave the drug candidate an ORR of 100%, which is virtually unheard of. In fact, 20 of the 23 individuals responded to U2 alone (for an ORR of 87%) prior to the introduction of venetoclax later in the treatment regimen.
More impressive, all nine individuals who completed a full 12 cycles of treatment had undetectable minimal residual disease (MRD) in their blood, while seven of those individuals had undetectable MRD in their bone marrow. None of the 27 patients in the phase 1 trial (only 23 individuals were available for efficacy calculations in time for ASH) have progressed after treatment at a median follow-up of 6.4 months.
TG Therapeutics also reported promising data from a separate triple-combination comprising U2 and a proprietary BTK inhibitor called TG-1701. The therapy delivered an ORR of 86% (six of seven patients responded) at the lowest dose of TG-1701 tested.
As the biopharma sector goes all-in on complex cellular medicines for treating CLL, it's refreshing to see the simpler, oral delivery approach of TG Therapeutics deliver such impressive outcomes. While the results collected to date are from small patient populations, they're robust and certainly suggest a promising future is in store for the $1 billion company.
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Could this help 75% of individuals without treatment options?
Shares of Forty Seven made an end-of-year movement that was more reminiscent of Axsome Therapeutics, soaring from a market valuation of $220 million in October to $1.6 billion today following the company's presentation at ASH.
Forty Seven reported that its lead drug candidate, a monoclonal antibody named magrolimab, achieved an ORR of 92% and a complete response (CR) rate of 50% in untreated patients with higher-risk myelodysplastic syndrome (MDS). The drug also achieved an ORR of 64% and a CR rate of 55% in patients with untreated acute myeloid leukemia (AML) who are ineligible for chemotherapy.
Perhaps the most impressive takeaway is that magrolimab achieved these results in a patient population that is severely underserved. An estimated 75% of individuals with MDS have no treatment options other than supportive care.
While the results presented at ASH were only from a phase 1b study, Forty Seven laid out a development roadmap that could allow the company to file a biologics license application (BLA) with American regulators by the end of 2021. Sticking to that timeline could put magrolimab on the market by 2022, although investors shouldn't discount the possibility that the roadmap might be a little ambitious.
Timeline or not, Forty Seven appears to have a very promising drug candidate for MDS and AML patients with few other options. The business ended September with $166 million in cash and raised $196 million in gross proceeds from a public stock offering before the end of 2019, which gives it more than enough financial firepower to develop magrolimab in the next few years.
