With the Nasdaq Biotechnology Index up 65% since the start of the year, it's clear that the biotech sector performed extraordinarily well in 2013 -- but which stocks were the biggest winners? Several small-cap and mid-cap biotech companies posted returns of 200% or more through the middle of December this year, and, in this series, I review the 15 biggest movers of 2013. Let's continue this review with number 7 on the list, Inovio Pharmaceuticals (NASDAQ:INO). Inovio believes it's got the right formula for revolutionizing vaccines ability to take on the hardest-to-treat disease. Investors, who drove shares up nearly 300% this year, appear to agree.
An immunotherapy gold rush
Big drug companies are scurrying to get a foothold among a slate of emerging cancer immunotherapies being developed by companies like Inovio. One of them is cancer drug goliath Roche (OTC:RHHBY), which markets Avastin and Herceptin -- two of the most widely used, and lucrative, drugs in oncology. In keeping with Roche's laser focus on protecting this cancer franchise, the company agreed to partner partner up with Inovio earlier this year in a deal that may eventually be worth as much as $422 million plus royalties.
The deal gives Roche access to Inovio's promising pre-clinical compounds INO-5150 for prostate cancer and INO-1800 for hepatitis B -- a disease commonly associated with liver cancer. Both those drugs had intriguing pre-clinical data and the Roche deal will help Inovio move them more quickly into human trials next year. But Roche isn't alone in linking up with emerging biotechs with intriguing immunotherapy approaches.
AstraZeneca (NYSE:AZN) spent $500 million to acquire Ampliimune in 2013, netting it AMP-514, a pre-clinical PD-1 compound. AMP-514 will join AstraZeneca's MEDI-4736 anti-PD-L1 drug in human trials soon. Merck (NYSE:MRK), fresh on the heels of encouraging trial data for its MK-3475 cancer treatment, is also searching for in-licensing deals in immunotherapy that it hopes can one day be used in combination with MK-3475. And Bristol-Myers (NYSE:BMY),with 25 ongoing studies for its cancer drug nivolumab, has similar aspirations following the success of Yervoy, a drug it received when it acquired Medarex in 2009.
Big money is at stake
Inovio's ability to eventually commercialize its immunotherapy cancer drugs could someday mean big money for the company. The immunotherapy market may reach $35 billion by the end of the decade and spending on cancer treatment may climb to as much as $207 billion in 2020 from $125 billion in 2010, according to the National Cancer Institute.
One of the biggest growing areas for spending will be for the treatment of prostate cancer, which Inovio's INO-5150 may target. That market may grow to as much as $19 billion in 2020 from less than $12 billion in 2010.
Hepatitis also remains an under-treated disease that may cause as much as 80% of liver cancer cases. That's alarming given the number of liver cases diagnosed annually in the U.S. has climbed from less than five per 100,000 people to eight per 100,000 in 2009. That means there's a significant need for new therapies, like Inovio's INO-1800, that may be able to reduce or eliminate hepatitis B.
Fool-worthy final thoughts
The deal with Roche frees Inovio up to spend money developing other promising vaccines, including a pre-clinical one for the rare and often fatal MERS virus and VGX-3100, a treatment for cervical cancer in phase 2 trials. Inovio expects to release data from that VGX-3100 trial in the middle of 2014.
However, all of Inovio's opportunities come with significant risk. The company's drug compounds are all in the early or pre-clinical stage. That means Inovio is a speculative play suited only to the most risk tolerant investor. Regardless, the company's intriguing approach and its relationship with the well-heeled Roche suggests investors may want to keep an eye on its progress.
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