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Source: U.S. Food and Drug Administration. 

For clinical-stage biotech companies nothing is more important the release of clinical data. Since the vast majority of biotech companies lose money (somewhere near 90% of publicly traded biotech stocks), clinical data helps to shape the treatment potential and peak annual sales forecasts of a drug developers' pipeline.

When things go right, the wheels keep churning. Positive clinical data can allow a biotech company to raise much needed capital to push early and midstage drugs into costlier later-stage trials, or perhaps even toward a registration filing.

On the flipside, when things go wrong, or there's a hiccup along the way, everything can seemingly come to a grinding halt. Worst of all, shareholders often pound the stock price of a drug developer reporting disappointing results or clinical news.

Although it managed to fully erase the losses that totaled as much as 25% in after-hours trading, cancer immunotherapy developer Advaxis (NASDAQ:ADXS) and its shareholders learned exactly what can happen this week when things don't go according to plan.

Houston, we have a (temporary) problem
Cancer immunotherapy developers seek to develop injectable vaccines that in some way stimulate your immune system to locate and kill cancer cells more efficiently. However, Advaxis isn't your typical cancer immunotherapy company. It's method of vaccine development involves utilizing a bacteria known as Listeria monocytogenes to trigger an immune response (thus why Advaxis' proprietary drug platform is known as "Lm technology"). This is done by allowing the Listeria strains in the body to secrete specific fusion proteins that alert the immune system to an antigenic presence (the cancer cells).

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Source: Advaxis. 

Advaxis has three primary focuses for its Lm technology: HER2-expressing solid tumors, prostate specific antigens, and cancers that are caused by the human papillomavirus, or HPV. Advaxis' lead drug candidate, axalimogene filolisbac (previously ADXS-HPV), is being examined in nine indications at present, including cervical, anal, and head and neck cancers. The furthest along being the planned phase 3 study known as AIM2CERV for patients with high risk, locally advanced cervical cancer caused by HPV.

But, what happens if that study doesn't move forward as planned?

According to a press release issued by Advaxis after the market closed on Tuesday, Oct. 6, the Food and Drug Administration issued a verbal notice to Advaxis that it was placing axalimogene filolisbac on clinical hold, ultimately affecting four of Advaxis' studies. To be crystal clear, the hold does not affect ongoing studies targeting PSA or HER2 solid tumors.

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Source: Flickr user Truthout.org.

Per the release, the reason for the hold stems from a safety report issued to the FDA highlighting the death of a patient with advanced cervical cancer. As noted by the press release, investigators deemed the cause of death to be the progression of the patients' cervical cancer. However, blood cultures taken from the patient in July 2015 showed that she was positive for Listeria monocytogenes. She had not received an injection of axalimogene filolisbac since early 2013.

Advaxis suggests that the patients' multiple rounds of surgery may have allowed the Listeria monocytogenes a place to "hide," so to speak, allowing it to persist in the body for an extended period of time and be detected during routine blood cultures while the patient was hospitalized. Two weeks after being discharged, the patient returned to the hospital with respiratory distress and passed away later that day. The FDA is conducting research into whether or not Advaxis' Lm technology played a role in the woman's death.

For what it's worth, Advaxis agrees with the investigators' assessment of cervical disease advancement leading to death and expects the clinical hold to be resolved "expeditiously and without significant interruption to our HPV clinical development program."

What's next for Advaxis?
You're probably wondering, "What now for Advaxis?"

The good news is the clinical halt doesn't affect its entire pipeline, so research into its partnered combo therapy with Merck's Keytruda involving ADXS-PSA for prostate cancer, and ADXS-HER2 for HER2-expressing solid tumors, can continue.

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Source: National Cancer Institute.

Also, this is, as the press release notes, an isolated incident. Isolated does not mean that axalimogene filolisbac is safe necessarily – the FDA will determine that. However, after years of studying its Lm-based therapy in cancer patients without an issue like this probably tips the scales more toward the vaccine being safe than unsafe. Keep in mind trying to guess what the FDA is thinking is like trying to find a needle in a haystack, but the prior history of data would seem to suggest that Advaxis' Lm-based therapy is safe and well-tolerated.yy 

The big concern here is how long the FDA will take to review the facts of the aforementioned patients' death. Advaxis seems to believe this will be a short-term clinical hold, but each day that passes represents a missed opportunity to get potentially game-changing medicines to pharmacy shelves sooner. It also means more waiting to generate recurring revenue and more ongoing losses.

The good news here, if there is a silver lining, is Advaxis reported a little more than $97 million in cash and cash equivalents on its balance sheet halfway through 2015, and this doesn't account for recent grants and financing options during the third quarter that totaled in excess of $25 million. Still, it means ongoing cash burn is likely to continue, and the longer we wait, the further Advaxis' losses could be pushed out.

Axalimogene filolisbac has certainly impressed in early and midstage cervical cancer studies thus far, but I would approach the stock right now as if I were walking on eggshells. Having no approved products on pharmacy shelves and its lead therapy put on hold isn't a particularly attractive spot to be in, especially considering that biotech stocks as a whole have been hammered by the prospect of prescription drug reform. Until we have more clarity on this clinical hold, I would suggest remaining safely on the sidelines.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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