PropThink’s Recap from a Troubled Market Week

At PropThink, the story of the day on Friday was the sell-off in Endocyte, Inc (ECYT). Endocyte‘s lead asset is vintafolide, a folate receptor-targeting small molecule drug conjugate. On Friday morning, Endocyte announced that an independent, interim assessment of the Phase IIb TARGET trial, testing vintafolide in FR+ lung cancer, concluded that testing of vintafolide as a monotherapy (one of three arms in the trial) should be discontinued for futility. Based on available data, the safety monitoring committee believes that vintafolide alone will not produce PFS superiorirty over patients treated with docetaxel – the third arm of the trial is vintafolide in combination with docetaxel, which will continue to be assessed in comparison to docetaxel alone. Here’s what we wrote to PropThink Premium subscribers on Friday morning:

Today’s news, in our view, is a buying opportunity for those willing to hold through the binary EU decision [expected this quarter and discussed in PropThink’s last article on ECYT]. Friday’s early trading knocks $100M off of Endocyte’s $500M market cap, which we view as considerably overdone given that vintafolide as a monotherapy is not crucial to the long-term thesis: the TARGET trial was the only mid- or late-stage study being conducted by Merck (MRK) and Endocyte that included a monotherapy arm; Merck’s planned triple-negative breast cancer trial does not include a monotherapy arm; and vintafolide in a previous Phase I trial in PROC, as a monotherapy, did not produce impressive results, thus this should not be a major surprise.

ECYT’s price action in the last month suggests that many holders are taking money off the table ahead of the EU decision. We suggest buying on this dip, keeping powder dry for addition following the upcoming EU decision.  

Endocyte rebounded from $11.00 in the pre-market, when our note came out, to a high for the day of $13.28. However, the stock made a complete round trip and closed Friday at $10.50.

Endocyte is now a $380 million company with just over $150 million in cash, a compelling pipeline and platform technology, and results from two late-stage studies due next year. For a closer look at the story, read PropThink’s previous coverage (here and here). In our view, ECYT selling off is simply a better opportunity to add.

BIND Therapeutics (BIND), like Endocyte, develops highly targeted oncology therapies. BIND’s technology, however, differs in that the newly public company employs a proprietary nanoparticle platform of “Accurins” designed to maximize the level of drug delivered to a patient while minimizing systemic exposure. BIND is a little pricey for us given the lengthy wait before proof of concept data, but the company has inked research collaborations with some major blue chip pharmaceutical players and is worth keeping an eye on. Here’s the full story.

Onconova’s (ONTX) rally last week failed to hold up, and the stock closed Friday’s trading session at $23.98, off 23% from its 52-week highs. The company’s Phase III ONTIME trial, testing rigosertib in 2nd-line myelodysplastic syndrome, should read out in the next five months, and Onconova expects to present final results from the Phase II trial of oral rigosertib in 1st-line MDS at the American Society of Hematology (ASH) annual meeting this December. We’re optimistic about these trials, and MDS is an attractive market given a lack of approved treatments in the 2nd-line setting. With an interim analysis, proof of concept data, and top-line survival data from late-stage studies expected over the next six months, we’re optimistic that Onconova will surpass its former $31-highs. Read more in our prior coverage here.

Tekmira Pharmaceuticals’ (TKMR) provided a robust update to its pipeline in a webinar this Tuesday, revealing a number of existing pre-clinical programs that it plans to roll into human testing over the next two years. Recall that PropThink hosted an exclusive conference call on Thursday, October 3 with Tekmira. Following the PropThink-hosted event, TKMR broke through a previous $7.72 high to set a new 52-week top at $11.42 on expectations of a possible liver-targeting, orphan RNAi therapeutic entering the company’s pipeline, to be announced at the then-upcoming webinar. With new candidates and a clear vision for Tekmira’s future, we remain bullish, particularly considering the strong performance of RNAi peers and Tekmira’s comparatively low valuation, despite having a best-in-class delivery platform. The stock closed the week at $9.60, up over 100% from PropThink’s April initiation. In our view, Tekmira is worth north of $300M, or over $20 per share.

We’re offering a free 30-day trial of PropThink Premium, our exclusive research service, to investors who sign up at We deliver market insights, trade ideas, and fundamental research to Premium members throughout the week, and are always available for questions and comments about the healthcare landscape – and our top picks.

We’ve been surprised by how well shares of ImmunoCellular Therapeutics (IMUC) have held up over the last few days given the broad sell-off in the biotech segment. We like ImmunoCellular coming into the company’s third quarter conference call (likely in early November) and the end of the year as the release of Phase IIb data for its experimental brain cancer vaccine, ICT-107, approaches. That data is expected in the fourth quarter of 2013 or first quarter of next year, and although timing isn’t likely to be defined, we expect the stock to begin moving higher as year-end approaches.

Sunshine Heart (SSH) conducted a secondary offering at the end of September that netted the medical device company $42.6 million, sufficient funds to see the read-out of its pivotal COUNTER-HF trial in 2016. The deal priced at $10.50 per share, and we’ve been told was highly oversubscribed. As evidence, the stock continued to rally following the offering, climbing to a new 52-week high of $13.80 in the days following the financing. Naturally, traders took some gains off the table, but the $10.50 offering price continued to hold as support until this week, when the market softened up among government shutdown and debt ceiling concerns.

Sunshine Heart will present new data from the ongoing and open-label OPTIONS-HF study at the 25th annual Transcatheter Cardiovascular Therapeutics scientific symposium in late October, in addition to full patient-weaning data to date, which has yet to be seen. Barring major macro events, SSH will generate interest among investors within the month. Read more in our previous coverage of Sunshine Heart, here.

In connection with SSH, IMUC, ONTX, ECYT, and TKMR, PropThink has taken a long position.