Staying Skeptical on a Biotech Buzz

 | Jul 02, 2013 | 4:00 PM EDT
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Vical (VICL) is all set to present data for its phase III study of Allovectin as a treatment for stage III/IV melanoma. The $270 million company has lost almost 20% of its value in the last three months, ahead of the data. While retail investors are overly zealous about Allovectin's likelihood of success, you should consider a few things.

The bull case surrounding Allovectin is quite simple: The vaccine works by injecting a melanoma lesion, enabling the immune system to identify the lesion as foreign. Then the immune system naturally targets melanoma-specific antigens, rather than targeting just one antigen like other approved immunotherapies (such as Dendreon's (DNDN) Provenge).

Vical bulls will note that results from its phase III trial were expected in 2012, but since data are yet to be seen, many believe that it's an indication that the drug works. In theory, patients who have the disease should live just 11 months. Yet in Vical's phase II trial of 127 patients, there were 15 total responders, 50% of whom have surpassed six years of life after treatment.

While these numbers look good at first glance, investors need to remember that Allovectin is not being tested on patients who have brain or liver metastases. Its patient population has normal lactate dehydrogenase (LDH) levels, meaning its group is the healthiest of late-stage melanoma patients -- those who have the greatest likelihood to survive.

Therefore, as days pass, it doesn't necessarily mean that Allovectin is performing so well that the company cannot close the trial. Instead, it most likely means that very few total deaths have occurred (in both groups) because these patients are among the healthiest bunch.

In many ways, this makes it much more difficult for Vical to show that its vaccine has any benefit over standard-of-care. Since both Yervoy and Zelboraf have been approved with survival benefits, it also seems logical that the Food and Drug Administration will want to see a survival benefit from the trial, and that may be difficult.

In my opinion, Vical will fail to show any significance with Allovectin, because superior treatments are in the market. In other words, I don't believe Allovectin will compare favorably with these treatments. Moreover, I don't believe Allovectin is the best melanoma product in clinical studies.

The local and distant response, as shown, tells us how successful a product is at treating both local and distant tumors. Back in January, Celsion's (CLSN) ThermoDox was unsuccessful at treating distant tumors and failed its phase III trial. Allovectin has shown success in this area. However, the issue is complicated, because Vical is not treating patients whose cancer has spread to parts of the body such as the liver. This might explain why the product's distant response was better than its local response, as no distant tumor would be "severe."

All three of the noted products are injected directly into the tumor. Therefore, these are all fair to compare. To me, this is telling, as it shows that Allovectin is stimulating the immune system the least of the three products.

Now, many people might automatically point to OncoSec Medical and say that that's an unfair comparison. Yes, the noted data are from a small phase I trial. However, OncoSec Medical is testing its product on the very sickest of patients, and in an ongoing phase II trial (in which 13 patients have been assessed), it still produced a local response of 45%, which is far greater than Vical's Allovectin.

Theoretically, Allovectin and ImmunoPulse are very similar. Both are using plasmid constructs in their approach, in an attempt to stimulate the immune system to destroy the cancer cells. The difference (and what has made ImmunoPulse the better approach) is electroporation. OncoSec uses a device that produces electrical currents to create temporary pores for a better delivery. In clinical trials, using both immunotherapies and chemotherapies, Onosec's device increased the uptake 4,000-fold while decreasing the side effects. As a result, this approach greatly improved the efficiency of the drug itself. Thus, I don't believe Vical's plasmid construct alone will stimulate the immune system enough to produce meaningful phase III results without a more reliable delivery.

When it's all said and done, I just don't believe Allovectin will be able to prove a therapeutic effect by treating its "healthy subgroup of patients." Furthermore, I just don't believe Vical will be able to stimulate the immune system in a significant manner. The dangers of investing in clinical biotechnology companies prior to late-stage data is substantial -- Celsion dropped from $8 to under $1 in January on bad data -- and I believe that Vical is at high risk to see such a decline.

Consequently, invest with caution and be certain to look at investments such as Vical from every possible angle, not just the bullish side.



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