Biotechnology stocks, especially those focused on treating different forms of cancer, offer the potential for tremendous investment returns as well as treating life-threatening illnesses. However, with great potential comes high risk. Before investing in these volatile securities, investors need to understand the full picture behind each stock. Below are 2 companies that were chosen based upon the following criteria:Market Cap Under $200 Million Average Daily Trading Volume Of At Least 200,000 Shares Breakthrough Cancer Therapy Approach Strong Cash Position
OncoSec Medical Inc (OTCMKTS:ONCS)
OncoSec Medical Inc (OTCMKTS:ONCS) is an early stage biotechnology company focused on developing and commercializing therapies for advanced-stage skin cancer. Currently, OncoSec Medical Inc (OTCMKTS:ONCS) is attempting to develop therapies for melanoma, Merkel cell lymphoma, and cutaneous T-cell lymphoma.
The most exciting thing about OncoSec Medical Inc (OTCMKTS:ONCS) is its unique approach to developing therapies. It is an approach that is focused on electroporation, which involves temporarily opening up pores in the cell membrane of infected cells via applied electrical bursts. Once the pores have been opened, an anti-cancer agent can be transmitted. The agent is able to destroy tumor cells with much more accuracy due to the short and concentrated electrical pulses as this increases porosity and then traps the therapeutic inside once the current ceases. Additionally, electroporation has been shown to result in much lower levels of toxicity, as the agent is trapped in place.
The company has two primary technology platforms. The first platform is ImmunoPulse, which delivers a protein called DNA plasmid interleukin-12 or IL-12. This protein appears to stimulate the immune system toward targeting and destroying cancer cells. The second platform is NeoPulse, which is a targeted therapy that delivers a drug called bleomycin. Bleomycin is an existing anti-cancer drug that also destroys cancer cells.
To make use of the company’s impressive technology platforms, OncoSec Medical Inc (OTCMKTS:ONCS) currently has three ongoing clinical trials that are all in Phase II status. OMS-I120 is using ImmunoPulse to deliver IL-12 in patients with early and late stage cutaneous T-cell lymphoma. OMS-I110 is using OMS ElectroImmunotherapy to deliver IL-12 in patients with local and metastatic Merkel cell carcinoma. OMS-I100 is using OMS electroporation to deliver IL-12 in patients with late-stage metastatic melanoma.
Just recently, the company announced the completion of patient enrollment in the OMS-I100 clinical trial of ImmunoPulse for metastatic melanoma patients. The Phase II trial is evaluating efficacy of ImmunoPulse in patients with Stage IIIb to IVa in-transit cutaneous metastatic melanoma with a primary endpoint of overall objective response at 6 months as measured by modified RECIST. Secondary endpoints for the trial will evaluate safety and tolerability, as well as local response of treated lesions at Day 90. The company expects that final trial data will be announced during the next 6 to 12 months. And while investors can certainly look to that catalyst to potentially send the shares much higher, there is another catalyst that will be coming much sooner.
OMS-I110, the trial that is treating patients with Merkel cell carcinoma, should also be completing enrollment fairly shortly. Based on when the trial started and the progress shown thus far, I anticipate enrollment completing by the end of the summer. This will give OncoSec Medical Inc (OTCMKTS:ONCS) a second Phase II trial that will announce data towards the middle of 2014. As these events gain traction, I expect the share price to begin a gradual climb heading into the end of this year.
Earlier, I mentioned the importance for early stage biotech companies to have a strong cash position. Well OncoSec certainly qualifies. As of April 30, 2013, the company had a net cash position of $7.3 million. Given that the company’s current burn rate is only $500,000 per month, the company should have enough cash to at least take the company through the Phase II data announcements. Hopefully, the share price will be much higher before any secondary offerings take place. This will allow the company to raise more cash at a more favorable share price for investors.
Clearly OncoSec appears to have a lot going for it. However, there are still a few risks that investors need to be aware of. First, as an early stage biotechnology company, OncoSec will need to raise cash at some point in the future. Ideally this will occur when the share price is much higher so it doesn’t impact investors as much. But if there are any setbacks with the trials, the secondary offerings could come earlier than expected. Second, there is extreme volatility risk. Given that the upcoming trials will decide the future of the company, investors should expect volatile trading around catalysts, announcements, and analyst reports. Although I expect OncoSec to be trading much higher in a few months, the day-to-day swings could be intense.
Cellceutix Corp (OTCBB:CTIX)
Cellceutix Corp (OTCBB:CTIX) is an early stage biotechnology company focused on discovering, developing, and commercializing small molecule drugs for hard to treat diseases, including drug-resistant cancers and psoriasis.
The company’s most important product candidate is Kevetrin. In laboratory testing, Kevetrin has been shown to be effective in treating advanced solid tumors. Pre-clinical research also indicated that Kevetrin is effective against many forms of aggressive cancer including breast, colon, lung, and brain tumors. The research demonstrated tumor growth delay and tumor size reduction. Kevetrin is currently in Phase I testing at Harvard Cancer Center’s Dana-Farber Cancer Institute.
So what makes Kevetrin special? The secret sauce (so to speak) behind Kevetrin is its ability to activate p53. More commonly known as the “Guardian Angel Gene,” the p53 gene is extremely important in controlling cell mutations. P53 is a tumor suppressor protein that is encoded by the TP53 gene in humans and is widely thought to hold a key to the cure for cancer.
At the end of the last quarter, Cellceutix Corp (OTCBB:CTIX) reported a cash position of $1.1 million. This is an increase of more than $800,000 from the prior quarter. Given that Cellceutix Corp (OTCBB:CTIX) has a comfortable cash position and recently signed a new financing deal worth $10 million with Aspire Capital, investors should take comfort that the company will most likely not to have dilute for some time.
Cellceutix Corp (OTCBB:CTIX) currently has a market capitalization of approximately $170 million. In 2010, a similar company signed a partnership agreement with potential milestone payments of $400 million. Should a similar type of deal be reached here, investors can certainly expect the current share price to at least double. However, investors must be aware of the risks. There are two main risks with Cellceutix Corp (OTCBB:CTIX). The first risk is future share offerings. Given that the company is very early on in its trials, future secondary offerings are to be expected. Early stage biotech companies typically burn a significant amount of cash each quarter, so it will be important to analyze this going forward. Thus far, the company has been able to efficiently manage its assets, and hopefully that continues.
The second risk is the competitive landscape. There are three biotechnology giants that are also participating in the p53 race. Those companies are Merck & Co., Inc. (NYSE:MRK), Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY), and Sanofi SA (ADR) (NYSE:SNY). The good news for shareholders and prospective investors is that Cellceutix is ahead of these other companies. Ideally, Cellceutix will be able to complete its Phase I trial within the next few months and proceed to Phase II to firmly establish itself as the p53 leader.