By The Swiss Trader
One of my favorite hobbies is to research and learn about small, undiscovered biotechnology companies. Often, companies with small market caps and unheard of therapies and/or drugs can return the largest multiple year gains. Therefore, I have always kept my options open and have tried to view biotechnology through unbiased eyes.
Last month a reader wrote me an email asking for my thoughts regarding the use of electric pulses to temporarily open pores to increase the uptake of utilized chemotherapeutic agents (in so many words). The reader was asking about a technology that is now being used by OncoSec Medical Incorpeorated (OTC:ONCS), a company that I have known about and followed for some time. I decided it was time to refresh my studies on ONCS. As a result, following my research, I have decided to post the information, both the positives and negatives.
Basics:
The system being discussed is called “OMS” which stands for the OncoSec Medical System. The system is based on Inovio Pharmaceuticals’ (NYSEAMEX:INO) electroporation technology platform which was purchased by OncoSec, leading to the inception of the company. The company’s theory is that the system can use DNA vaccines and immune therapeutics in addition to delivering a chemotherapeutic or cytokine agent to treat cancer safer and more efficiently. It is believed that the system could work well with various cancer therapies to enhance the results of cancer treatments.
The OMS platform is being marketed as both electrochemotherapy and electroimmunotherapy in which both use OMS to increase the uptake of the drug, while limiting the amount of the dosage and causing less damage to healthy tissue. The electrochemotherapy platform is being tested with bleomycin, a chemotherapeutic agent that is believed to have the capabilities to treat a number of cancers by being used in conjunction with a multitude of chemotherapeutic agents. The electroimmunotherapy platform is being tested with a DNA cytokine (DNA IL-12) to treat melanoma tumors by using the “seek and destroy” process of immunotherapy combined with OMS’ safe technology. The company is currently testing the system in late phase trials on several cancers. To read more about the company’s technology click here.
Positives & Negatives:
Sometimes the trouble with effectively analyzing any small biotechnology company is the fact that, though most information is objective, people are not. You either have excessive optimism or excessive pessimism. The only way to properly assess the upside, or downside, of a small company is to list both the most significant strengths and weaknesses, which then allows investors to dig deeper with due diligence.
Positives:
As I searched through the data of the treatment itself, I did find a significant number of positives that do lead me to believe that the treatment is legit. The company’s electrochemotherapy has already been tested on over 400 patients and has been deemed safe and effective. OncoSec’s CEO, Punit Dhillon, and the company’s board chairman, Avtar Dhillon, were both part of the executive team at Inovio, where the technology was initially developed. It should serve as a sign of confidence that they would take the risk of starting a new company, to acquire and continue developing a therapy that has significant upside if approved. However, it is easy to see why Dhillon would pursue this treatment for melanoma. It is one of the most common forms of cancer, thus presenting the potential for up to four million patients per year in the U.S. alone, according to Dhillon.
So far, the clinical data for both the electroimmunotherapy and chemotherapy has been encouraging, and has proved that the treatment does achieve its primary goal of opening cells to allow a therapy or vaccine to enter the cancer cells more effectively, and reduces exposure to the surrounding healthy cells. Of course, the therapy is still in clinical trials, but early results indicate the OMS system can increase the uptake in certain drugs by over 4,000 fold, which is why it requires less of the drug therefore having fewer side effects.
Negatives:
Let me start by saying there is nothing that I can compare to either OMS therapy, and in biotechnology, that can actually hurt a company. And although we believe the potential for the treatment would be large, with millions per year who qualify, it is hard to place a valuation on something that we have never seen. As a result, the treatment is a tough sale to investors, which may explain the reason for its low valuation.
The company has publically stated that it does not plan to commercialize DNA IL-12, and that it is seeking a partner. This could be viewed as both positive and negative. If the company finds a partner, then all is well, but if not, then it could keep the company from reaching its full potential. Obviously, as a small company it would need a partner to properly commercialize the therapy, sooner rather than later. This brings me to my final problematic area with the company, and that is money. For most small clinical phase biotechnology companies, money is a significant problem. I view this more as an unfortunate reality versus being a problem, as there are many great companies with cutting edge technology, but struggle with maintaining a sufficient amount of cash. The company just recently finished a round of financing, although it does not have enough cash to properly test, develop, or market either of its two OMS systems, making the need for a partner even greater.
Conclusion:
I will conclude by saying that I think it is a company worth watching, and that with its current valuation, the risk does not outweigh the reward. It is always difficult to know whether or not regulators will accept a new type of treatment, and investors are counting on its results to continue being strong. If you would have asked me eight years ago whether or not this same technology would be approved, I would have said absolutely not– but because of the need for new cancer treatments and recent progress, the FDA and other global regulators have become more open to the idea of new cancer treatments. Based on data so far, the company appears to have a good shot. For a company this small, if it were to be approved, it could lead to unimaginable gains. The bottom line is that it’s worth watching. Significant upside could be in the future, so additional due diligence wouldn’t be a bad idea for those considering an investment.
Disclosure: Long ONCS
