Fighting the cancer battle, ASX small-cap edition

• Stockhead got the latest on cancer fighting treatments from two leading small cap CEOs.
• Industry analyst Tim Boreham also explained how he views the space from an investor perspective.

From an ASX small cap perspective, the battle against cancer is alluring as an investment proposition.

By size (and relative importance) it’s a multi-billion dollar industry with huge returns for medical breakthroughs.

But at the same time, even just bringing a new cancer treatment to clinical trials on humans is often a multi-year process that requires a patient approach.

In view of that, we caught up with two CEOs and one analyst in the space, with the aim of getting an understanding of the complexities involved and strategies investors should use to approach the sector.

Long road

Speaking with Stockhead, Imugene (ASX:IMU) CEO Leslie Chong described the complexities in that process.

The company specialises in the field of immunotherapy – treatments which help activate the body’s immune systems against cancerous tumours.

IMU’s HER-Vaxx treatment for gastric and breast cancer is moving through clinical trials.

It’s also received multiple US approvals to commence clinical trials for PD1-Vaxx – a drug that activates the immune system to attack cancerous cells, with a focus on lung cancer.

To get there, it’s graduated from “myriad committee reviews comprising scientists, oncologists and laypeople, as well as scientific committees”.

And the end goal is to develop a drug that allows the body to inhibit PD-1 cells – which regulate the immune system but can also prevent it from killing cancer cells – with a lower level of toxicity.

Chong explained that existing treatments developed in laboratories come with the risk of increased toxicity.

“They may be synergistic and combine well, but the safety and toxicity catches up with you before effectiveness will. So our drug development is all about balancing that out,” she said.

“In effect what we hope is that because we’ve differentiated the way your immune system creates antibodies, it will have less toxicity than antibodies which are developed externally in the clinic.”

Platform approach

Another player among cancer-fighting ASX small caps is Prescient Therapeutics (ASX:PTX), which also has two clinical trials currently underway.

But alongside that, CEO Steven Yatomi-Clarke is also excited by the company’s advancements in CAR-T cell therapy.

Short for Chimeric Antigen Receptor T-cells, the ‘CAR’ component is a modification of patients t-cells, which effectively adds a more effective receptor for detecting cancer antigens.

“CAR-T is a real therapy today, but it’s kind of like a VHS tape – in other words the first generation of a brand new tech. So we’re basically bringing that discussion forward to the Netflix equivalent,” Yatomi-Clarke said.

In that context, the broader goal for PTX is to effectively rollout OmniCAR – a platform solution developed in conjunction with researchers at UPenn and Oxford.

Using OmniCAR, other researchers in the field of CAR-T will have a platform to demonstrate the safety and effectiveness of their treatment, thus speeding up the pathway to clinical trials.

“It’s quite disruptive because a lot of companies are focused on trying to develop single products, but this is an entire enabling platform,” Yatomi-Clarke said.

“If you look at the thematics on a broader scale, cancer treatment can be a very crowded play depending on sector you’re in. For example, our PTX-100 treatment is highly differentiated but PTX-200 faces more competition.

“So with OmniCAR, our goal isn’t so much fighting the system, but creating a new standard which other companies can enhance their products.”

Market observer

To get the external view, Stockhead also caught up with resident small cap analyst Tim Boreham.

Discussing the biotech space more broadly and cancer fighters in particular, Boreham reiterated that the sector is defined by the potential for big rewards, offset by a long and winding regulatory landscape.

So from an investment point of view, he looks for additional cues outside of the big hits – a positive clinical trial or a potential big pharma takeover.

“You kind of need to look at the track record of management, and also question where the drug candidate’s come from,” Boreham says.

“For example – has it been rejected by another drug company? Cancer treatment candidates are often hived off by big pharma, and sometimes it’s because it just doesn’t suit big pharma’s interests, so that’s not necessarily a bad thing.”

Another framework is to look at what kind of investors are taking interest.

“If you can stand back a bit and say — well if the instos are willing to fund these plays with serious money — then as a retail investor that should give you some comfort,” Boreham said.

But given the complex nature of drug development, “you’re not hanging around for the dividend”.

“So you’ve kind of got to trade stocks in this space on good news – trial results, partnerships, effective funding.”

“And if you do hang on you hang on, you’re most likely looking for a partnership with big pharma (so the partner bears the cost of the late-stage clinical trials), or a potential takeover.”

Working with investors

Taking all that into account, cancer development can be summed up as a complex and competitive sector, capital intensive in nature with the potential for huge returns if (plenty of) the right boxes are ticked.

Amid such a backdrop, both Boreham as well as the two CEOs we spoke to highlighted the importance of maintaining a healthy bank account through the development phase.

And with future revenues tied to complex trial results, investor relations is paramount.

“A key skill in this game is the ability to attract funding,” Yatomi-Clarke said.

“And I think that comes in two forms — one is the ability to latch onto a thematic, and then you have to differentiate your business from others on a crowded plane.”

Yatomi said a good example of that is in the development of PTX’s OmniCAR platform.

“In order to explain what OmniCAR does, I have to explain the problems with CAR-T,” he says.

“Then in order to explain that I have to describe what CAR-T actually is. To explain CAR-T I have to explain how the immune systems works and what a t-cell is.”

“So you have to play the long-game, then break down the technology into elements people can understand.”