|
Training Special Forces Units to Fight Cancer
By
Michael Brush
October 06, 2005
Many investors avoid biotech stocks out of sheer habit. They were either
burned by this notoriously volatile sector in the past. They are leery of
money-losing companies that may have to do a dilutive financing. Or they
know that even analysts who master the intricacies of the science behind
drug development still have a tough time picking winners.
All of these potential problems are legitimate concerns. That’s why
following the insider signal is particularly useful in biotech -- a group
that can provide handsome returns when you select the right plays.
advertisement
One of these might be Oxigene (OXGN),
a tiny cancer treatment research company. Oxigene has multiple Phase I and
Phase II tests that are yielding positive results, and the company has
strong financials. It’s also targeting life-threatening diseases for which
there are few treatments – exactly the kinds therapies the Food & Drug
Administration is more likely to approve.
The lead drug
Oxigene’s lead drug candidate is a molecule discovered years ago in the bark
of African willow trees. Today, Oxigene is running tests to see if this
molecule can be used as a kind of Special Forces unit that seeks out and
destroys blood vessels feeding tumors. These compounds are called vascular
targeting agents (VTA).
Oxigene’s molecule, called CA4P, works by changing the shape of certain
cells in new blood vessels. That makes the blood vessels collapse, shutting
off blood supplies to tumors that feed off them. In a sense, CA4P is similar
to hugely successful antiangiogenesis compounds like Avastin, developed by
Genentech (DNA). The difference is that antiangiogenesis compounds shut down
the formation of new blood vessels meant to supply tumors, whereas VTAs go
after existing blood vessels.
One advantage of Oxigene’s CA4P is that it doesn’t cause any of the
traditional side effects of chemotherapy, such as hair loss or weakened
immune systems. Patients using CA4P, if it is ever approved, will likely
have to go through some chemo, however, since this compound does not wipe
out cancer cells entirely.
Oxigene’s CA4P may also work to control some forms of macular degeneration,
an eye disease that causes blindness when abnormal blood vessels leak or
create scarring in the back of the eye. In theory, CA4P could help by
destroying those abnormal blood vessels before they do their damage.
Financial position
Oxigene keeps a lid on costs by outsourcing research and exploiting
relationships with universities and pharmaceutical companies. The company
has just over $38 million in cash and an annual burn rate of $11 million to
$13 million. That suggests it has enough cash to last until late 2007.
The Bottom line: Oxigene can move up an easy 5% in a day when it
announces progress with research. That happened earlier this week as the
stock moved above $5.50 after telling a cancer conference that early-stage
testing of CA4P showed promise against cancer. But it may be a while before
more news comes out -- and biotech companies are volatile. So I think
patient buyers can get this stock closer to $5, where one insider recently
plowed $509,000 into the company’s shares. Since May, insiders have
purchased over $1.4 million worth of stock – a hefty amount.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in
any of the companies listed in this column. Mr. Brush is an independent
columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About
Insiders Corner:
http://www.investorideas.com/insiderscorner/. InvestorIdeas.com
Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article.
|
|
