Lessons from the Pros

Vaino’s Biotech Corner: Vical and a Cardiome Update 

My focus this week is on a company called Vical (VICL). It has developed a very interesting way to deliver DNA into muscle tissue. Their focus is on so-called DNA vaccines.

A vaccine acts by exposing the immune system to low levels of pathogens, to which are generated antibodies that remove the interloper. Even after all the protein is gone, the antibodies persist, sometimes for decades. This means that subsequent exposure to the pathogen will be harmless (or less harmful) as antibodies are already present to remove it.

In DNA vaccine therapy, a modified form of pathogenic DNA is injected, typically into muscle tissue, where it begins forming the pathogen’s proteins in small doses. The immune system does the same job of creating antibodies against the pathogenic proteins. A particular advantage of DNA vaccines is they are much cheaper to produce, are easier to store, and may last longer.

Two weeks ago Pfizer announced it had agreed to purchase PowderMed, a private company, for an undisclosed sum. PowderMed has figured out a way to deliver DNA by precipitating it onto gold particles and, literally, blasting it through the skin. It’s pretty cool. It’s also broadly similar to what Vical does.

Vical has a pretty decent pipeline of clinical trials. Its most advanced product is a Phase 3 study on a DNA construct (not strictly a vaccine, but same idea) to generate angiogenic growth factors that should have application in the treatment of arterial disease. In addition, they have three other Phase 2 studies and nine Phase 1 studies underway. This is a less than mature pipeline, but the stock is trading in the low single digit range.

Vical announced on Friday (October 20) that it had demonstrated the efficacy of a DNA vaccine to treat avian flu in ferrets. This prompted a lemming-like surge of buying that pushed the stock price up as high as 22%: the price retraced, but still closed up almost 10% on the day.

I’m not usually overly impressed with preclinical studies, but this caught my eye—and it’s not that I’m a big rodent fan. I like the simplicity of the technology, and I like the breadth of Vical’s pipeline. To be fair, revenue from any of Vical’s products is years away, but my guess is they’ll be able to generate enough interest that they’ll be bought out or will enter into a substantial partnership within the next year.

While the company is risky, I do think Vical’s drugs show promise. The share price will wind back down in the next week or so, and when it gets back to $5.50 I think it will be a good buy.

Canadian Cardiome Carries On 

I mentioned Cardiome Pharma (CRME) in celebration of Canada Day in July. The stock took a nicer flyer after that, jumping from the high $8s to just above $14 in early September. The stock had tanked due to the FDA rejecting their NDA filing for an IV form of their drug RSD1235, which treats atrial fibrillation. A paper in 2004 published in the Journal of the American College of Cardiology on a Phase 2 study on this drug was very encouraging. The rejection had nothing to do with the science but merely with careless paperwork. While this is a stupid mistake, it’s easier to fix than a drug that doesn’t work.

Cardiome announced positive Phase 2a data for an orally available form of RSD1235 on September 13th. The markets response after “buying the rumor” was to “sell the story” and the stock dropped almost 25%. The stock is also off a bit more on announcement of a shelf-registration to sell up to $150M of stock. My take is this makes for a good entry point. This stock will get a bump when they refile the NDA for IV RSD1235, and when they initiate a larger Phase 2b study for oral RSD1235. I think this is a good buy, eh.

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