MAURER: Promising investment may save lives

February 16, 2018

commentary-maurer-2018.jpgOver the last decade, this column accurately touted a few stocks of local interest. That prompted criticism, perhaps justified, that I was an amateur who had no business picking stocks.

But that won’t dissuade me. I have renewed interest in West Lafayette-based Endocyte Inc., a company with which my track record is mixed but one I believe still holds great promise.

In 2012, I correctly predicted a run-up of Endocyte from more than $5 to above $10 per share. The company develops drugs and imaging diagnostics to identify and treat cancer and other diseases. By the end of the year, when the stock dipped back to the $7-$8 range, I touted it again. The stock topped out at $33 in 2014, but by June of that year it had plummeted to $6 on news that studies of its drugs were suspended for failure to meet prespecified criteria for progression-free survival. Let me explain.

Cancer cells replicate wildly and greedily consume the vitamin folate, a requirement for cell division. Because they need so much folate, some cancers absorb it using special receptors. Endocyte’s drug, vintafolide, targeted those receptors with folate laced with cancer-fighting drugs far more potent than tolerated under customary delivery systems—and administered it more frequently over longer periods of time. The theory was that the folate would knock off the cancer without poisoning normal cells. The theory is sound, but during trials it was determined that it was impossible to provide a marker that would identify the 10 percent of the patients with proper receptors for the drug to be successful. For all other patients, it would be a waste of money and precious time.

I did harvest profits, but I should have sold it all at $33. Today the stock trades in the $3 range, and I see opportunity.

Endocyte recently obtained exclusive worldwide rights to develop and commercialize Lu-PSMA-617, an injectable liquid that delivers the beta-emitting radioactive isotope Lutetium selectively to tumor cells while bypassing non-PSMA-expressing healthy cells. It is based on the same theory as vintafolide, but the injected drug appears to enjoy a wider receptivity level. The target is advanced-stage prostate cancer. There are 100,000 patients in the U.S. with metastatic prostate cancer, and 30,000 of them have already failed with earlier therapies. Once metastasized, prostate cancer is nearly always lethal. Every year, 300,000 people worldwide die of this disease.

Endocyte will meet with the FDA during the first quarter of this year and hopes to start phase three trials of the drug in the second quarter. After making this new investment, Endocyte ceased prior investigations into other drugs and reduced its workforce. Endocyte ended the year with a cash balance of about $90 million. That is a satisfactory position relative to its estimated monthly burn rate, which should fall to $5 million before the end of 2018.

On an Oct. 2 investor call, CEO Mike Sherman said, “Based on the activity this drug has demonstrated in hundreds of patients already, we believe it has the potential to be a life-saving treatment for a significant population with a critical unmet medical need. PSMA is a cell surface protein expressed on prostate cancer cells. It is a great target as it is expressed around a hundred times more commonly on the prostate cancer cells rather than normal tissue, which will enable us to target the tumors specifically.” On a Nov. 6 call with analysts, Sherman called Lu-PSMA-617 the most exciting prostate cancer drug in development today.

The results of phase three trials probably won't be available until 2020. Some clinical data may become available in 2018 and 2019 and, if so, the stock could take wing. One week after the publication of this article I'll buy more shares of Endocyte.•


Maurer is a shareholder in IBJ Corp., which owns Indianapolis Business Journal. To comment on this column, send e-mail to mmaurer@ibj.com.


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