By The Life Science Report
Daniel Carlson of Tailwinds Research explains why he has designated this company his 2019 stock of the year.
On Thursday, January 24, Anixa Biosciences Inc. (ANIX:NASDAQ) held an investor update call. In the preview to the call, management had talked about 2019 being a “transformative” year for the company. Based on the conference call, if they deliver on their goals, transformative isn’t nearly a strong enough adjective to describe how big 2019 could be.
“Let me begin with the punch line: One of these goals is to launch the first of our Cchek cancer detection tests. The second goal is to begin human clinical testing of our CAR-T therapy in ovarian cancer patients.” ~ Dr. Amit Kumar, CEO
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That line says it all. Everything that I had hoped for in terms of accomplishments by Anixa in 2019 has been laid out as official goals and timelines for the company in 2019. And, while there is no guarantee of success, I believe Anixa has positioned itself very well to accomplish both these tasks in the timeline stated.
Amit confirmed on the call that the company is actually pursuing a Q3 launch of Cchek as a confirmatory test for prostate cancer. This is certainly sooner than anyone had expected and should be treated as very positive news by the market. Even more exciting was the following statement:
“We have been in discussions with a suitable partner to launch out of their laboratory. I am not prepared to talk about that laboratory today, but we will be announcing that partnership soon, when it is signed. Obviously, they have reviewed our data and commercial opportunity and they are interested in partnering with us to launch this product.”
This is potentially super exciting news. Obviously, the quality of the partner is incredibly important and Amit, unfortunately, didn’t tip his hand in that regard. But, investors can bet that a partnership is going to be inked very soon; how else could they confidently state they intend to launch a product in Q3?
In order to have a CLIA approved product, a lab (and the lab director) must run their own tests confirming what Anixa has said about Cchek. This is a process that will take several months to complete, in a best case scenario. If the data doesn’t look great, it could take longer. Therefore, one has to assume that Anixa signs the partnership here in Q1 or it will struggle to meet the Q3 launch timing.
Following up on the partnership, it is easy to extrapolate that the very strong data shown by Cchek will continue through the lab trials. The bar (PSA test, ugh) has been set fairly low and Cchek has soared over it to date. I believe the company will achieve the goal of having a diagnostic on the market in Q3, which should be worth a lot to shares of ANIX.
Even more exciting is that Anixa hopes to be entering first-in-human trials of its CAR-T treatment for ovarian cancer sometime in the third quarter as well.
“We expect to file our IND near the end of the second quarter and upon approval by the FDA, we hope to begin clinical trials in July of this year We hope our CAR-T approach, which takes advantage of hormone-hormone receptor biology, will be the first CAR-T therapy that works against a solid tumor.” ~ Dr. Amit Kumar, CEO
On the risk-reward spectrum, this therapy is off the charts on both sides of the see-saw. As Dr. Kumar said, no one has shown efficacy and safety in solid tumor CAR-T. This is a high risk opportunity. It could fail miserably.
However, the upside is that success here would be potentially enormous. Think about Kite and Juno each being acquired for around $10 billion, as they both pursued CAR-T in liquid tumors. The solid tumor market is the much bigger market and, if successful, Anixa could be the first player in the space. The potential rewards are in the tens of billions of dollars for success with CAR-T in solid tumors.
In the near-term, however, we are looking at a potential blockbuster therapy that is about to go into Phase 1. Based on all indications (meetings with FDA, Moffitt’s endorsement, preliminary data, etc.), it makes sense that Dr. Kumar can take this into Phase 1 on the timeline he has suggested. As such, this appears to be a much lower risk hurdle than the final end game of curing ovarian cancer.
Achieving a Phase 1 trial launch in Q3 should be a major value driver for the company.
2019. . .The Year of Good News
I don’t want to understate the risks involved in Anixa. The path to it pulling off the double whammy of making both products big successes is fraught with potential disasters. One should always be aware of the risks here.
The good news is that the path to success gets much harder in 2020. That is when sales of Cchek could disappoint, or the CAR-T therapy could fail in treatment. For the meantime, we are like a race horse being led into the starting gate; the final outcome is undetermined and tough to achieve, but I’m pretty sure we’ll be involved when the starting gun goes off.
Which is a way of saying that the catalysts for 2019 are significant, yet highly achievable in my opinion. Let’s break them down chronologically.
- Cchek partner. Sounds like it’s close to being a done deal. Will be announced in Q1.
- CAR-T IND filed with FDA. This is a Q2 event that in which Dr. Kumar has shown a high degree of confidence.
- Cchek CLIA approval. This requires a lab to do confirmatory testing on prostate studies. If the results are close to those shown in previous studies, which have been awesome and continually improving, the Lab Director should certainly approve the diagnostic. This is likely an end of Q2 event.
- FDA approves the IND for CAR-T. Assuming the IND is filed with no material changes to the preliminary data shown by Anixa, there’s no reason to assume the FDA will not green light this drug ASAP. It’s been shown as efficacious and is looking to cure patients with a deadly disease and no other possible alternatives. This is also an end of Q2 event.
- Cchek is launched. Q3 event that follows up on CLIA approval.
- CAR-T patients are selected, trial begins. This is also a Q3 event that follows on FDA approval of the IND.
Thus, you have six major catalysts that are coming between now and the end of Q3. There are also many other smaller catalysts that are likely to occur along the way. All of these catalysts are significant value creation events. And, they all appear, in the grand scheme of biotech, to be relatively low risk events. In Tailwinds’ opinion, the path to getting both products through to their Q3 goals has bumps but no major hurdles. I think success is highly likely.
This unique combination of outsized potential reward combined with less risk, relative to the potential upside, is why I continue to buy shares in ANIX and exactly why I made it my stock of the year for 2019.
Daniel Carlson is the founder and managing member of Tailwinds Research Group and its parent company DFC Advisory Services, which is a licensed registered investment advisor (CRD # 297209). Tailwinds is a microcap focused research company that provides research on and consults to over 20 emerging growth companies in the technology and life sciences arenas. DFC Advisory Services is an RIA that manages money dedicated to investing in the companies covered by Tailwinds. For more information on these two companies and their track record, please see www.tailwindsresearch.com. Prior to founding these two entities, Dan spent many years working with small public companies, having been CFO of two public companies and helping finance many others. A 1989 graduate from Tufts University with a degree in Economics, Dans formative years in business were spent as an equity trader, first on the Pacific Coast Stock Exchange then on the buyside at several multi-billion dollar firms.
This article was submitted by Tailwinds Research. For more information on Tailwinds Research or on Anixa Biosciences, please visit www.tailwindsresearch.com.
Tailwinds is engaged by Anixa Biosciences and owns stock in the company. For a complete list of disclosures, please click here.
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