Worth the risk
There are bad days at the office -- and then there's what
Endocyte (
NASDAQ: EXYT) shareholders had to endure on Friday. The company announced that a phase 3 trial involving vintafolide, an experimental cancer drug being co-developed with
Merck (
NYSE: MRK) for platinum-resistant ovarian cancer, would be stopped early due to futility following a recommendation from the independent data safety monitoring board.
The move was particularly odd considering the Committee for Medicinal Products for Human Use in the EU recommended Vynfinit (the branded EU name for vintafolide) for approval in PR ovarian cancer just weeks earlier.
Some would view this failure as a death knell for Endocyte given that the failure of vintafolide in PR ovarian cancer might preclude it to additional disappointment in other indications where it's being studied such as nonsmall-cell lung cancer and triple-negative breast cancer. I view this drop as potentially overdone and an intriguing opportunity for extremely high-risk tolerance investors to dip their toes in the water with Endocyte.
To begin with, investors should understand that different cancer types can react differently to the same therapy. What works for one indication may be inferior in another. This means Endocyte's positive midstage NSCLC results are still very important. Plus, NSCLC is a much larger potential market than PR ovarian cancer, so there's a still a moat of opportunity for success with vintafolide both in the U.S. and EU.
Secondly, Endocyte is much more than just vintafolide. In total Endocyte has six ongoing clinical trials and three preclinical studies, not counting its phase 3 PR ovarian cancer study. Only three of its clinical studies involves vintafolide meaning there are other oncologic and inflammation therapies in development that could prove successful.
Third (and for now at least), Endocyte has the backing of a large-scale partner in Merck. Ultimately, Merck may choose not to proceed any further with vintafolide's development depending on costs, but even so that wouldn't be a complete loss to Endocyte. Should Merck stick around, Endocyte has an experienced marketing powerhouse and someone to help pay for the exorbitant costs of drug development.
Lastly, Endocyte is incredibly cheap relative to its existing cash. Inclusive of its share offering in April, the company has around $233 million in cash, yet closed last week at a valuation of roughly $240 million. Although this cash is going to dwindle over time due to Endocyte's lack of adequate cash flow and its ongoing R&D costs, the prospect of trading at just $7 million over cash value with a bevy other pipeline products in clinical and preclinical studies seems a bit unwarranted.