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Drug Study’s Results Test Investors’ Confidence

If a rising tide lifts all boats, then a lowering tide will surely bring them down again.

That was what sunk shares of Santa Monica biotech firm Kite Pharma Inc. last week. Data from a clinical trial conducted by a competitor among a small coterie of companies seeking regulatory approval on a cutting-edge cancer therapy came back disappointing.

Most studies in the field thus far have focused, with great success, on blood cancers. Now Kite and its competitors are turning to solid tumors, a Holy Grail of sorts.

The University of Pennsylvania, which is collaborating with Swiss pharmaceutical giant Novartis AG on drug development, presented data at a conference April 19 from a small, early study targeting solid tumors. The results were modest; on Monday, shares of Kite and Seattle-based competitor Juno Therapeutics Inc. both fell.

Shares of Kite dropped 10 percent to $57.56 for the week ended April 22, making it one of the biggest losers on the LABJ Stock Index. (See page 32.)

“The market reacted negatively because it must’ve thought, out of six patients, four reported that the disease did not progress,” explained New York-based Jefferies Group Inc. analyst Biren Amin. “It basically kept the tumor in check … to me that’s modest efficacy. It’s still early days. Does it have a path forward? I think it still does.”

In this corner of immunotherapy, doctors extract a cancer patient’s immune system cells and engineer them to recognize the cancer. The cells are then grown in the lab and released back into the patient’s body, ideally better equipped to find their target.

And while one company’s outcome might have nothing to do with another firm, sometimes there’s a “read-across,” or implied correlation, explained Tony Butler, an analyst at Guggenheim Securities in New York.

“Kite, as well as Juno and Novartis, are all developing engineered T-cells to fight tumors in the blood; leukemia, lymphomas and eventually to fight those solid tumors; breast or lung cancer,” he said.

Still, Butler thinks the overall prognosis is good.

“There’s been demonstrative results that have never been seen before clinically using these engineered T-cells,” Butler said. “The data is extraordinarily elegant, and if I can do that against a blood tumor, I’m unsure why I shouldn’t be able to do that against a breast tumor, lung tumor or any other type of tumor. We have to crawl a little bit sometimes before we walk.”

Other boats

It might be tempting to apply the lowering-tide metaphor to other biotech firms on the LABJ Stock Index, a majority of which were down this week. But it would be a stretch.

The 13 companies in the Biomedical/Pharmaceutical section on the LABJ index were down 3 percent as a group, in stark contrast with the Nasdaq’s broader biotechnology index, which was up almost 1 percent in the same period.

Nine local biotech/pharma companies saw their shares decline last week, though all for different reasons.

For example Puma Biotechnology Inc., a Westwood biotech company making a breast cancer therapy, fell 7.2 percent to $225.63 seemingly on no news at all.

“The stock has done very, very well,” said RBC Capital Markets analyst Simos Simeonidis. “This is just idiosyncratic to it, some profit-taking.”

The New York-based analyst said Puma had confirmed last week that it was going to present data at an upcoming conference, which wasn’t much of an event because that was already known. It was likely that a small population of investors and traders decided they didn’t want hold the stock in six weeks when the full details of data are revealed, even though most people are confident in the results.

“I don’t really read much into it,” Simeonidis said. “I just think it’s normal trading if anything.”

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