In Randall Woods’ vision for the future, his biotech firm will be collecting royalties from two drugs created from a bloodsucking worm.
They are a stroke-therapy drug, which is being tested by the New York-based pharmaceutical giant Pfizer, and a treatment for deep-vein thrombosis, which is expected to enter late-stage trials by the end of this year.
If Woods’ wishes come true, the president and CEO of San Diego-based Corvas International Inc. will also see his company in the black by 2005 with a solid pipeline of cancer drugs on the way.
But four years in the biotech industry can be an eternity filled with uncertainties. As with all biotechs that spend millions of dollars on researching leads, Corvas’ hopes can be dashed by disappointing results even in the latest stage of development.
Rejection A Possibility
The risk of drug rejection by the Food and Drug Administration also plays a role for Corvas.
The 14-year-old company has yet to bring a drug to the market and has had its share of disappointments, some analysts said.
After hitting an all-time high of $27.88 last December, Corvas’ stock declined.
On Feb. 13, company stock was trading on the Nasdaq stock exchange at $10.56. That is below its 1992 initial public offering price of $12, but according to one analyst, a far more fair value than $27.
“I think the stock made its run,” said Bud Leedom, a senior equity analyst at Wells Fargo Van Kasper in La Jolla. “That was way ahead of itself $11 is fairly valued.”
James McCamant, editor of the Medical Technology Stock Letter in Berkeley, agreed.
“The company has been around for a while they are survivors,” McCamant said.
Both agreed what makes Corvas unique is its novel technology: create drugs from proteins found in parasitic creatures that have the ability to suck blood from their hosts, frequently dogs, without the blood clotting.
Stocks Undervalued
Ivonne Marondel, an analyst with Gerard Klauer Mattison in New York, said given Corvas’ unique technology and strong partners, its stock price should be far higher.
Marondel has a 12-month price target of $29 for Corvas stock. She is convinced that by the second half of this year, Corvas will appear on investors’ radar screen again.
By then, Pfizer is expected to finish a uniquely designed efficacy trial with Corvas’ stroke therapy drug. She said, this trial will provide answers that will be easier and quicker to interpret than traditional trials.
Citing Wall Street analysts, Woods said the stroke therapy could bring $1 billion in sales in the United States alone; 10 percent of which will flow to Corvas in royalties.
Considering there are an estimated 720,000 annual stroke victims in the United States with no efficient therapies to treat the secondary injuries, the upside is great, he said.
Dr. Thomas Edgington, a scientist at the Scripps Research Institute who started Corvas in 1985, agreed. He said today, doctors prescribe bed rest and emotional support as treatment for most stroke victims.
Similar Drug Available
Genentech Inc. in South San Francisco has a drug on the market that dissolves blood clots in ischemic stroke victims, but that doesn’t help secondary injuries, he said.
“The tissue where the blood clot is, is dead in eight minutes,” Edgington said.
To administer the drug, Woods added, doctors must also first rule out a hemorrhagic stroke with a CT scan or an MRI.
That is a costly and time-consuming process, he said. Corvas’ drug can be given to all stroke victims, has shown no side-effects thus far, costs less and prevents secondary injuries associated with stroke from spreading, Woods said.
Essentially, the FDA will have the final word.
The same holds true for Corvas’ second drug.
Woods said he’s talking to two major pharmaceutical firms to bring this drug , designed to prevent deep vein thrombosis after orthopedic surgeries and in unstable angina patients , into late-stage clinical trials this year.
An estimated 265,988 Americans have total knee replacements every year, according to data published by the U.S. Department of Health.
Current therapies to prevent the blood from clotting are given twice a day for seven to 10 days. Corvas’ drug needs to be administered only once every other day, he said.
Expecting High Royalties
Since Corvas took some of the risky clinical testing of the drug upon itself, royalties on sales of this drug should be higher , between 15 percent and 18 percent, Woods said citing analysts’ opinions.
John Park, a health care analyst for Wanger Asset Management, which also is a Corvas shareholder, remains bullish on the company.
Park said Wanger has owned Corvas stock since 1996. As of last week, Wanger held 1.383 million Corvas shares.
He agrees with Marondel that both drugs, if approved, could hit the market by 2004. Additionally, Marondel anticipates Corvas will receive a $3 million milestone payment this year from an earlier partnership with Schering-Plough, the Madison, N.J.-based pharmaceutical firm, if Schering brings an anticoagulant to treat deep vein thrombosis created by Corvas into the clinic.
Refocus On Cancers
Last year, Schering paid Corvas $2.5 million to obtain the rights to a protease inhibitor for hepatitis C, she said.
However, Woods now wants to shift Corvas’ focus from cardiovascular treatments to solid tumor cancers, which are easier and less costly to develop than cardiovascular drugs.
Under his ambitious plan, Corvas will develop and build their own sales force to bring future cancer drugs to 7,000 U.S. oncologists.
With $135 million in cash as of December 2000, Corvas will be financially secure for years, analysts and Woods agreed.
Woods said this year, the company will have a burn-rate of between $15 million and $17 million. That compares to $10 million in 2000.
Woods plans to hire 20 scientists to move Corvas’ clinical development forward, boosting his total staff to 100 individuals.
If all goes as planned, Corvas will bring one drug candidate for prostate or breast cancer, or both, into the clinic next year, he said.
For now, Woods and investors will have to wait for the FDA to realize all of their biotech dreams.
