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Medical Breakthroughs to Create Miraculous Cures and Profits BY PATRICK COXPOSTED JUNE 30, 2008
Welcome back. In past issues, we’ve talked about some of the big medical breakthroughs. These new technologies will produce nearly miraculous treatments and returns for investors with foresight. This month, I have another one for you. It’s a stock that I believe is well positioned to surpass the spectacular rises of companies like Genentech and Amgen.
Most people, I think, know we’re on the verge of world-changing medical innovations. The media are full of stories about extraordinary new fields of scientific exploration. Cloning, stem cells and gene therapy are getting tabloid treatment. Even RNA interference is starting to get mainstream coverage.
It would be a mistake, however, to assume that this short list begins to cover the field. The pace of scientific discovery is accelerating so quickly that it is difficult even to keep track of cutting-edge research. This is true not only for laymen. I frequently talk to researchers who are so wrapped up in their own work that they don’t know what’s going on in closely related fields.
One area still well below the mainstream radar is sigma receptor research. This is not surprising. Up until about 1995, there were only a handful of papers published on sigma receptors.
In grossly oversimplified terms, these receptors are switches that sense specific molecular signals and react in some fashion. One example of a substance that acts on sigma receptors is cocaine. The effects are not only mood altering, they are toxic to the point that they can cause death. Researchers at the University of Oklahoma Health Sciences Center have blocked those effects with a substance that turns sigma receptors’ cocaine switch off.
One of the people most responsible for developing the science of sigma receptors is molecular pharmacologist Alexandre Vamvakides. For 30 years, the visionary Vamvakides has focused on the relationship between maladies such as Alzheimer’s, epilepsy, depression and cancer. In the process, he made critical discoveries regarding sigma 1 and 2 receptors. If there were a way to bet on future Nobel Prize winners, I’d put money on Vamvakides. In the process of making those discoveries, by the way, he won pivotal patents governing therapies that exploit them.
In January last year, Dr. Vamvakides joined Anavex Life Sciences Corp. (AVXL: OTCBB) as chief scientific officer and a member of the board of directors. Anavex had barely incorporated, though the core team had been working on sigma receptor research for years. Vamvakides’ key patents, of course, followed him. So did his partnerships with important groups investigating sigma receptors, including other leading researchers in the field.
An explosion of sigma receptor research has taken place in the last decade, much of it based on Vamvakides’ work. There have been thousands of new scholarly papers on the subject since 1995. Several important books have come out in the scientific press. More importantly, Anavex holds the lead position in the development of sigma receptor therapies.
I first heard rumbles about the company when it produced remarkably potent results in preclinical tests of an anti-Alzheimer’s compound, Anavex 1-41. Apparently, the compound functions by reducing oxidative stress believed to be a primary cause of Alzheimer’s disease. A Ph.D. biochem friend of mine who works helping get drugs approved by the FDA read the journal articles. Though he normally doesn’t use the word, he told me the Anavex compounds were “exciting.” So I paid attention.
Anavex scientists believe that their drug limits the creation of plaques that attack the part of the brain responsible for learning, emotion and memory. The hippocampus, of course, is responsible for learning, emotion and memory. Testing continues in cooperation with Universite Montpellier in France, where much of the sigma receptor research is based. Phase 1 human trials are scheduled for late 2008 or early 2009.
I know, by the way, that a lot of my readers have advanced scientific backgrounds. Those readers can access an excellent third-party analysis, funded by the National Institutes of Health, of the beneficial effects of sigma receptor agonism with Alzheimer’s. You can download the book Sigma Receptors: Chemistry, Cell Biology and Clinical Implications at:
Another important abstract written by Anavex researchers was just published as part of the Alzheimer’s Association International Conference on Alzheimer’s Disease. The conference was just held in Chicago, and the paper is available at ICAD’s Web site:
www.alz.org/icad/abstracts.
Recently, Anavex’s public profile began to increase somewhat. A number of analysts have started talking about the positive Alzheimer’s test results. This was bolstered by preclinical tests showing that Anavex 7-1037 reduces cancer tumor growth rates by 69%, with minimal side effects. I fully expect that the stock will begin moving in the not-too-distant future.
That’s not what I was looking for, though. One or two drugs, years from market, do not translate into transformational profits. This is true even if they address the enormous markets for Alzheimer’s and cancer. Analysts say a cure for AD would be worth at least $10 billion per year. The cancer drug market is five times that. When you’re recommending stocks for the long run, though, even dramatic test results for drugs are not enough.
The reason is simple. In this rapidly evolving world, something else could come out of the blue and supersede even the brightest prospect. Eli Lilly, for example, is working on two Alzheimer’s treatments, although there are reportedly side effects that could complicate FDA approval. Pfizer has its own product in early development. Gamma-secretase modulators are showing promise as an Alzheimer’s treatment, as well. On the natural side, another compound, found in grapes, shows signs of preventing Alzheimer’s in animal tests. (It is not, incidentally, resveratrol, which is also found in grapes. As you know, Glaxo paid more than $700 million for Sirtris, which is based on resveratrol and other sirtins.)
So I’m not willing to place a long-term bet based only on a couple of unapproved drugs. This is especially true in an era of accelerating pharmaceutical sciences. Will sigma receptor science yield an entirely new area of exploration and exploitation or just a few novel treatments? That’s what I was trying to find out when I first started investigating Anavex. Months ago, I began talking to Anavex executives while looking for third-party confirmation.
Discussions with Anavex officers have convinced me that the company sees itself as having the corner on a revolutionary area of pharmaceutical exploitation. I agreed, but didn’t give the buy signal back then. I didn’t because it was hard to find someone not connected to the company who truly understands the science behind Anavex. Few people have in-depth knowledge of sigma receptor science, so it took me a while. Ultimately, though, I got the confirmation I needed. Sigma receptor technology will, I believe, be the basis for an enormously disruptive and profitable field of drug production.
Talking to Anavex insiders, it is clear that the company is looking at this big picture. Dr. Cameron Durrant, a board member, told me flatly that “Anavex will be world leader in the understanding and development of drugs based on sigma receptors.”
In pharma jargon, he’s talking about a platform. That is the set of tools needed to fully exploit a biological system. Out of this platform, Durrant says, “The company has developed a portfolio of almost 60 compounds and is able to identify high-potential drug candidates. Eight are in preclinical stages.”
This is not, however, the end of the road. Durrant envisions many more therapies in the future. “The two big buckets are central nervous system conditions and cancers,” he says. “The company has compounds that address Alzheimer’s, epilepsy, depression and pain. Within oncology, we’re looking at a range of cancers including colorectal, breast, prostate, lung and melanoma — with patents filed and issued.
“These are potentially disease-modifying drugs, not just symptom alleviators,” he says. “Let’s take Alzheimer’s, for example. Rather than treat short-term memory loss, we want to preserve the brain cells implicated in memory. In the cancer example, we want to kill the cells that cause the cancer, without impacting healthy cells.”
Sigma receptors make this possible because they can be switched on or off, Durrant says. “They can either preserve the cell, important in CNS conditions like Alzheimer’s, or promote apoptosis — cell death. An example of where you would want that is cancer.”
He also points out that Anavex agents may be used for diagnostics and visualization. Durrant speaks my language when he says, “Obviously, Anavex is not a big pharmaceutical company. It’s more like an agile breakout disruptive play.”
There is one more thing that I want to point out about Anavex. Many of the top people in the company maintain relationships with pharma giants. These are companies, of course, that are working on their own drugs.
Durrant, for example, is worldwide vice president of virology global strategic marketing at Johnson & Johnson. Before joining Johnson & Johnson, Dr. Durrant was CEO of PediaMed Pharmaceuticals and filled high-level positions at Merck, GlaxoSmithKline and Pharmacia (now Pfizer). He was a 2005 Ernst & Young health care Entrepreneur of the Year.
Similarly, Anavex just appointed Alison Ayers to its board of directors. Ayers is worldwide commercial head for oncology at Pfizer. In that position, she is responsible for Pfizer’s oncology portfolio, including more than 20 drug candidates in clinical development. She develops Pfizer’s oncology department commercial strategy, and last year, her group had more than $2 billion in sales.
My point is simply that these well-connected officers of major pharmaceuticals are not assisting Anavex against the wishes of their primary employers. Anavex holds the patents on a potentially revolutionary technology, and the industry knows it. As Anavex proves its science, development partnerships with other companies will help keep stock prices headed upward. This should keep the faint of heart on board until the company earns the historic long-run profits I am convinced it will.
Let’s keep our fingers crossed that Anavex stockholders resist the nearly inevitable buyout offers and that the company remains a pure play with the potential for returns measured in the tens of thousands of percent.
Recommendation: Buy Anavex Life Sciences Corp. (AVXL: OTCBB) up to $4.75.
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