YM BioSciences

YM BioSciences (YMI) (follow link for my PDF profile) expects to report Phase 2 clinical trial results for nimotuzumab [nimo] in a colorectal cancer study some time during 3Q08, which are expected to have a major impact on the stock price. Nimo has the potential to be best-in-class among epidermal growth factor receptor (EGFR) inhibitors such as ImClone’s (IMCL) Erbitux, Amgen’s (AMGN) Vectibix, and Genentech’s (DNA) Tarceva — note that two of the three previous companies (DNA, IMCL) have recently received buyout offers from big pharma. The key differentiating feature for nimo is the lack of severe (Grade 3 or 4) toxic side effects such as a potentially fatal skin rash that may develop with other EGFR-inhibitors. To be deemed successful in the Phase 2 colorectal cancer trial, nimo must demonstrate progression-free survival of about four months with no incidence of severe skin rash. In addition, Japan licensee Daichii-Sankyo and European partner Oncoscience AG are both expected to release late-stage results for nimo throughout the remainder of this year for treatment in a variety of cancers. Furthermore, a European Marketing Authorization Application (EMEA) has already been filed by licensee Oncoscience AG with potential approval and launch in 2009, pending successful review of the 120-day list of questions and a manufacturing inspection.

YM Bio is a speculative, micro-cap biotech play with a near-term catalyst in the form of Phase 2 results for nimo in the treatment of colorectal cancer. Trading at a slight discount to its cash position of $55M as of mid-year, YM Bio is already being priced for failure by the market despite two late-stage drug candidates which have established mechanisms of action. YM Bio has retained the rights to nimo in the US, Canada, Israel, Australia, and New Zealand; with partnership discussions underway for some of these regions. YM Bio expects to have a total of four Phase 3 trials underway by the end of this year, which is an impressive feat for a company with a $54M market cap and cash burn rate of less than $4M per quarter. Given a stock price today near its cash position, YM Bio is trading like a long-dated call option which could rise substantially on positive nimo results, but not go out of business if the trial disappoints due to the global consortium that is committed to the development of nimo.