First Pick in 2010: TELK
HSKA & HEPH both have about 50% gain since late December after my introduction post, and I believe that there is still more room for these two picks to rise. While waiting for the big time to come, I would like to introduce another small cap biomedical stock which has several catalysts in the near term.
TELK was once a $20 stock when billionaire Carl Icahn became a shareholder of the company and increased the stake in 2006, but after that, it fell like a rock to $0.27 because of the unsatisfactory results of its ovarian and lung cancer drug trials and the worldwide economic crisis.
As the U.S. economy gradually improved and the clinical trials are back on the right track, TELK has bottomed out since last April and is trading around $0.80. However, this price is still grossly underestimated according to the financial situation and the potential market of TELK’s drug candidates. As my first pick in 2010, I believe that with the approach of short-term catalysts, TELK will have greater room for its stock price to grow.
TELK Overview: Telik, Inc. is a biopharmaceutical company focused on discovering and developing small molecule drugs for cancer and inflammatory diseases treatment. The company has two leading drug candidates, one is TELINTRA® (TLK199) which is currently in Phase 2 clinical development for myelodysplastic syndrome(MDS), and severe chronic idiopathic neutropenia(SCN); another one is TELCYTA® (TLK286), a cancer cell-activated chemotherapeutic that has shown clinical activity in a Phase 2 and Phase 3 clinical trials in advanced ovarian cancer, non-small cell lung cancer, colon cancer and breast cancer. Both product candidates are developed through the use of the company’s proprietary TRAP® technology, which enables the rapid discovery and efficient optimization of small molecule drug candidates.
*MDS is a form of pre-leukemia in which the bone marrow produces insufficient levels of one or more of the 3 major blood elements (white blood cells, red blood cells and platelets).
*SCN is a blood disordered typified by a very low neutrophil counts. Neutrophils are very important in defending the body against bacterial infections, and therefore, a patient with too few neutrophils is more susceptible to bacterial infections.
* Non-small cell lung cancer is the most common type of lung cancer, accounting for about 85% of lung cancer. Non-small cell lung cancer drug sales in 2008 have been as high as 3.5 billion dollars according to the latest statistics, and this market is expected to expand to 10 billion dollars by 2018.
* Ovarian cancer has become the fifth leading causes of death in women in the United States. More than 25,000 women are diagnosed with ovarian cancer, a disease that kills nearly 15,000 women every year. This is also a multi-billion dollars market.
TELK is financially sound. As we see from 10-Q, TELK has around 50 million dollars on balance sheet with no debt, but the market cap is only about 43 million. This means that if TELK close the company right now, share holders will get better price of their shares plus free technology and drug candidates which TELK already spent about 500 million dollars on them. We can tell that the current price has been seriously underestimated.
TELK has no NASDAQ listing problem in the near-term. On January 5, 2010, TELK received notice from NASDAQ that the Company's application to transfer listing of its common stock from The NASDAQ Global Market to The NASDAQ Capital Market had been approved. This means that TELK will not worry about this problem for a long time. Further more, when a number of catalysts are around the corner, I am expecting a big rally of TELK and get rid of this embarrassing situation once and for all.
TELK’s short-term catalysts：
1, TELINTRA phase 2 clinical trial of MDS:
TELINTRA phase 2 clinical trial of MDS is estimated to finish final data collection of primary outcome by last December according to clinicaltrials.gov, and the data is expected be released in this month. When TELK announced positive phase 1-2a result of its second drug candidate TELCYTA last September, its stock price jumped to $1.4. Will it be a bigger rally this time?
2,TELINTRA phase 2 clinical trial of SCN:
ELINTRA phase 2 clinical trial of SCN is estimated to finish final data collection of primary outcome by this December according to clinicaltrials.gov, but the interim clinical data should be a lot earlier than that. This study was started in last May, and if TELK released interim data based on the 6 months cycle like most other biomed companies, news should be released in this month.
3, TELCYTA’s prospect for collaboration:
TELK was hit hard by the unsatisfactory result of TELCYTA’S phase 3 clinical trial in 2006, but there were actually 5 trials ongoing at that time, 4 of them failed, and the fifth one initiated in May 2006 to evaluate TELCYTA in combination with PLD versus PLD alone as second line therapy in platinum refractory or resistant ovarian cancer. On October 29, 2008, TELK announced top-line results from the ASSIST-5 trial demonstrating that statistically significant improvement was observed in a sub-set of patients with platinum refractory or primary resistant disease. TELK is currently seeking a partnership for TELCYTA for further development. Once this drug candidate with multi-billion dollars potential market got a deal like OPXA & ATHX, TELK will be one of the biggest gainers in 2010 for sure.
4, TELINTRA prospect for collaboration：
Drug maker Celgene already has FDA approved drug Revlimid for myelodysplastic syndromes, but the pharmaceutical industry giant still tossed 2.9 billion dollars to merge Pharmion for its Vidaza in 2007 in order to built up a monopolistic position in the hematology field. So will Celgene be kind enough to let TELK develop a next generation drug independently for hematologic disease and challenge its dominance status in this area, especially when TELK is willing to find collaboration? The possibility is pretty low, and if so, we may see a big deal accompanying with TELINTRA’s phase 2 result for TELK soon.
So will TELK be the next ATHX? Only time will tell. But for my opinion, the situation is more like a combination of SNSS and ATHX.
*Disclaimer: The author of this post is not a licensed analyst and the purpose of it is for information sharing and discussion only, not recommendation for any stock buying and selling activity. Please do your own research before making any trading decision.