Oncothyreon Partner Starts New Lung Cancer Trial, Prompts Takeover Scuttle

12/10/09Follow @xconomy

Seattle-based Oncothyreon (NASDAQ: ONTY), the developer of a vaccine treatment to stimulate the immune system against cancer cells, said today that its partner has started another pivotal trial of the product. Germany-based Merck KGaA has begun a trial that will include 420 patients in Asia who will get the vaccine, dubbed Stimuvax, or a placebo for non-small cell lung cancer.

This is the third pivotal trial of the vaccine that Merck KGaA has invested in, which prompted at least one analyst to wonder whether Oncothyreon will soon get bought out.

“We see Merck’s additional investment in Stimuvax as increasing at least the theoretical possibility of a takeover of Oncothyreon,” said analyst Simos Simeonidis of Rodman & Renshaw, in a note to clients today.

Oncothyreon has had an amazing reversal of fortune in the past year. The company, running down to its last few months of cash, renegotiated its partnership with Merck KGaA last December to shift more of the manufacturing risk to his partner, while retaining a “double digit” percentage royalty on future sales of the vaccine. The company was buoyed by renewed interest from investors in April, when Seattle-based Dendreon showed another treatment of the field of cancer immunotherapies could help patients live longer. By June, Merck KGaA decided to start a pivotal breast cancer study of Oncothyreon’s vaccine, which surprised some investors because it pulled the trigger before waiting for full results of a separate lung cancer study to validate the product.

Oncothyreon seized on the momentum of its increasing stock price to raise another $24 million, more than double the amount of cash it expects to burn this year.  In addition to using the cash to further development of the immune-booster, Oncothyreon plans to spend some of its money on developing an oral pill for cancer called PX-866 which it is planning to advance into mid-stage clinical trials in the first half of 2010. This is part of CEO Bob Kirkman’s plan to diversify the company into a developer of cancer drugs, not just vaccines, which I described in this space back in March.

Shares of the company climbed 7 percent to $5.22 at 9:52 am Eastern time. The stock is now up almost 7-fold from where it started this year, trading at 80 cents.

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