|Mentor Capital (MNTR.PK): A Stealth Cancer Immunotherapy Play|
|Wednesday, 26 August 2009 07:43|
On 7/8/09, in the first of four steps leading to an anticipated merger and name change, Mentor Capital (MNTR.PK) acquired a 20% ownership stake in an innovative clinical stage cancer immunotherapy company, Quantum Immunologics, Inc. (QI). QI is a privately held company with a goal of initially marketing its active immunotherapy for the treatment of breast cancer in the U.S., in addition to planning for new studies in other types of cancer and a new cancer screening tool. Mentor Capital is providing funding for QI to complete its ongoing, FDA-authorized Phase I/II trials for its experimental metastatic breast cancer treatment, in addition to possible acquisitions and additional clinical trials.
Currently, the 1,386 shareholders on Mentor Capital stock hold $145 million in stepped warrants that will provide a continual flow of equity to fund QI and other projects. Mentor Capital has $13.5 million in assets under management through its lead hedge fund's S&P 500 investment portfolio, which has generated a 31.4% annualized rate of return on MNTR.PK invested funds since inception last year compared to a flat 0% return for the Dow Jones Industrial Average in the same time frame, as previously announced on 5/27/09.
In addition to providing $2.2 million in funding to help support the FDA Phase I/II trial through approximately February 2010, Mentor Capital has agreed to assist QI in funding future strategic stock or cash acquisitions. The Company will also serve as a preferred funding source for QI during later stage or additional trials. In exchange for this funding support, Mentor Capital has received common stock in QI reflecting a carried interest of 20%. At the current private placement price for the QI shares, this 20% stake in QI increases the assets of Mentor Capital by $3.74 per share.
Mentor Capital has nearly completed its second year of financial audits, clearing the way to start the process of moving the stock off the Pink Sheets to become a fully-reporting entity on the OTCBB and eventually graduating to the AMEX or Nasdaq. As of year-end 2008, Mentor Capital had 221,742 average weighted common shares of stock outstanding and posted the following full-year financial results: 1) revenue = $308,435; 2) expenses = $264,985; and 3) after-tax income = $43,450 or $0.20 per share.
The Mentor Capital website also features a Cancer Immunotherapy (CI) Index of 10 stocks, which has posted a gain of about 23% since its inception six weeks ago on 7/10/09 to reflect the start of the Company's initial 20% stake in QI. The index currently features the following 10 component companies, in addition to Mentor Capital as a public-traded proxy for tracking QI: Dendreon (NASDAQ:DNDN), ImmunoCellular Therapeutics (IMUC.OB), Antigenics (NASDAQ:AGEN), Biovest (BVTI.PK), Celldex Therapeutics (NASDAQ:CLDX), Oncothyreon (NASDAQ:ONTY), Northwest Biotherapeutics (NWBO.OB), CEL-SCI Corp. (AMEX:CVM), and Generex Biotechnology (NASDAQ:GNBT) ( as a proxy for its wholly-owned immunotherapeutic subsidiary, Antigen Express).
The CI Index is primarily a subset of my actively managed Cancer Diagnostic & Therapeutic (Dx/Tx) Micro-Cap Index, which reflects a cross-section of emerging cancer companies with market caps below $250 million at the time of index inclusion. In addition, Mentor Capital expects to update the CI Index on a weekly basis at its website.
Quantum's approach to cancer immunotherapy involves sensitizing the dendritic cells from a patient's own blood to recognize and direct the body's immune system to attack breast cancer sites in a targeted effort to eradicate or stabilize the disease. This approach does not involve breast surgery (e.g. complete or partial removal of breast tissue), chemotherapy, or radiation - with the goal of eliciting a targeted immune response directed at cancer cells which may prove to be more effective and safer (i.e. a few days of temporary flu-like symptoms following treatment as the immune system attacks the cancer cells) than existing treatments.
Dendreon follows a similar approach for prostate cancer and has a market cap of about $2.7 billion as it prepares to become a commercial-stage company with the possible 2010 launch of Provenge (sipuleucel-T), following positive Phase 3 results announced earlier this year which demonstrated an acceptable safety profile and survival benefit beyond chemo that is expected to result in FDA approval for the treatment of metastatic, androgen-independent prostate cancer. Provenge is derived from a patient's own immune system (dendritic cells, hence the name Dendreon) and is poised (upon FDA approval) to become the first of a new class of therapeutics called active cellular immunotherapies (ACI) which are sometimes referred to as cancer vaccines (even though treatments such as Provenge are not designed to prevent the disease like Gardasil or Cervarix, which are designed to prevent HPV infection that is associated with cervical cancer).
The dendritic cells are extracted from patients by a process called leukapheresis (a blood collection process which isolates white blood cells) and then attached to an antigen (a molecule or substance which elicits a reaction by the immune system) known as prostatic acid phosphatase (PAP), which is specific to prostate cancer cells and is not found elsewhere in the body. Dendritic cells are the primary antigen presenting cells (APCs) for the immune system which activate a T cell response against a given antigen. The patient's APCs are then transported to the Company's manufacturing facility where they are co-cultured with a recombinant fusion protein containing PAP. The activated, antigen-loaded APCs (which is Provenge) is then delivered to the physician's office for infusion into the patient with the goal of stimulating a T cell response targeted toward prostate cancer cells. The process is performed three times over the course of a four-week period, upon which treatment is completed.
The FDA-authorized Phase I/II clinical trial for QI is described in full detail at the ClinicalTrials.gov website with the official title posted as, "Phase I/II Vaccine Study With Autologous Dendritic Cells Loaded With Oncofetal Antigen/iLRP (immature laminin receptor protein) in Patients With Metastatic Breast Cancer." The University of South Alabama serves as a collaborator while the trial is sponsored by QI with a ClinicalTrials.gov identifier of NCT00879489. The Phase I/II clinical trial is structured as an open label, single-arm, interventional treatment study designed to assess both efficacy and safety in a single, combined trial. Combining Phase I/II into a single study saves about six months and $1 million from the clinical development process for Mentor/QI and reflects optimism toward the prospects for the Company's experimental cancer immunotherapeutic.
The study will be accomplished by collecting dendritic cells (APCs) from the each patient's blood using a machine to which the patient is connected through two small cannula placed into arm. The APCs will be manipulated in the lab with human recombinant oncofetal antigen (OFA/iLRP) and then injected into the skin of patients (intradermal administration). There will be a series of three monthly skin injections, administered at four-week intervals. The Company hopes to induce a safe, targeted anti-cancer response by this method and the outcome measures for the study will include toxicity/safety, response, survival, immunological monitoring, and time to disease progression. The OFA/iLRP patents are the by-product of 20 years and $30 million of research at The University of South Alabama Medical & Science Foundation and were primarily funded by the National Institute of Health's (NIH) National Cancer Institute (NCI).
The study utilizes an antigen that is found only on cancer cells and is not detected on normal tissue. The molecule is known as oncofetal antigen or OFA because it is only found on cancer cells and early-stage fetal cells/embryos in the womb. Because OFA is unique to cancer, the Company believes OFA could be used to train the patients' own immune system to mount a targeted attack of cancer cells which express this antigen. Although OFA has been found in large concentrations on all cancer types, it was found to be especially abundant in breast cancers. A study published in a medical journal (Blood. 2003;102:4416-4423) stated that it has been documented in previous rodent and human studies that OFA-iLRP is an immunogenic protein that can specifically activate both T and B lymphocytes, making it an ideal antigen for immunotherapeutic strategies directed against all types of human cancer.
The Phase I/II clinical trial is designed to examine the inherent immune response in breast cancer patients directed towards OFA/iLRP and whether this immune response could be amplified and modified through actively vaccinating using autologous (patient-derived) OFA/iLRP-pulsed dendritic cells which are re-injected into cancer patients. OFA/iLRP is the chosen target for this immunotherapy product candidate because it has been found to be expressed in all human cancers examined so far, including myeloid + lymphoid leukemias, lymphomas, renal cell (kidney) carcinomas, prostate cancer, breast cancer, lung cancer, melanoma, squamous cell carcinoma, and ovarian cancer.
Furthermore, OFA/iLRP is not found in normal human tissue after mid-gestation during early fetal development. OFA/iLRP is not only a highly-specific tumor marker, but it is also immunogenic in humans (i.e. eliciting a response by the immune system) based on studies outlined at QI's website. By producing dendritic cells which are personalized from each breast cancer patient's blood monocytes, loading them with OFA/iLRP, and inducing their maturation with cytokines, QI produces an OFA/iLRP-specific autologous cellular therapy for the treatment of metastatic breast carcinoma.
The mechanism of action of this active cancer immunotherapy product candidate is to generate a targeted and personalized immune T cell response that will fight the patient's cancer. The OFA/iLRP-loaded mature, moDCs (monocyte-derived dendritic cells) do not have a direct cytotoxic effect as with traditional treatments such as radiation therapy or chemo. Rather, the anti-cancer effect is generated by the presentation of OFA/iLRP to activate each patient's T cells for a targeted immune response to OFA/iLRP, which is specific to the patient's cancer cells which express this marker.
This mode of action is distinct from chemotherapy, which kills not only tumor cells, but also affects normal cells such as those which divide rapidly (e.g. hair, GI tract, etc.). This approach is also different from immune-therapies that generically stimulate the immune system (e.g. cytokines such as Interleukin-2 or IL-2) or specifically target the tumor via an anti-tumor antibody (Herceptin- trastuzumab). Because the product requires the development of an immune response after administration, there is some delay in the potential effect of the product with the generation of each patient's immune response and a clinical effect of that may take several weeks to develop, and is typically characterized by transient, flu-like symptoms rather than the harsh side effects of radiation and/or chemotherapy.
On 7/15/09, Mentor Capital announced that QI met a significant milestone which marked the beginning of its Phase I/II breast cancer trial upon the completion of the first clinical treatment injection. The Phase I/II clinical trial is testing the safety and efficacy of QI's immunotherapy on 27 Stage IV breast cancer patients who have failed conventional therapy, and the Company expects to provide updates on the study as it progresses. Mentor Capital's CEO, Chet Billingsley, stated that, "The successful initiation of concurrent Phase I/II trials represents an important step in the value equation for QI. Comparing the cost to acquire 20% of other dendritic immunotherapy companies, like Dendreon, with Mentor Capital, which holds 20% of QI, will reveal attractive buying opportunities for biotechnology investors, now that QI is at the clinical stage."
With expected updates and news flow from the ongoing Phase I/II clinical trial, Mentor Capital offers investors an under-the-radar opportunity for a promising new cancer immunotherapy approach which could apply to all types of cancer since OFA is only expressed on cancer cells and in early-stage fetal/embryonic development. At the current private placement price for the QI shares, Mentor Capital's 20% stake in QI increases the assets of the Company by $3.74/share, which is more than 2X the current stock price of $1.80/share. The prospects for this study and Mentor Capital are excellent since QI was given the okay for a combined Phase I/II trial, the study targets a cancer-specific marker (OFA/iLRP), the patents represent the by-product of two decades + $30 million of research that was primarily funded by NIH/NCI, and the previously announced positive Phase 3 results + potential 2010 launch of Provenge by Dendreon heightens investor awareness of the entire cancer immunotherapy space.
Below is a Q+A session that I conducted for BioMedReports.com (BMR) earlier this week with Mentor Capital's CEO, Chet Billingsley (CB), to provide an update on the Company's stock and the expected timeline for clinical data catalysts from QI's ongoing Phase I/II study. Click here to visit Mentor Capital's page on Facebook.
1.) BMR: What is your outlook for the Mentor Capital Cancer Immunotherapy (CI) Index?
CB: The market cap of the index is $3.3 billion, while the potential commercial opportunity is approximately $45 billion. If one fair notion of total value is to set it equal to one times revenue, then that would suggest the 10 CI Index component companies will appreciate by a factor of 13x (1,300%) much like Dendreon did this spring. Or, if the full value for the sector won't be harvested for eight years, then the compound annual growth rate for the sector would be projected to appreciate at 33% annually, compounded for eight years.
2.) BMR: What is the estimated timeline for clinical data catalysts from the ongoing Phase I/II trial?
CB: The May 2010 timeline (as listed on the ClinicalTrials.gov website) for clinical data on the study's primary outcome is unchanged. We are targeting to have all 27 women started in the three-month procedure by the end of December 2009. That puts them to be at the reportable stage by March 2010. So, having clinical data available by May 2010 is still good (most of the data will be ready one or three months in advance of this). That being said, this assumes the availability of suitable trial test subjects and that is always a little dicey. So far, it does look good, however.
3.) BMR: Since Mentor Capital ended 2008 with less than 250,000 shares of common stock outstanding, what is the current status of the Company's liquidity with regard to available shares of common stock?
CB: Mentor Capital is continually adding freely trading shares because its 1,400 shareholders are continually exercising registered warrants. About 72,000 shares were added in the last three weeks. Currently, there are 700,000 shares outstanding and another 28 million warrants total, in steps at $1, $3, $5, and $7 per share. The structure was designed to expand with increasing liquidity as the share price and market cap grows. No shares have been issued for services, or to promoters, or in lieu of salary. There are no 144 shares (a class of restricted stock), European shares, or blocks of owner shares waiting to be sold.
I believe, in 25 years, I have sold about 5,000 shares of stock. All but 15,000 of the current 700,000 shares of common stock were purchased by the exercise of $1 or $3 warrants during the last year. It is unlikely that many sellers will be interested in selling for less than $2/share, however, I believe there would be an ample supply of shares that could be purchased in the $2.30 range from individuals that will hold out to get more than $2 per share before they exercise their warrants at $1 and sell above $2. I expect no problems with having shares available for sale at any price less than $8.80/share. At that point, the Company would have collected $145 million in fresh cash and have a market cap of $250 million.
Disclosure: Long MNTR.PK