Biotech: Fighting Blindness

Small biotech firms are risky but offer great promise. That’s the case with a Canadian company working on treatments for retina damage.
 
It is taken for granted  – that little part of your eye allowing you to read a book, drive a car or distinguish the face of your mother in a crowd. The under-appreciated macula is near the center of your retina and provides detailed central vision. But the increasing incidence of diabetes threatens us.
 
Some 8% of the U.S. population, or 25.8 million people, suffers from diabetes. Another 79 million are considered “pre-diabetic” and could cause the incidence of this chronic disease to mushroom to an estimated 40 million people by 2015. Diabetics battle numerous side effects of their condition, including greater susceptibility to blindness.
 
This is brought on by diabetic macular edema or DME – the swelling of the retina due to fluid leaking from blood vessels within the macula. The lifetime risk for diabetics to develop DME is approximately 10%. That means a very large number of people are at risk. An estimated 1.6 million people have already developed DME  –  presenting a very large market opportunity for clever scientists with an effective treatment.
 
Clever Science
 
A Vancouver-based biotechnology company named iCo Therapeutics (ICOTF), which in the U.S. trades over-the-counter, is targeting DME with its ICO-007 compound.  A Phase II clinical trial is under way to evaluate whether ICO-007 could help treat DME in diabetics.  The Wilmer Eye Institute of the Johns Hopkins University School of Medicine is coordinating the study.
 
Laser treatment has been the standard of care for DME for over 25 years and has been effective in 25% to 30% of patients.  In recent years, new drugs have been used alone or in conjunction with lasers. For example, the Genentech product ranibizumab, marketed under the name Lucentis, works against the vascular endothelial growth factor (VEGF) that is thought to be one of the culprits leading to DME. This approach has yielded much improved results with as many as half of patients experiencing improved vision.
 
To iCo Therapeutics, ICO-007 can do much better. VEGF is only one of several factors that lead to the proliferation of weak blood vessels in the macula.  Consequently, the anti-VEGF treatments are only partially successful in treating DME. Instead of focusing on one growth factor, ICO-007 interrupts a signaling process that could be the cause. Early test results show remarkable results, says iCo.
 
Its product has a cost advantage. The annual cost of ICO-007 is estimated to be $10,000, while the Lucentis costs approximately $24,000 per year.
 
A self-styled drug re-profiling company, iCo leaves expensive research work to others and focuses on developing compounds closer to commercialization.  Designed and discovered by ISIS Pharmaceuticals (ISIS), ICO-007 was licensed by iCo in 2005.  The company’s second drug candidate is ICO-008 or Bertilimumab, a compound also aimed at sight-threatening diseases that was originally developed by MedImmune, now a part of AstraZeneca (AZN).  Also, iCo is working on an oral delivery system for the antifungal Amphotericin B that could be used to treat life-threatening infectious diseases in developing countries where the usual intravenous infusion is not practical.
 
Hidden Assets
 
An early-stage company, iCo reported $1.3 million in cash and equivalents on its balance sheet at the end of December 2011. My firm estimates the company needs approximately $160,000 per month in cash to support operations. The appearance of skimpy resources might dissuade some investors, but we note iCo’s management team has been nimble in making the most out of its assets.
 
In addition, iCo has negotiated a couple of smart trades.  A licensing deal for ICO-008 was struck in 2010 with Immune Pharmaceuticals Ltd., a biotechnology company based in Israel. And iCo will retain rights to ICO-008 for ocular applications and Immune will further develop the compound for systemic uses such as treating inflammatory bowel disease. 
 
In September 2011, iCo entered into a research collaboration agreement with the Juvenile Diabetes Research Foundation (JDRF), a highly influential leader in the search for the treatment and cure for diabetes. 
 

 
Debra Fiakas, CFA, is managing member of Crystal City Research LLC in New York City.
 
Neither the author, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned here.
 
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