Assigning a value to development-stage biotech companies is a questionable task, and generally requires more intangible assumptions (market potential, clinical trial progress, partnership implication) than tangible assumptions (balance sheet, income statement, various financial strength indicators).  However, the merit in such assessment is that biotech investments have a more pronounced value inflection point that could, if things go well, represent a significant return on investment in multiples instead of percentages.  In that scope, I would like to present Oncothyreon, a biotech company developing cancer therapies; it's lead product is Stimuvax, a cancer vaccine.

Cancer vaccines are designed to treat cancer by stimulating the immune system to fight the cancer; the general public is more aware of this class of medicine due to recent milestone achievements by Dendreon in developing Provenge.  Stimuvax is a more traditional biologic approach to what Dendreon is attempting to achieve through Provenge (ex vivo cell therapy).  Biologic cancer vaccines target a specific tumor cell antigen (antigens are markers that allows the immune system to recognize non-self entity such as tumor), but this is a technical disadvantage against cellular products: tumor antigens can differ from patient to patient, and tumor to tumor, because cancer is a mutative disease.  However, from a commercial product perspective, biologics are cheaper to produce, and can be off-the-shelf, which makes them more compatible to traditional pharmaceutical business model; this is probably the reason Oncothyreon was able to partner its cancer vaccine earlier in the development timeline compared to its peers such as Dendreon. 

Stimuvax is partnered with Merck, and Merck initiated a Phase 3 clinical trial for non-small cell lung cancer (START study) in December 2006 under this partnership.  The terms of the partnership agreement surrenders clinical development, commercialization, and manufacturing rights.  Oncothyreon will receive royalties on the sales, which, however, could be a substantial source of revenue considering typical blockbuster performance by cancer drugs; there are no approved maintenance therapies for patients responding to first-line treatment for unresectable stage III non-small cell lung cancer (NSCLC).  The existing data from Phase 2 trial in NSCLC is compelling: median survival for subset of patients with Stage IIIB NSCLC was 30.6 months for patients treated with Stimuvax + standard of care (SoC) vs. 13.3 maonths for the patients treated with SoC alone.  What's more encouraging than the existing data or the August 3 2009 press release ("Oncothyreon announces presentation of long-term Stimuvax data at World Conference on Lung Cancer", or ir.oncothyreon.com/re...00512) is the fact that after 3 years into Phase 3 clinical trial in Stage IIIB NSCLC, Merck has initiated another Phase 3 clinical trial in breast cancer, the STRIDE study (Jun 22 2009 PR ir.oncothyreon.com/re...  Given the typical cost and resource requirements of clinical trials, this is a good indicator that substantial scientific, medical, and commercial feasibility is established to commit and invest more in the program.

Oncothyreon, in addition to its Stimuvax, also has a healthy product pipeline.  Although not as cutting-edge or sexy as the biologic cancer vaccine, 3 small molecules are being studied in early clinical trials: Px-12 for pancreatic cancer in Phase 2, Px-478 for multiple solid tumors in Phase 1, and Px-866 for multiple solid tumors in Phase 1.  It's probably too early to comment on these drug candidates, nor are any of them partnered to suggest anything.

In conclusion, Oncothyreon is a biotech company with good trackrecord in regards to drug development and business development with enormous potential (risk?).  It's a good company to review and consider for placing a bet on the biotech gamble.