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Vical, Exelixis Surge as Cancer Meeting Nears

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ASCO study data will move shares of a number of cancer drug companies.

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Biotech company Vical's (VICL) stock has more than doubled this year, Oncothyreon's (ONTY) shares jumped almost 75% and Exelixis (EXEL) has risen by more than a third.

All of the companies are developing experimental cancer treatments, and some investors are betting that the small-cap firms will release promising study data at the upcoming American Society of Clinical Oncology conference in Chicago next month. Investors will get a sneak preview of scores of scientific papers on drug research Wednesday evening when the cancer group, known as ASCO, will make much of the research available online. (Click here.)

A number of companies presenting research at the conference, which includes the vast majority of biotech firms studying cancer therapies, will see their stocks move based on the data. As noted, some of these companies already are seeing their shares rise.

Wednesday's data dump and results of the actual presentations at the ASCO meeting June 3-7 can cause small company stocks to more than double. The conference is the biggest and most prestigious scientific meeting for cancer research in the country, drawing about 30,000 people.

Michael Becker, a biotech industry consultant, calls the stock movements the ASCO effect, a term he coined a decade ago. Previously, only ASCO members were privy to the scientific papers, known as abstracts, before the research was presented at the conference. That allowed some --but not all-- investors to trade on the information prior to the research presentations. In recent years, ASCO reversed its policy and makes the abstracts available to anyone through the organization's website.

It's tricky when companies such as Vical have such big stock run-ups prior to the abstracts even being released. So, it's possible some stocks will surge before the conference only to drop later even if study data is positive. The conference presentations will update information on the companies' studies, which can be significant given the pace of drug discovery.

"It will be up to investors as to which (companies) still have some gas in the tank to reach higher price levels," says Becker, senior partner at MD Becker Partners.

There are around 300 publicly traded biotech companies and more than half are researching cancer treatments. Becker estimates more than 100 of these public biotech companies will present data. In all, there will be more than 4,000 abstracts.

Investors should be bone up on current research themes. Cancer vaccines, for instance, still make up a fraction of the oncology drugs being developed, but Dendreon's (DNDN) prostate cancer vaccine has highlighted the benefits of immunotherapy to treat cancer. (Also read Dendreon Presents Additional Provenge Safety Data.)

Vical is conducting late-stage human studies for Allovectin-7, a vaccine to treat skin cancer patients. There's a lot of focus on skin cancer research and the area is getting even more attention from investors since Bristol-Myers Squibb (BMY) won approval to sell the melanoma immunotherapy Yervoy this year. Bristol-Myers will present new Yervoy data at ASCO, which will spur more discussion about the treatment and the disease..

Oncothyreon licensed its experimental lung cancer vaccine to German-based Merck KGaA. The vaccine is in the late stages of human studies and, if shown to be effective treating lung cancer, could be tested for other types of cancer. Oncothyreon also is testing a drug, PX-866, to treat head and neck and (separately) colon cancer in combination with other therapies. PX-866 is among a class of drugs known as PI3-kinase inhibitors, which is getting a lot of attention among cancer researchers.

Another vaccine maker, Agenus (AGEN) will present data on its mid-stage trials for Prophage to treat brain cancer.

Exelixis is partnered with French drug maker Sanofi (SNY) to develop two PI3-kinase inhibitors. It will also make oral presentations at ASCO for its most advanced solely owned developmental drug cabozantinib for the treatment of both ovarian and prostate cancers.

Overall, ASCO presentations will include scores of potential first-line and second-line treatments for cancer, new types of chemotherapy and screening products. Those first-line treatments tend to attract a lot of investor interest.

After a previous disappointment, Japanese company Eisai will report results from its late-stage study of Dacogen to treat elderly patients with a form of leukemia. The company's data may have an impact on SuperGen (SUPG), which licensed the drug to Eisai. The drug is aimed at acute myelogenous leukemia, a particularly difficult to treat form of the disease. Two other companies are presenting data at ASCO on experimental treatments for the type of leukemia, Cyclacel Pharmaceuticals (CYCC) and Sunesis Pharmaceuticals (SNSS).

These are just a handful of examples. A number of other story lines will emerge in the coming weeks.
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