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Cancer-Fighting Biotech OncoGenex Rates a Buy


With two promising prostate cancer drugs in the pipeline and a partnership with a major pharma already signed, it should be up, up, up for this company.


Short of a market meltdown that sends every investor screaming out of anything with a bit of risk, biotechnology stocks tend to march to their own drummer, going up on the progress of drug trials and corporate partnerships independent of what the market does.

OncoGenex (OGXI) scores highly on both those metrics. Which is why I'm adding it to my Jubak's Picks portfolio today.

The company has two drugs for treating prostate cancer in Phase II and Phase III trials. Prostate cancer is a big disease with 200,000 to 220,000 new cases a year. (There are roughly 2 million men in the US now dealing with prostate cancer. Europe and Japan combined have twice that number.)

Unlike many cancers, it is very treatable - with a 100% five-year survival rate if the cancer is diagnosed early. The problem is that 30,000 men die of the cancer in the US every year because they weren't diagnosed early enough.

The race among drug companies is to find an effective treatment for those men who aren't diagnosed early. The current standard of treatment is taxol, which is an expensive and highly toxic drug, and provides only about 2.4 months of survival after treatment on average.

OncoGenex Custirsen (OGX-011), now in Phase III trials, is an antisense molecule. When administered with other cancer drugs, it decreases resistance to the drug treatment.

OncoGenex has just signed a partnership with Teva Pharmaceutical Industries (TEVA) that includes a $60 million upfront payment and $370 million in potential milestones related to OGX-011. OncoGenex anticipates finishing recruitment for its Phase III trial in 2012, with data in 2013. (This sets up a very interesting marketing angle, since a therapy could combine generic taxol from Teva with OGX-011.)

The company's second drug, OGX-427, uses a second antisense pathway to also reduce resistance to drug therapies used against prostate cancer.

The company finished 2011 with $64.9 million in cash. Operating expenses in 2011 came to $27.8 million.

The stock has sold off a bit (3%) from the March 1 high at $16.20 to today's price (at 1:00 p.m. New York time) of $15.71. I'm adding this stock to Jubak's Picks today with a February 2013 target of $22.

Editor's Note: This article was written by Jim Jubak of MoneyShow.

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Twitter: @TopProsTopPicks

No positions in stocks mentioned.
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