Investing in innovative drugs, many universal logics can no longer be universal.
For example, in most industries, the combination of star founders + capital + potential products basically means that the company has a greater probability of success. But in the world of innovative drugs, the more such a combination is, the more likely it is to become a sweet trap.
Nextcure, an innovative pharmaceutical company in the U.S. stock market, can be said to be a very classic innovative drug investment lesson.
Behind this company stands a Nobel Prize-winning founder, and there is also a FIC drug in the pipeline that has the potential to rival PD-1. Whether it is today or 4 years ago, such biotech can be regarded as a perfect investment target from any point of view, and investors are flocking to it.
But you would never have guessed that it is now a value destroyer.
After repeated clinical failures, Nextcure's stock price has gone from $109 at its peak to $1 today$11 shares, with a market capitalization of only $30.97 million, is almost zero.
All the investors who fancy its star biotech halo have entered it, and there is no hope of a turnaround. Nextcure's lessons can be said to perfectly demonstrate the high threshold for innovative drug research and development and investment.
1) The first half of life
Since its inception, NextCure has come with its own "Gold Sucking" buff.
In less than a year after its establishment, the company completed a round A financing of $67 million, and in 2018, it received another $93 million in Series B financing.
At that time, the two products in Nextcure's pipeline were still in a fairly early stage, but they were able to attract so much money that they were the top experts in the entire biotechnology industry. So, what do investors really like about Nextcure?
As written at the beginning of the article, from the founder to the target, there are indeed many attractive things about Nextcure. In particular, the star founder behind NextCure - Professor Chen Lieping.
If you follow the biotech industry, you must have heard of the name Chen Lieping. That's right, the same one who first discovered PD-1. From 1999 to 2002, Professor Chen Lieping discovered the PD-1 L1 pathway with the function of inhibiting tumor immune response, and independently established the PD-1 L1 pathway as the target of cancer immunity**, which provided an important theoretical basis for the subsequent discovery of PD-1 PD-L1 drugs.
After that, Professor Chen Lieping's team discovered the Siglec-15 target and developed a potential FIC drug for NextCure, NC318.
In 2019, an article published by Professor Chen Lieping's team in Nature Medicine proved that SIGLEC-15 is highly expressed in specific tumors, and its expression is mutually exclusive with PD-L1 expression, which may have an effect on drug-resistant patients.
As soon as this discovery came out, everyone's expectations for the Siglec-15 target were instantly filled, and it was hoped that this target could become the second PD-1. At that time, PD-1 had already shown a strong future of tumor immunity**, and those passengers who missed the PD-1 high-speed train naturally did not want to miss SIGLEC-15 again.
With celebrity founders as endorsements and targets for potential new targets, NextCure is a perfect investment target in all aspects. Such a company, let alone four years ago, even if it is placed in the current domestic investment market, there will definitely be many supporters. Therefore, at that time, well-known investment institutions such as Eli Lilly Asia, Hillhouse, Ping An Ventures, and Pfizer entered the market one after another.
On May 9, 2019, NextCure was successfully listed on the NASDAQ exchange with an issue price of $15 shares. On the first day of trading, Nextcure's shares soared 32% to 19$9 shares. In November, NextCure's stock price soared to $109 shares, with a market capitalization of $3 billion.
From its inception in 2015 to its listing in 2019, NextCure has attracted much attention in both the primary and secondary markets, and the first half of its life can be described as open. Unfortunately, NextCure has not been able to prove itself at the clinical level.
2) Can not play clinical data
The next PD-1 may be the best imagination of all investors for Nextcure, but the clinical data of pulling the crotch again and again has punctured everyone's illusions.
For a biotech, no matter how powerful the founder is and how cutting-edge the pipeline is, the final judging criterion must return to clinical data.
In early clinical trials, NC318 performed fairly well. On November 4, 2019, NextCure announced the Phase 1 and Phase 2 clinical phase data of NC318, with a best response rate of 27 in 7 patients with non-small cell lung cancer (NSCLC), including 1 complete response (CR) and 1 partial response (PR), and the disease control rate (DCR) of NSCLC was 71.
In particular, one of the patients with complete tumor disappearance was a patient who was resistant to PD-1 and had resisted chemotherapy three times, then received PD-1** and became resistant, and finally received NC318**. When this patient underwent 41 weeks**, the tumor completely disappeared for up to 13 weeks. As soon as this data came out, the industry was full of reverie about patients resistant to NC318**PD-1 antibody, and NextCure's stock price also soared by 248%.
However, the data released on November 9 showed that when it was expanded to 49 patients in 15 cancer types, there was only one CR and one PR, which means that except for NSCLC, other cancer types did not respond to NC318. Nextcure's investors have also gone from heaven to hell, with its share price nearly halved from $82** to $39 after the market opened on November 11.
Later, the data of NC318 was more than a crotch pull. Data presented at the May 2020 ASCO meeting showed that there was still only one case of CR and one case of PR among the 49 patients in the Phase 1 clinical trial of NC318. On July 13, NextCure terminated the clinical trial of NC318 in non-small cell lung cancer and ovarian cancer amid unsatisfactory Phase 1 and Phase 2 clinical studies of NC318 and continued its studies in head and neck cancer and triple-negative breast cancer.
Later, the clinical trials for these two cancer types did not turn around, and in the third quarter of 2022 financial report, NextCure announced that it had stopped the development of the NC318 project. Now, NextCure has given up on the development of monoclonal antibody drugs and has instead focused on ADC drugs.
However, the chances of a comeback for NextCure are slim. The company's stock price is only about $1 left, and the company still has 1$1.8 billion, which is expected to last until mid-2025.
3) Inertia in investing
There are many more examples like Nextcure, such as Neon Therapeutics, a cancer vaccine company founded by the 2018 Nobel Prize winner in medicine. However, after the listing, product research and development were hindered one after another, and the stock price continued to perform, and was finally acquired by Biontech at a low price.
Together, the failures of these star pharmaceutical companies demonstrate a trap that innovative drug investors can easily step on: star pharmaceutical companies have a higher success rate. Many investors may have such a thinking inertia, that is, the risk of innovative drug research and development is very high, and having a good founder + unique pipeline = a greater probability of drug development success.
But this may not be the case, and companies with a star halo are no more likely to succeed in drug development than others. Because the objective laws of science treat all people equally.
Of course, a biotech with such a background will have a higher probability of success in financing. But money cannot reverse the objective law.
Such examples are not uncommon in China. In the past few years, when the market was hot, I believe everyone had heard of many projects, academicians or well-known overseas pharmaceutical company bigwigs started businesses, and they could receive countless financings just by relying on their research directionsOverseas big pharmaceutical companies have pipelines with the same mechanism and target, which is a major investment highlight, and the entry of well-known investment institutions is a major highlight.
But if you think about it, which of these is really relevant and directly related to the value of the drug itself?
It's easy to have the inertia of thinking in investment, so it's easy to miss out on those companies that don't look good.
A recent example is Baili Tianheng, because its background is not so glittering, so many people in the industry are actually not optimistic about it before, but everyone is clear about the rest of the matter, through the large order signed with BMS, Baili Tianheng can be regarded as a name for itself.
When investing in innovative drugs, don't blindly worship star founders and star concepts, and don't fall into the trap of only investing in star companies and innovative targets. In many cases, the greater the expectation, the greater the disappointment that may end up.
Because, the research and development of new drugs is really difficult.