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California

CancerVax, Genitope Plan IPOs This Week

The firms, which are developing cancer vaccines, are going public at a tough time for biotech stocks.

October 27, 2003|Denise Gellene | Times Staff Writer

Two California companies working on cancer vaccines hope investors will give them a big booster shot.

CancerVax Corp. of Carlsbad and Genitope Corp. of Redwood City plan to go public this week in what has been a rocky season for new biotechnology stocks. In fact, the first biotechs with initial public offerings this year, Acusphere Inc. and Advancis Pharmaceuticals Corp., are trading below their starting prices.

Analysts said investors were wary of new biotechnology firms, which generally don't have products but do have big losses from drug development.

"It is a difficult market," said San Francisco merchant banker G. Steven Burrill. "And vaccines are difficult."

CancerVax and Genitope are toiling in a field that has yielded mostly disappointment. Despite four decades of academic and corporate research, no cancer vaccine has been approved for sale in the U.S.

Those in development at CancerVax and Genitope are in the final round of human tests required for Food and Drug Administration approval, but that is no guarantee of success. A long list of companies -- including Avax Technologies Inc., Biomira Inc., Corixa Corp., Dendreon Corp. and Progenics Pharmaceuticals Inc. -- have had vaccines stumble in late-stage clinical trials.

"The field is complicated," said vaccine researcher Dr. Stanley P.L. Leong, a surgery professor at UC San Francisco. "We have made advances, but to date, we have not yet found an ideal vaccine."

Cancer vaccines differ from shots given to healthy children to protect them from measles or chickenpox. People who receive cancer vaccines in drug trials already are sick, in part because their immune systems failed to notice or sufficiently fight their tumors.

Researchers believe that a vaccine made from bits of tumor could train a patient's immune system to recognize and fight cancer.

CancerVax is testing a vaccine for melanoma, a type of skin cancer. The shots, developed by Dr. Donald Morton of the John Wayne Cancer Center in Santa Monica, contain irradiated tumor cells from three melanoma cell lines grown in a laboratory. CancerVax believes the cells are genetically similar to tumors found in most patients.

The company hopes to raise $72 million to $84 million through the sale of 6 million shares at $12 to $14 each. CancerVax, led by biotech veteran David Hale, has lost $73.7 million since it was formed in 1998. Morton isn't an executive at CancerVax but owns 25% of the firm.

The vaccine, administered in 33 injections, showed promise in a recent trial. The firm reported in January that 107 very sick patients lived an average of 38 months after receiving shots; historical data at John Wayne showed that a similar, untreated group lived 19 months. A larger test is underway.

The Genitope vaccine targets another cancer, non-Hodgkin's lymphoma, and takes a different approach. Its shots are not mass produced but are customized to each patient's specific tumor, a step toward personalized medicine. To test its vaccine, Genitope teamed with Stanford University scientist Ronald Levy, who started work on similar cancer vaccines in the 1980s.

The vaccine -- which consists of genetically engineered copies of the patient's own cancer cells -- appears to have postponed relapses in some patients, but results aren't definitive. Genitope is conducting a large clinical trial, but it won't have results until 2007.

The company hopes to raise $41.4 million to $59.8 million through the sale of 4.6 million shares at $9 to $13 each. Without a successful IPO, Genitope said, it will run out of cash in December. The company has lost $69 million since 1996.

Genitope's shares will be sold through an "open auction" that allows investors to set the IPO price by bidding for the stock online. The method was developed four years ago by Genitope's underwriter, W.R. Hambrecht & Co., to get shares into the hands of average investors.

As it prepares to go public, Genitope is stirring up a rivalry.

Biovest International of Minneapolis has a non-Hodgkin's lymphoma vaccine in late-stage trials and is a competitor to Genitope. Biovest Chief Executive Dr. Stephane Allard said Genitope's registration statement was "misleading" because it failed to list Biovest as a rival.

"My feeling is that they are scared of us," he said.

The Biovest shots were developed at the National Cancer Institute by Dr. Larry Kwak, a former student of Levy's at Stanford. Kwak said the Genitope registration statement contained "misleading" comparisons of its vaccine with the one Kwak developed at the cancer institute.

Genitope cites successful NCI studies as evidence that a lymphoma vaccine might work but dismisses the NCI shots as costly and cumbersome, Kwak said.

Genitope legal counsel Laura Woodhead said the company's registration statement "speaks for itself."

"It lists who we consider a rival, and we did not list Biovest," Woodhead said. She said federal securities rules prevented her from elaborating so close to the company's IPO.

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