Biovest International (BVTI): A New Lease on Life - Analyst Blog

Grant Zeng, CFA

Biovest International Inc. (BVTI) (Biovest) is a clinical stage biotech company focused on the research and development of therapeutic cancer vaccines and related business.

The Company operates in three identifiable industry segments. Cell Culture Products and Services segment is engaged in the production and contract manufacturing of biologic drugs and cell production for research institutions worldwide. The Instruments and Disposables segment is engaged in the development, manufacture and marketing of patented cell culture systems, equipment and consumables to pharmaceutical, diagnostic and biotechnology companies, as well as leading research institutions worldwide. The Therapeutic Vaccine segment is focused on developing BiovaxID for non-Hodgkin Lymphomas.

The Company generated revenue of $1.3 million from Instruments and Disposables segment in 2Q10, accounting for about 81% of total revenue. Cell Culture Products and Services segment generated revenue of $0.3 million, accounting for 19% of total revenue in 2Q10. The Company's Therapeutic Vaccine segment has generated no revenues to date.

Biovest is a majority-owned subsidiary of Accentia Biopharmaceuticals, Inc.

BiovaxID is the Key to the Company's Success

Since revenue from the other two segments is limited, Biovest's current focus is apparently its lead therapeutic vaccine BiovaxID. In collaboration with the National Cancer Institute (NCI), Biovest is developing BiovaxID as a personalized therapeutic cancer vaccine for the treatment of non-Hodgkin's lymphoma (NHL), specifically follicular lymphoma (FL), mantle cell lymphoma (MCL), and potentially other B-cell blood cancers. Both FL and MCL are generally considered to be incurable with currently approved therapies.

BiovaxID belongs to the emerging new class of targeted cancer therapy known as active immunotherapy (therapeutic cancer vaccine) like Dendreon's Provenge. BiovaxID is the only cancer vaccine in late stage development after Provenge was approved in April 2010 by the FDA. BiovaxID is manufactured through a process known as rescue fusion hybridization in which individual tumor cells obtained through biopsy are fused with an antibody-secreting cell to form a heterohybridoma. This cell then secretes the unique idiotype, or immunoglobulin antigen characteristic of the individual tumor, which is purified for use as the vaccine.  The vaccine is administered as a subcutaneous injection along with granulocyte-macrophage colony-stimulating factor (GM-CSF) and keyhole limpet hemocyanin (KLH) as a carrier protein and adjuvant.

Biovest has finished three clinical trials for BiovaxID in NHL so far. These studies include a Phase II clinical trial and a Phase III clinical trial in patients with FL, as well as a Phase II clinical trial in MCL patients. The Company presented the eight year pivotal, randomized, multi-center, double-blind, controlled Phase III clinical study results at 2009 ASCO.

In the Phase III study, investigators analyzed a cohort of 117 randomized FL patients who maintained a complete response to chemotherapy for at least six months and who received BiovaxID (n=76) or control (n=41). After a median follow-up of 4.7 years (range: 12.6–89.3 months), the median disease-free survival (the primary endpoint) in the BiovaxID arm was 44.2 months compared with 30.6 months in the control arm, an 14 month improvement for the BiovaxID patients, which is a clinically and statistically significant difference (p=0.045). In the study, patients receiving BiovaxID experienced a 38% lower risk of disease recurrence compared to patients receiving the control vaccine. BiovaxID demonstrated a favorable safety profile and was very well-tolerated by patients.

The completed Phase III study achieved its primary endpoint of prolonging disease-free survival in BiovaxID patients. The Phase III study confirmed a previous Phase II study which demonstrated that patients receiving the BiovaxID vaccine developed a highly-specific immune response against tumor cells, with 95 percent of patients showing significant T-cell activity against their lymphoma and 75 percent of patients showing a humoral immune response. Furthermore, with a median follow-up of 9.2 years, 45 percent of patients remained in continuous first complete remission with a median disease-free survival of 8 years.

Biovest plans to present new data analysis of the above Phase III study at the ASH meeting on Dec 6, 2010. We expect to see some long term follow up data and subset data for the FL patients.

The data collected so far for BiovaxID for follicular lymphoma are encouraging although the Phase III trial is relatively small. The enrollment number fell short of the original one probably due to the financial difficulty. According to management, the Company plans to meet with the FDA, EMEA and other international health authorities to seek accelerated and conditional approval of BiovaxID for the indication of FL. Accelerated or conditional approval would require the Company to perform additional clinical studies as a condition to continued marketing of BiovaxID.

BiovaxID is already available on a named-patient (compassionate-use) basis in Europe for follicular lymphoma patients. This compassionate-use drug access program allows European physicians to prescribe BiovaxID to qualifying patients before approvals are granted.

Biovest plans to further study the role of BiovaxID in patients with mantle cell lymphoma and other B-cell lymphomas. In addition, new lymphoma studies will evaluate the addition of BiovaxID booster maintenance therapy, which is expected to even further improve survival benefits by maximizing the chance of continuously maintaining complete remissions.

The Chapter 11 Reorganization and Liquidity

Like many other small biotech companies, Biovest has been in a difficult position to get sufficient cash to fund its operations in the past few years. The Company filed voluntary petitions in November of 2008 for reorganization under Chapter 11 of the Bankruptcy Code due to funding shortage.

From November 17, 2010, Biovest has successfully completed its reorganization. The Company has now formally exited Chapter 11 as a fully restructured organization.

The Plan of Reorganization restructured Biovest's balance sheet by reducing outstanding debt, rescheduling debt payment obligations and reducing operating expenses. Under the Plan, stockholders retained their common shares. An important part of the confirmed restructuring was a $7 million financing (notes and warrants) for which Roth Capital Partners, LLC acted as the exclusive placement agent. Structural changes to certain agreements are now in effect including the reduction of the outstanding royalty on BiovaxID sales from 35% to 6.30%, thus expected to enhance Biovest's commercial and partnering opportunities.

In early November of 2010, Biovest received a grant of approximately $245,000 from the US Government's Qualifying Therapeutic Discover Project Program (QTDP). The funds were awarded to support the advancement of BiovaxID for the treatment of non-Hodgkin's lymphoma. The amount of funds awarded were the maximum allocation allowed under the program. The grant program was very competitive and being selected is a strong validation of the Company's technology.

As of June, 2010, Biovest held $131,000 in cash, plus the above $7 million notes issued in October and the federal grant of $245,000 awarded in November, the Company should have roughly $7.3 million in cash at hand now which will last for a few quarters.

Obviously, cash position is still a major issue for the Company. Cash burn may be relieved if the Company can find a partner for the commercialization of its lead candidate BiovaxID. Otherwise, the Company may need to tap the capital market again in 2011. Equity financing will dilute current shareholder base, and the share price will suffer. 

 The Bottom Line……
 
Increased interest in anti-cancer therapeutic vaccines among investors has been triggered by the approval of Dendreon's Provenge, the first in class of anti-cancer therapeutic vaccine, for the treatment of advanced prostate cancer. The approval of Provenge is certainly good news for this whole class of new targeted therapy, including BiovaxID. 

BiovaxID is the only cancer vaccine after Provenge, which is in late stage clinical trials. There are approximately 65,000 new cases of non-Hodgkin's lymphoma diagnosed each year in the US with a comparable number in Europe, among which about 30% cases are follicular lymphomas. About 195,000 NHL patients died in 2009 in the US alone. Despite the use of aggressive chemotherapy and recent advances in targeted therapy such as Rituxan, the disease is almost invariably fatal. Follicular lymphoma (FL) patients, in particular, can have an indolent but ultimately fatal clinical course. The median relapse time for FL patients is three years, with 90% of patients dying of a tumor-related mortality within 7 years of the date of diagnosis. The clinical course is usually characterized by a series of remissions and relapses. Good response rates are seen with treatments such as chemotherapy, radiation, lymphocyte transplantation, and monoclonal antibodies. However, following initial response to treatment, the cancer invariably returns and the majority of patients relapse with resistance to all available therapy.

Current data for BiovaxID are encouraging which could transform the treatment of NHL if approved. With the exit from Chapter II reorganization, Biovest is poised to deliver shareholder value in a new way.