Antigenics' Pipeline Looks Like a No-Go

Editor's note: Antigenics has responded in writing to this column. Please see our Readers Talk Back section.

This column was originally published on RealMoney on June 13 at 1:04 p.m. EDT.

I do not see a viable future business for Antigenics (AGEN Quote) with its current late-stage product pipeline. Yet the stock continues to trade in the $6-$7 range with a market cap just under $290 million; both the stock price and market cap are at risk, because prospects for an approvable lead product candidate appear slim.

The company's Oncophage product is in phase III clinical trials for metastatic melanoma and renal cell carcinoma. Antigenics does not expect to submit a biologics license application, or BLA, to the Food and Drug Administration for the melanoma indication. Even if Antigenics does submit a BLA for the renal cell carcinoma indication, I do not believe the product can be competitive.

As a result, my target price for the stock is $3 as news is released in the September-October time frame about the company's phase III clinical trial and manufacturing practices.

Here then, is the rationale for why I think this stock remains overvalued, despite its already steep percentage decline year to date and low absolute price (remember, "cheap" stocks can get cheaper):

Antigenics' lead product candidates are based on the autologous cancer vaccine business model -- the "non-drugable" business model -- which does not utilize standard biologics manufacturing and is fraught with more risk than potential reward. Autologous cancer vaccines involve removing cells from the patient, altering the cells or extracting cellular components to create the vaccine, then returning them to the patient -- an individualized product.

While this sounds like a great idea, it may not be, for several reasons -- not the least of which is that product processing logistics are challenging, margins lower and distribution channels nonstandard. As a result, securing a commercialization alliance with a major pharma company, a move that is usually accomplished by phase II clinical trials for other therapeutics, is difficult.

In pharma/biotech, manufacturing is scaled up for commercial production to a highly automated process that can be closely monitored to produce a standardized product that enables the company to use existing distribution channels. What Antigenics offers in its lead product candidate, Oncophage, is more like a service than an off-the-shelf product. Antigenics' second product is also a personalized vaccine, HSC-858. The production process for this type of product does not lend itself to creating the same cost efficiencies as standard biologics manufacturing of today's protein therapeutics, monoclonal antibodies or conventional vaccines.