ASCO '11: YM BioSciences Attracts Wall Street

CHICAGO ( TheStreet) -- YM BioSciences ( YMI) was the beneficiary of the first Wall Street scrum of ASCO 2011 Friday afternoon.

Dozens of investors and analysts jockeyed for position around a scientific poster detailing interim results from a phase I/II study of YM BioSciences' experimental myelofibrosis drug CYT387. Questions were hurled at the poster's author from the Mayo Clinic, while a few feet away, YM BioSciences' CEO Nick Glover was surrounded by still more investors and analysts.

The American Society of Clinical Oncology (ASCO) annual meeting had just started a few hours ago, but Wall Street was already making its presence felt. The money crowd that showed up to see the YM BioSciences poster all wanted to know the same thing: Is CYT387 a real drug? And is it potentially better than Incyte's ( INCY) ruxolitinib, also being developed for myelofibrosis?

Incyte sports an enterprise value of approximately $2 billion, largely because of ruxolitinib in myelofibrosis. Incyte and its partner Novartis ( NVS) have completed two successful phase III studies of ruxolitinib and are preparing to seek regulatory approval. New phase III data on ruxolitinib in myelofibrosis will be released at ASCO on Saturday afternoon.

By contrast, YM BioSciences' market value is about $300 million. CYT387 is still in early stage testing and is probably two or three years behind Incyte's drug. Investors are taking a hard look at CYT387 because if the drug is real, YM BioSciences is a cheap stock in comparison to Incyte.

Myelofibrosisis is a disorder in which abnormal bone marrow stem cells produce scar tissue that replaces healthy marrow. Patients with myelofibrosis suffer from anemia and enlarged spleens. Approximately 3,500 people in the U.S. are diagnosed with myelofibrosis annually and about one-third of these patients develop acute myeloid leukemia or bone marrow failure.

The U.S. market potential for a new myelofibrosis drug is in the range of $300 million to $500 million, double that if the drug is also approved and used in Europe, according to analyst estimates.

The buzz for CYT387 is due to the fact that early data suggest the drug effectively treats anemia -- one of three key morbidities associated with myelofibrosis. Incyte's drug ruxolitinib doesn't improve anemia.

Both drugs seem to do a good job of clearing up the other two main issues that myelofibrosis patients face -- enlarged spleens and constitutional symptoms. But if CYT387's ability to treat myelofibrosis-associated anemia is proven in larger, more definitive studies, the drug could become the standard of care for the disease, supplanting ruxolitinib.

The Wall Street fan base for YM BioSciences liked the CYT387 data presented yesterday, even though much of it wasn't entirely new from what has been shown previously. In 42 myelofibrosis patients evaluable, 50% had an anemia response. Of the 33 patients who were transfusion dependent at baseline, 19 (58%) became transfusion independent. All anemia responses persisted for a minimum of 12 weeks.

Of the 52 patients evaluable for spleen response, 24 (46%) achieved a response per with a median duration of currently at 7.7 months.

All the data presented at the ASCO poster Friday come from a phase I/II study conducted at the Mayo Clinic. YM BioSciences has expanded this study to enroll more patients from other hospitals and to explore higher doses of CYT387.

Glover, YM BioSciences' CEO, told investors Friday afternoon to expect much more definitive phase II data on CYT387, particularly more anemia response data, to be presented at the American Society of Hematology annual meeting in December.

"We think we have a myelofibrosis drug right now," Glover told investors and analysts gathered around him in front of the CYT387 poster at the ASCO meeting. "It could get better. We want to maximize what we know about the drug before moving to phase III."

For every bull story on a stock, a bear story exists. YM BioSciences is no exception. Critics don't believe that CYT387's ability to treat anemia will hold up once the drug is studied at higher doses or in larger numbers of patients. They believe YM BioSciences is withholding key data such as durable improvements in hemoglobin levels that would more definitively illustrate the drug's effect on anemia.

If CYT387 can't treat anemia in myelofibrosis patients, the drug is undifferentiated from Incyte's ruxolitinib and three years behind, sharply reducing its value to investors, the bears say.

The critics also pointed out Friday emerging side effects of CYT387 such as peripheral neuropathy and elevations of pancreatic enzyme levels that may get worse as the drug's dose is increased.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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