Endocyte, Wedbush Analyst Upgrade, and the PSMA-617 Licensing Deal

Endocyte, Inc. (NASDAQ: ECYT) is a biopharmaceutical company and leader in developing targeted therapies for the treatment of cancer. Endocyte uses drug conjugation technology to create novel therapeutics and companion imaging agents for personalized, targeted therapies.

On October 3, 2017, Wedbush analyst David Nierengarten has upgraded Endocyte to Buy and revised its price target to $7 from $2, citing the PSMA-617 opportunity along with relatively attractive valuation of the company. The analyst sees potential peak sales of $1B and said ECYT could have a broader chance and lesser constraints in scaling up relative to Xofigo. Followed by this, many other brokerages have also issued favorable reports on ECYT. The stock presently has a consensus rating of “BUY” and a consensus target price of $7.00.

The past few days or so have been eventful for Endocyte and the company’s stock has gained significant strength and popularity. The gains come on the back of a licensing agreement related to a development asset, a drug called PSMA-617. On October 2nd, the company announced the completion of an exclusive worldwide license of PSMA-617 from ABX GmbH.

PSMA-617 was developed at DKFZ (German Cancer Research Center) and University Hospital Heidelberg and exclusively licensed to ABX GmbH in Germany for early clinical development. Because of the enthusiasm of physician investigators and patients, the investigational therapy has been evaluated in hundreds of patients through both compassionate use studies and prospective trials.

Under the terms of the agreement, Endocyte has exclusive worldwide rights to develop and commercialize PSMA-617. Endocyte has made an upfront payment of $12 million to ABX. Endocyte issued 2 million shares of Endocyte common stock to ABX and issued a warrant for the purchase of up to 4 million additional shares of Endocyte common stock. ABX is eligible for regulatory and commercial milestones of up to $160 million, and tiered royalties beginning in the mid-teens.

With PSMA-617, Endocyte is attempting to harness the toxicity of a chemotherapy agent and to simultaneously add an element of selectivity that will ensure that the drug only targets cancer cells and leaves healthy cells alone. Prostate cancer cells express an antigen called PSMA, which is the PSMA in the name of this drug, while healthy cells do not.

Dr. Michael Hofman of the Peter MacCallum Cancer Center in Melbourne, Australia presented the results of an open-label, single-arm, non-randomized pilot study of PSMA-617 in September 2017. The results showed a remarkable 57% PSA response rate (> 50% reduction) and 71% interim response rate in soft tissue lesions (as measured by RECIST criteria) in patients who had previously failed such conventional therapies as docetaxel, cabazitaxel, enzalutamide, and abiraterone. Median overall survival was 12.7 months. The drug was well-tolerated, with a low rate of adverse effects and no renal toxicity. Significantly improved quality of life scores and reduction in pain scores were recorded in 37% and 43% of patients, respectively. This trial has subsequently been expanded to 50 subjects from the original 30, with updated results expected to be presented in 2018.

As per management, the transaction as mentioned earlier is transformational to Endocyte, accelerating its path to commercialization. The company wants to go directly to phase 3 and expects to initiate during early 2018. Trial completion, assuming no overruns or exigencies, should come during 2020. Additionally, the company would continue to explore out-licensing opportunities for all other development programs as well.

From a forward-looking perspective, Endocyte is expected to continue to appreciate over the near to medium term. ECYT’s pipeline has significant potential to create value, and the management is committed to bringing these assets forward through clinical development and identifying paths to accelerate value-driving catalysts.

Investors might see a capital raise over the medium term, as the company would need incremental funding to conduct its upcoming trials, but any correction that this financial closure brings about could be a rewarding opportunity for the long-term value investors.


About the Company: Endocyte is a biopharmaceutical company and leader in developing targeted therapies for the treatment of cancer. Endocyte uses drug conjugation technology to create novel therapeutics and companion imaging agents for personalized, targeted therapies.


The company’s agents actively target receptors that are over-expressed on diseased cells relative to healthy cells, such as prostate specific membrane antigen (PSMA) in prostate cancer. This targeted approach is designed to enable the delivery of highly potent drug payloads safely. The companion imaging agents are intended to identify patients whose disease over-expresses the target of the therapy and who are therefore more likely to benefit from treatment.

Product Pipeline and present stages:

2017 Second quarter financial results:

Net Loss: Endocyte reported a net loss of $11.7 million, or $0.28 per basic and diluted share, for the second quarter of 2017, compared to a net loss of $14.0 million, or $0.33 per basic and diluted share for the same period in 2016.

R&D Expenses: Research and development expenses were $8.7 million for the second quarter of 2017, compared to $6.8 million for the same period in 2016. The increase was primarily attributable to $2.2 million of expenses recorded in June due to the company’s restructuring relating mostly to severance for the workforce reduction, EC1456 trial termination expenses, and fixed asset impairment charges. Other increases included costs for the EC1169 phase 1 trial, development of EC2629 and other pre-clinical and general research.

Liquidity and financial flexibility: Cash, cash equivalents, and investments were $118.4 million at June 30, 2017, compared to $154.6 million at June 30, 2016, and $138.2 million at December 31, 2016. The company anticipates its cash, cash equivalents and investments balance at the end of 2017 to be approximately $105 million. As the full expense impact of the company’s restructuring is expected to be realized by the end of the fourth quarter of 2017, the company anticipates cash expenses to be approximate $5 million per quarter before potential increases associated with advancing clinical trials and new investment opportunities currently under evaluation


Key risk factors and potential stock drivers:

The favorable outcome of the upcoming catalyst. The company wants to go directly to phase 3 and expects to initiate during early 2018. Trial completion, assuming no unforeseen exigencies, should come by 2020.

Given upcoming trials, the company might need incremental funding. Therefore, timely financial closure would remain a key business sensitivity factor for the company. Also, additional funding entails dilution risk for the existing shareholders.

The biotech iotech space is a high-risk sector due to uncertainties associated with the novel drug development. Therefore, favorable outcome of the upcoming catalyst is necessary for the stock to retain its momentum. Any adversities related with the same could upset the stock performance significantly.


Stock Chart:



On Monday, October 9th, 2017, in intra-day trading, ECYT was at $5.26 (-8.52%) on volume of 2.2 million shares exchanging hands. Market capitalization is $244.81 million. The current RSI is 79.16

In the past 52 weeks, shares of ECYT have traded as low as $1.17 and as high as 6.55

At $5.26, shares of ECYT are trading above its 50-day moving average (MA) at $1.77 and above its 200-day MA at $2.06

The present support and resistance levels for the stock are at $5.48 & $5.93 respectively.






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