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Successful early Ebola drug trial boosts Canadian drug firm’s shares

Successful early Ebola drug trial boosts Canadian drug firm’s shares

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.

This week an Inner Circle member asked us about a pharmaceutical firm whose shares recently had a strong run. Tekmira specializes in RNAi therapeutics which can “silence” disease-causing genes. The company is developing two drugs, one for Ebola and one for cancer. Pat looks at the progress of Tekmira’s drug trials and examines the company’s cash balance and its ability to continue developing its treatments in the years ahead.

Q: Pat: I would like your opinion on Tekmira Pharmaceuticals. I am looking at purchasing some shares, but they have just had quite a run. Your feedback on this would be greatly appreciated—I have been member of your Inner Circle for some time and look forward to your opinion on this one, because I know it is highly speculative. Thanks.

A: Tekmira Pharmaceuticals (symbol TKM on Toronto;, is a biopharmaceutical company that focuses on RNAi therapeutics.

RNAi therapeutics have the potential to treat a broad number of human diseases by “silencing” disease-causing genes. The discoverers of RNAi, a gene-silencing mechanism that all cells use, were awarded the 2006 Nobel Prize in the Physiology/Medicine category.

To be effective, RNAi treatments need special delivery systems. Tekmira believes its lipid nanoparticle (LNP) technology is the best method.

For the three months ended September 30, 2013, Tekmira reported revenue of $3.1 million, up from $2.1 million a year earlier. Almost all of the company’s revenue came from its development of TKM-Ebola, an Ebola virus treatment, under a contract with the U.S. Department of Defense.

For many years, the Zaire strain of Ebola has caused periodic outbreaks of hemorrhagic fever in humans, with mortality rates reaching 90%. There are no approved treatments for Ebola or other hemorrhagic-fever viruses.

In May 2010, The Lancet, a leading medical journal, published a series of studies demonstrating the ability of an RNAi therapeutic using Tekmira’s LNP technology to protect primates (monkeys and macaques) from Ebola. Tekmira conducted the studies in collaboration with infectious disease researchers from Boston University and the Department of Defense.

These preclinical studies demonstrated that when RNAi targeting the Ebola virus—delivered by the LNP system—was used to treat infected primates, the result was a 100% cure from an otherwise lethal dose of the Zaire Ebola virus.

Small cap stocks: Tekmira moves to Phase I clinical trial on Ebola drug, Phase II on cancer treatment drug

In July 2010, the company signed a contract with the Department of Defense to advance its RNAi therapeutic, along with its LNP technology, to treat Ebola. The contract is for at least $146.6 million U.S.: Tekmira is getting $41.7 million U.S. over the first three years and the rest in a series of payments if the program moves through all clinical trials and receives FDA approval.

Tekmira now aims to start a Phase I clinical trial on TKM-Ebola in the first quarter of 2014, with data available in the second half of the year.

The company’s other major therapy is its lead cancer-treatment candidate, TKM-PLK1, which targets a protein known as PLK1 that’s involved in the spreading of tumour cells. TKM-PLK1 has completed Phase I trials and has proven effective so far. The company is now moving to Phase II trials.

In Phase I trials, researchers look for side effects and assess a drug’s safety and tolerability.

Phase II trials assess how well the drug works and continue Phase I safety assessments. When a new drug fails, it usually occurs during Phase II.

Phase III studies are the strictest scientific trials. They aim to compare the drug to the current “gold standard” of treatment. Phase III trials are the most expensive, time-consuming and difficult to design and run.

Tekmira holds cash of $40.8 million, or $2.23 a share, and had no debt. The company’s stock has moved up from $5 in July 2013 to $8.61 today. It has just taken advantage of that jump to raise a further $34.5 million with a share issue.

In the Inner Circle Q&A, Pat balances Tekmira’s research spending against its cash balance and payments from the Department of Defense to see how well the company is positioned to continue the development of its promising treatments. He concludes with his clear buy-hold-sell advice on this stock.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

COMMENTS PLEASE—Share your investment experience and opinions with fellow members

If you invest in pharmaceutical stocks, do you stick to the U.S., with its much greater number of established drug companies, or are you willing to invest in Canada where the stocks are fewer and more speculative? Have you had any big successes with pharmaceutical stocks from either country?


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