Call it The Power of the Press or another case of bull market investors looking for the Next Big Thing.
Either way, EntreMed Inc., a little-known biotechnology company in Rockville with just 50 employees, saw its fortunes change dramatically yesterday as investors raced to grab the stock on speculation that it may be on to two blockbuster new treatments for cancer.
That speculation made EntreMed the hottest stock on Wall Street, with shares rocketing $39.75, or nearly 330 percent, to close at $51.8125. More than 23 million shares traded hands.
The company's average daily trading volume prior to yesterday: 64,000 shares. Yesterday's stunning volume is particularly remarkable because the company has just 12.3 million shares outstanding.
EntreMed's stock posted the biggest percentage gain in U.S. markets and the second highest volume behind computer giant Compaq.
"This isn't hysteria, but I would certainly call it romance," said Alan Auerbach, a biotechnology analyst who covers EntreMed for the Seidler Companies, a Los Angeles-based investment firm.
Wall Street's sudden surge of interest in EntreMed came on the heels of a front-page article in the New York Times Sunday that portrayed two drugs under development by EntreMed and a Harvard researcher as a potential breakthrough cancer treatment.
The drugs work by cutting off the blood supply to tumors. Given intravenously to mice, they have eradicated any type of cancer, with no apparent side effects. The drugs also appear to prevent the spread of tumors.
The article quoted the National Cancer Institute's director, Richard Klausner, as saying he had placed the highest priority on moving the drugs into human trials. And Nobel Prize laureate James Watson was quoted as stating that the drugs' discoverer, Dr. M. Judah Folkman of Harvard Medical School, would "cure cancer in two years."
Yesterday analysts and even company executives sounded voices of caution.
For one, they noted, both drugs, which are based on naturally occurring human proteins, are in the very early stages of development.
Analysts also pointed out that the company faces many hurdles in developing the drugs, angiostatin and endostatin, as marketable drugs, and it could be years before either is available even as an experimental therapy.
"As others have pointed out, there are lots of drugs that worked perfectly well in animals, but when they got into human trials they weren't quite as effective as initially hoped," said Kurt Funderburg, a biotechnology analyst with Baltimore-based Ferris Baker Watts.
"I hope their drugs work out perfectly well, but we are a long way from that. I think a lot of people read 'cure for cancer' and ended up buying the hype," said the analyst.
The risks didn't deter investors from snapping up the stock yesterday, sending its price on a wild run. EntreMed shares -- which closed at just over $12 Friday -- opened at $83, quickly shot to a high of $85 and fell as low as $40.
Yesterday's surge pushed EntreMed's market value from $149 million to $641 million and turned on a cavalcade of interest from the national press.
Analysts and company executives said they were swamped with requests for interviews.
R. Nelson Campbell, the company's chief financial officer, said EntreMed had not been aware that the Times was working on a story about the two proteins and Folkman of Children's Hospital in Boston and Harvard Medical School. He has been researching how tumors grow and spread for more than 25 years.
Mouse to man
Yesterday's onslaught prompted EntreMed officials to urge caution, noting that it could be another 12 to 18 months before the company is ready to seek Food and Drug Administration approval to test either protein in human safety tests.
"We are cautious about using the word 'cure'; there is a long way from mouse to man," Chairman and Chief Executive Officer John W. Holaday said in an interview on CNBC.
And the National Cancer Institute issued a statement cautioning that, while it had assigned a high priority on research on the two compounds, human clinical trials weren't expected until next year.
Nor is EntreMed the only company attempting to develop drugs to turn off tumors' ability to grow blood vessels, called angiogenesis.
Industry analysts estimate there are at least 25 other companies with active angiogenesis-research programs, including pharmaceutical powerhouses SmithKline Beecham PLC, Merck & Co. and Novartis.
Some analysts estimate that an effective angiogenesis inhibitor for cancer could bring annual sales of $1 billion.
"There's enormous competition in the field now," said Auerbach at Seidler. "But for me the mice data on these two proteins is very compelling. The first time I read it over, it blew my socks off."
The analyst said he believes that the Times story justifiably gave EntreMed exposure it deserves. The company was launched in 1991, principally to license and market drug research of others.
'Very strong pipeline'
"People are finally getting excited about this company," Auerbach said.
"It's been amazing to me how depressed their share price has been for so long. They have a very strong pipeline of drugs in the works. I think it's safe to assume that from now on this will be a widely viewed stock."
EntreMed licensed the rights to angiostatin and endostatin, as well as two others, from Harvard. As part of the licensing agreement, EntreMed agreed to provide about $11 million in funding for Folkman's research. That agreement expires next April.
More licensing talks
In turn, EntreMed signed a $76 million partnership agreement with Bristol-Myers Squibb Co. Under that deal, BMS has the rights to market Thalidomide-based drugs for treating cancer and an eye disease that EntreMed is working on as well as any drugs the company develops based on the angiostatin protein.
Bristol-Myers stock gained $3.3125 yesterday to close at $109.3125.
EntreMed's Campbell said the company has been in licensing talks with several potential drug partners interested in the endostatin protein.
Starving a tumor
1) A cancer tumor releases substances to stimulate the growth of new blood vessels, which it needs to survive.
2) Two new drugs kill tumors by starving them. One releases a substance that stops the rapid growth of new blood vessels. The other blocks the new vessels from forming in the first place.
3) Deprived of nourishment, the tumor shrinks and ultimately dies.
Pub Date: 5/05/98