Shares of OncoMed Double on Celgene Pact and New Pancreatic Cancer Drug Trial

On Tuesday, shares OncoMed Pharmaceuticals, Inc. (OMED) catapulted nearly 100 percent to surpass the closing price from their IPO day back in July on news that the Redwood City, California-based drug maker had agreed with Celgene Corp. ($CELG) to jointly develop and commercialize up to six anti-cancer stem cell product candidates in the OncoMed pipeline.

Only July 17, OncoMed sold 4.8 million shares to investors at $17 each, but on the first day of trading, shares opened around $28 and rose to as high as $31 before slipping back to close just above $27 each.  What followed in subsequent months was a steady decline to lows of $12.06 in November before finding some buyers to pick shares back up to close Monday at $14.

Then the Celgene news hit and shares mushroomed. 

In that accord, OncoMed will control and conduct initial clinical trials at which point Celgene has an option to license worldwide rights to up to six of the novel drug candidates.  There is a host of conditions regarding the development, commercialization and royalties with the drugs, most of which are still in the pre-clinical or discovery stage of development.  The prize of the agreement is OncoMed’s most advanced drug candidate, demcizumab, for which Celgene will obtain an exclusive option during or after the completion of certain planned Phase II trials.  OncoMed is currently researching demcizumab in a Phase Ib trial as a combination therapy for advanced pancreatic cancer patients.

Celgene president Tom Daniel said in a statement that early clinical data on demcizumab “warrants aggressive yet careful evaluation in several indications where we have strength, including non-small cell lung cancer and pancreatic cancer.”

Under the terms of the agreement, Summit, New Jersey-based Celgene will make an upfront payment to OncoMed of $155 million and also purchase about $22.25 million in a private placement of newly issued OncoMed common stock at $15.13 per share.  Combined with the cash the company already had on hand, OncoMed now has roughly $322 million in the bank.

Future option exercise and milestone payments for the six drugs could cumulatively tally as much as an additional $3.15 billion for OncoMed.

OncoMed also has drug development agreements with other majors, namely GlaxoSmithKline plc (GSK) and Bayer AG (BAYRY) .  OncoMed has collected $33 million in milestone payments this year from these collaborations.

On Wednesday, the company took a step in the direction towards another future payment from Bayer as it started a Phase Ib trial of its first-in-class Wnt-pathway-targeting antibody vantictumab (OMP-18R5) as a combination therapy with nab-paclitaxel (Abraxane®) and gemcitabine in patients with Stage IV pancreatic cancer.  The trial is the third and final Phase Ib trial for vantictumab started in 2013 as part of the deal with Bayer to develop the drug.  On November 15, the second trial in the agreement began; evaluating vantictumab with docetaxel in non-small cell lung cancer.  The other trial is testing vantictumab combined with paclitaxel for treatment of Her2-negative breast cancer.

Add it all up, and you get a stock that has been flying high for two days.  After closing yesterday at $27.70, shares are up about 12 percent again in morning trading, printing $31.00 after hitting $32.39 shortly after the opening bell.