Genocea Biosciences Inc (GNCA) Investors Run for the Hills; Here’s Why

Genocea shares are plunging on termination of genital herpes treatment GEN-003.


Monday evening turned out to be a nightmare for Genocea Biosciences Inc (NASDAQ:GNCA) investors, after the drug maker announced that it has decided not to continue development of genital herpes treatment GEN-003, shifting to immuno-oncology and focusing on the development of neoantigen cancer vaccines. As such, Genocea is reducing its workforce by approximately 40 percent.

Genocea shares didn’t react well to the news, crashing nearly 50% to $2.69 as of 7:20 PM EDT.

Chip Clark, president and chief executive officer of Genocea, commented: “With our research and development efforts now focused entirely on neoantigen cancer vaccines, we believe the power of ATLAS to identify the right vaccine antigens, combined with our vaccinology expertise, gives us the opportunity to create value for our shareholders by developing best-in-class vaccines for cancer patients and achieving leadership in this exciting field.”

Genocea has confidence that it is positioned for leadership in the development of neoantigen cancer vaccines through its unique antigen identification capabilities and vaccinology expertise. More specifically, the company believes that antigen selection is a crucial determinant of neoantigen vaccine efficacy and that previously presented head-to-head data show that ATLAS, the only platform to comprehensively identify the actual neoantigens to which a patient’s CD4+and CD8+ T cells respond, is a superior approach for identifying neoantigens for personalized vaccines compared to methods used by others developing similar products.

The company plans to initiate a Phase 1 clinical trial for GEN-009 in a range of tumor types in the first half of 2018 and expects to report initial immunogenicity data in the first half of 2019. GEN-009 is an adjuvanted peptide vaccine designed to direct a patient’s T cells to attack their tumor. Antigens in a patient’s vaccine are selected by Genocea’s proprietary ATLAS platform.

As a result of the workforce restructuring, which is anticipated to be completed by the end of the third quarter, Genocea estimates annualized savings of approximately $6.5 million in personnel-related costs, with estimated one-time severance and related costs of approximately $1.1 million in the third quarter of 2017. Genocea now expects that its existing cash and cash equivalents are sufficient to support its operating expenses and capital expenditure requirements into the middle of 2018.

On the ratings front, Genocea has been the subject of a number of recent research reports. In a report issued on August 9, Cowen analyst Phil Nadeau reiterated a Buy rating on GNCA, with a price target of $40, which implies an upside of 650% from current levels. On July 24, Needham’s Alan Carr upgraded the stock to Buy and has a price target of $12.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Phil Nadeau and Alan Carr have a yearly average return of 18.4% and 9.7% respectively. Nadeau has a success rate of 61% and is ranked #128 out of 4653 analysts, while Carr has a success rate of 47% and is ranked #454.

Genocea Biosciences is a biopharmaceutical company developing T cell-directed vaccines and immunotherapies to treat infectious diseases and cancer. The company uses its proprietary ATLAS™ antigen identification platform to build a pipeline of immunotherapies that currently includes GEN-003, an immunotherapy for genital herpes, and GEN-009, its first neoantigen cancer vaccine, for which an Investigational New Drug application filing is expected by the end of 2017. 

 

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