Endocyte, Inc. (NASDAQ:ECYT) Is Running: Here's Why And What's Next

Endocyte, Inc. (NASDAQ:ECYT) is a real early week runner this week. The company closed out the session on for a 157% premium to the price at which it opened and, subsequent to this run, has logged a further 50% or more in premarket activity on Tuesday.The gains come on the back of a licensing agreement related to a development asset, a drug called PSMA-617. Volume is looking likely to be strong heading into the middle of the week, so we ask the question – what's next?In an attempt to answer, here is a look at the science that underpins the drug and the path that Endocyte intends to carry it down as it moves towards commercialization in its target indication in the US. ECYT Daily ChartSo, as mentioned, it's called PSMA-617 and it was initially developed at DKFZ (German Cancer Research Center) and University Hospital Heidelberg in Germany. These two entities then licensed it out to a company called ABX GmbH, with the latter then working to produce proof of concept early-stage data in anticipation of then licensing it out to a biotechnology company that could take it a step further and push towards commercialization.Endocyte is that company.The drug is targeting a type of prostate cancer called metastatic castration-resistant prostate cancer (mCRPC). Many reading might already be familiar with the fact that prostate cancer is incredibly difficult to treat (often because it is caught late) and current standard of care treatment options in the space revolve around legacy cancer type therapies – chemotherapy, surgical resection (to some extent) and radiotherapy.All of these standard of care treatments have associated with them debilitating side effects and these side effects are primarily rooted in the way that chemotherapy and radiotherapy don't really have any inbuilt selectivity with regards to which cells they attack. They kill cancer cells, sure, but they also attack healthy cells and this is why chemotherapy can be so crippling for many patients.With PSMA-617, Endocyte is attempting to harness the toxicity of a chemotherapy agent but to simultaneously add an element of selectivity that will ensure that the drug only targets cancer cells and leaves healthy cells alone. Basically, prostate cancer cells express an antigen called PSMA, which is the PSMA in the name of this drug, while healthy cells do not.The drug is a toxic chemotherapy agent coupled with an element that targets PSMA antigens, meaning it hunts out cells that express PSMA (the prostate cancer cells) and only when it finds them does it release the toxic agent. This should, theoretically, make it far more selective and a far more effective (and safe) treatment for these patients.And there is a strong early-stage data that suggests that this theory can transfer to the clinic. In a recent European presentation, data showed that the drug can bring about a close to 60% response rate (a more than 50% reduction in lesion size, as measured by RECIST, the industry gold standard) and a 71% interim response rate. This is in patients that have basically failed all other therapy options and for which the only other alternative would be palliative care.Endocyte has paid ABX GmbH $12 million and 2 million shares for exclusive rights to the drug and will carry it through to commercialization in the US initially. There are also regulatory and commercial milestones of up to $160 million, and tiered royalties beginning in the mid-teens, tied into the deal.So what's next?Now it is all about getting the asset into the clinic and building on the data that inspired Endocyte to acquire the rights to this drug. The company wants to go direct to phase 3 (which is realistic, given the wealth of early-stage clinical data and the large unmet need in this indication) and expects to initiate during early 2018.Trial completion, assuming everything runs smoothly, should come during 2020.From a forward-looking perspective, we expect Endocyte will continue to appreciate into enrollment and then it will all be about the binary data drop come trial completion. Keep in mind that we might see a capital raise as the company will need funds to conduct the trial, but any dip that this raise brings about might be an opportunity to pick up some cheap shares head off a longer-term recovery.We will be updating our subscribers as soon as we know more. For the latest updates on ECYT, sign up below!Image courtesy of Ed Uthman via FlickrDisclosure: We have no position in ECYT and have not been compensated for this article.