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The biotech space has picked up some momentum on the back of a Democratic miss in the US elections, and there's a large amount of speculative capital returning to the sector that had previously withdrawn. Sentiment shifted to risk off in anticipation of a Democratic-driven reform in pricing and development practices in the industry, and now that the potential for scrutiny is reduced, companies at both ends of biotech are benefiting.

What just happened with PhaseRx Inc (NASDAQ:PZRX) is a perfect example.

The company is a one of those on-the-radar juniors. That is, it's a tiny junior right now, but its lead asset has been on the watch list of a number of a large number of investors for the better part of the last half decade. It's got some pedigree leadership – Dr. Stephen Gillis, Managing Director of industry-renowned pharmaceutical fund Arch Venture Partners, is Chairman – and its pipeline is promising, but very early stage. The risk inferred by this latter point dominates its valuation, but the promise of the asset and the quality of the leadership means investors are waiting to pull the trigger on a speculative position as and when news or data hits. News just hit (the company announced that its lead liver disease asset, PRX-OTC, picked up Orphan Designation from the FDA) and the company rocketed as the just-mentioned in-waiting investors pulled their triggers.

There's another company that fits into the on-the-radar juniors category, and that has just put out some news. However, unlike PhaseRX, as yet, it hasn’t revalued to accommodate the update.

The company is MabVax Therapeutics Holdings, Inc. (NASDAQ:MBVX).

MabVax is a junior oncology company, developing treatments in a pancreatic cancer target indication. The company's assets are based on monoclonal antibodies, and derive from a unique partnership that MabVax has with the Memorial Sloan Kettering Cancer Center (MSKCC).

MSKCC treats thousands of cancer patients every year, and it uses antibody samples derived from these patients as part of its agreement with MabVax. The science behind the partnership is rooted in the use of these antibodies in the next generation of immuno-oncology. When a patient has received immunotherapy for a particular type of cancer at MSKCC, their body creates antibodies, which are specific to the type of cancer in question. These antibodies attach to proteins on cancer cells, and signal the immune system to come and attack (generally by way of inducing necrosis or apoptosis) the cancer cells in question. MabVax's theory is this: If the company can identify an antibody that is highly selective to a particular cancer cell (in other words, if it only attaches to proteins on cancer cells of said type, and not other, healthy cells), it can produce these antibodies at a mass scale, and inject them into patients who suffer the cancer they are selective towards.

So far, companies have found it difficult to do this, because it's incredibly difficult for a junior biotech to secure a large enough sample of various antibodies – antibodies that are linked to specific cancers – and process them to narrow down the selective, and in turn, effective, ones. By way of its MSKCC partnership, however, MabVax has been able to secure this sample, and it's found what it's looking for.

The antibody that the company has identified is called HuMab-5B1, and it's highly selective to pancreatic cancer cells. The antigen that the antibody targets is expressed by more than 90% of pancreatic cancer cells, and, just as importantly, it's expressed by very few healthy cells.

The company first set out to demonstrate the safety of using HuMab-5B1 in this way, formulating into a therapy called MVT-5873 and offering it to patients with relapsed or refractory locally advanced or metastatic pancreatic cancer. This is a pretty standard practice in early stage oncology therapies; rooted in the ethics of offering an as-yet unproven cancer drug to patients. Essentially, only offer the drug to patients for which there is no other option (they've been treated with standard of care (SOC) and it hasn’t worked), and do so as a monotherapy, to determine that it's safe and tolerable. Once this part of the early stage development process is complete, and a drug is proven safe as a monotherapy, the FDA will then allow it to advance into tests as a combination therapy in first or second line therapy.

This is the stage the MabVax just announced it's at with MVT-5873, and it's the news that (as yet) markets have failed to respond to. This failure to respond offers a chance to get in ahead of wider market realizing exactly what this sort of development means.

When a company goes after an oncology indication, its two goals are these – pick up a marketing authorization for the indication in question and maximize the portion of patients that comprise this population that it can target. There's no better way to maximize a patient population potential than to target a first line therapy approval.

MabVax has just announced that it has dosed its first patients in pancreatic cancer, in a trial that is investigating the impact of MVT-5873 when administered in combination with nab-paclitaxel plus gemcitabine, which is the SOC chemo regimen in pancreatic cancer therapy. If this combination proves effective, and the company can use the data to underpin an NDA that seeks approval as a combo therapy in first line pancreatic cancer, it's got a blockbuster on its hands.

Now, it's early days, and this latest announcement is just first dosing, but it's a major threshold, and as yet, the crossing of this threshold has flown under the radar. This could be explained in two ways.

The first, that markets have overlooked the importance of moving from a third line investigation to a first line combination therapy investigation. This isn’t an unreasonable suggestion, if only because of the way MabVax has set up this trial. The moving from one to the other isn’t technically a trial shift. The company sat down with the FDA pre phase I initiation and agreed on a protocol that allowed for a shift from third line mono to first line combo within the same protocol, meaning that although the company is now investigating the drug in a different patient sample, it's still doing so as part of the same phase I investigation. If this was dosing in a fresh combo trial, it's not the sort of things markets would miss. With it just being a case of shifting focus (however big) within the same trial, it's easy to see how some may overlook the transition.

The second is that markets are waiting for a readout on the initial focus before committing capital to the drug's first line potential. The first part of the study is ongoing, and data from the mono element is set for release end second quarter 2017. Safety is primary, yes, but there's a clinical benefit secondary. It's a reasonable assumption that risk averse investors are looking for some degree of in vivo clinical benefit at a topline readout (we've seen some benefit on an interim readout already) before taking the plunge.

Whatever the reason, it looks like an opportunity. This is a major gear shift for a company like MabVax, whether markets realize it or not, and we expect a revaluation near term to reflect this fact.

There's risk, of course. This is junior biotech, and early stage junior biotech at that. If MVT-5873 fails to build on its interim, and shows no clinical benefit in advanced patients when used as mono, MabVax will take a hit ahead of the combo topline. If the combo topline doesn’t serve up some indication of benefit, and even if it hits on the safety primary, MabVax will be in trouble. There's also the potential for dilution, as the company raises to shift into a phase II (the point of the ongoing trials are to determine optimal dose for a phase II) and beyond.

With that said, ahead of markets picking up on the latest news, and as part of a speculative exposure, MabVax looks attractive at its current price.