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An Off The Radar Industry With A Billion Dollar Target

By
Roger Hannington
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Bioburden

Oncology, neurodegenerative disease and immunotherapy dominated the biotech space in 2015, and as we head into a fresh year’s worth of R&D, chances are we will see a continuation of this dominance. There are, however, a number of fringe subsectors in healthcare that promise to expand rapidly in the coming few years, and could be a great exposure in advance of their meeting potential. One such sector is bioburden testing. Readers can be forgiven for a lack of familiarity with this sector – it is neither particularly revolutionary from a scientific perspective, nor has it made headlines as late. It’s about time it got one however – and here at Market Exclusive we’re happy to give it just that. A high rate CAGR should see growth to a billion-dollar industry over the next 10 years and big pharma is already gaining exposure to this growth. As early investors, it’s probably a great time to do the same. So, this said, let’s take a look at the space itself, and note some of the current key players.

First then, what is bioburden testing? Well, as mentioned, it’s not really cutting edge science – and as such, not an overly interesting thing to discuss – but we’re here for actionable investment ideas, not just scientific fascination. As with pretty much every industry, and to some extent more so than any other, the healthcare space has a rigorous framework in place to ensure the quality and safety of its component products. Bioburden testing primarily relates to one element of this framework, namely surgical devices (diagnostic tools, surgical tools etc.) However, it also extends to things like transplant devices and hypodermic needles, and even some types of drug products – essentially anything that is is going to come into contact with a patient that might be predisposed to microbes. All of these things undergo what’s called final sterilization before use. However, before this final sterilization step, some also undergo bioburden testing. It is essentially a controlled data collection that results in a stack to show what level of microbes (measured and recorded as “colony forming units”) is associated with non-sterile medical products.

There are a few different methods of this type of testing, but the primary (at present) involves passing a solution produced from a washed device, or a solubilised product, through a filter with tiny holes in it (ones that inhibit the passing of microbes), then measuring the filtrate. This is where the our exposure options come into play.

The Charles Schwab Corporation (NYSE:SCHW) has developed a system it calls PTS-Micro. The system is a bioburden testing unit that users lasers to determine levels of viable microbes, and in turn, determine a product’s bioburden. The aforementioned solution is prepared and inserted into three separate plates, all of which the technology processes simultaneously. Once active, the plates spin, causing the viable microbes to luminesce in the solution. A laser counts the luminescent microbes, and reports within 30 minutes its results. Traditional bioburden testing can take far longer, and teh speed with which this technology paints results puts Charles Scwhab as one if the leaders in the space. In addition, the company acquired the then publicly traded Celcis International for $212 million in July last year. Celsis was a endotoxin and microbial detection (EMD) organization, with a focus on bioburden and other comparable quality analysis assay tech. The takeaway here is that – with the ever growing diagnostics and pharmaceutical tooling sector – Charles Schwab is taking steps to increase its exposure.

Next, another biotech giant – Merck & Co. Inc. (NYSE:MRK). Merck has long been associated with bioburden testing (across both the biotech and pharmaceutical spaces) through its Millipore filtration units. These are very similar to the type of units we described a little earlier, in that they are a (funnel shaped) unit through which a solution passes, and the filter catches the viable microbes. However, and more interestingly, the latest addition to Merck’s quality assay tech is the company’s Milliflex Quantum unit. The technology is similar to the Millipore unit, but it is far quicker, and the substance tested can be recovered. Say, for example, a company is testing a soluble product. When the product is passed through the traditional filtration tech, that is its end. With the Quantum unit, the end product is restored and can be used. This is a cost saving exercise, and should entice industry attention as the space heats up.

Looking at the numbers, the industry is currently worth a little over $350 million. Analysts expect a CAGR over the next ten years at just over of 10%, which would see a 2026 valuation of a little over $1 billion. Beyond that, as biotech advances, expect this growth to expand. All said, it is a nascent space, and one that rarely garners much attention. However, off the radar doesn’t always mean not fruitful – indeed, often the opposite is the case – and we believe it’s one to keep an eye on going forward.

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Here are Two Biotech Stocks to Watch in January

By
Jennifer Aldershot
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FDA

As we head into the new year festivities, our thoughts are already focused on a number of opportunities in biotech stocks during the coming weeks. Here are a couple of stocks with PDUFA dates looming, and a quick look at the drugs in question.

Genmab A/S (OTCMKTS:GMXAY)

First up, Genmab. This company is off the radar for a lot of individual investors, mainly because it’s based in Denmark and trades over the counter in the US, but don’t let that fool you. It has a market cap just shy of 48 billion, and generates nearly $100 million revenues annually from two FDA approved drugs – both of which target oncology indications. One of these drugs, Darzalex, the FDA approved just last month, and on the approval the company’s market capitalization got some swift upside. On January 22, the FDA will rule on Arzerra, for a chronic lymphocytic leukemia indication, and if it gets the green light, Genmad should strengthen again. The drug is part of a family of drugs called monoclonal antibody – a family that has garnered much attention from oncology researchers over the last few years – and works by attaching itself to receptors on the surface of B-cells, the cells in our immune system that become cancerous in leukemia sufferers. Once attached, it signals the rest of a patient’s immune system to attack, and in doing so, initiates an immune response that trials have shown reducers tumor size and kills cancerous cells. It is already approved for a chronic leukemia indication (this one is relapsed leukemia) and so the latest NDA is really just an extension of the current application. Having said this, it’s an extension that will widen the patient market and – perhaps more importantly – open the door for further indication. Indeed, the company is already trialing a number of these applications, with ongoing studies in MS, Lymphoma and neuromyelitis.

With these sorts of oncology candidates, the FDA generally seeks the opinion of an advisory board. With this in mind, keep an eye on any releases ahead of the date in question to gain insight into this board’s recommendation and – in turn – the drug’s chances of approval on the 22nd. One to watch.

Neos Therapeutics, Inc. (NASDAQ:NEOS)

Shifting to the other end of the biotech spectrum, let’s now look at Neos. Neos has a market cap of a little over $200 million, a relatively condensed pipeline, and only one drug commercially available – a combination therapy for pediatric ADHD. It’s a risky one, but there’s also plenty of upside potential, especially if the FDA gives the nod for its lead pipeline candidate next month. The PDUFA is set for January 27, and the drug in question is NT-0202. Just as with the company’s marketed product, NT-0202 is an ADHD target – but this one is proprietary to Neos. The company picked up the currently available product as part of an asset acquisition back in 2014 from its then-rights holder Chiesi USA and Coating Place, Inc.

NT-0202 is an amphetamine product, which is pretty common in the pediatric ADHD space, but what sets it apart is its sustained delivery feature. Sustained delivery reduces the number of doses necessary for effective administration – an especially handy feature in restless kids, and something that has no comparable in the current marketplace.

The latest NDA is actually a resubmission – Neos initially proposed the drug to the FDA back in 2013. However, the agency responded to the initial application with a complete response letter (basically a note that outlines issues with the NDA) requesting some fresh data. Alongside the resubmission, Neos stated that it believes it had met the data requirements, and the FDA issued its standard 6-month resubmission timeframe. Those 6 months are up on Jan 22nd – a date that could mark the end of a highly scrutinized road to approval for Neos and NT-0202. We probably won’t get an advisory panel recommendation on this one, so all ones on the agency going forward. Approval is far from guaranteed – the FDA is notoriously (and understandably) tough on pediatric therapies – but if NT-0202 gets a thumbs up, it will be a big payday for Neos shareholders. Again, definitely one to keep an eye on.

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The Science Behind Exelixis’ Billion Dollar NDA

By
Jennifer Aldershot
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Exelixis

California based biotech Exelixis, Inc. (NASDAQ:EXEL) just submitted a rolling new drug application (NDA) to the FDA for its lead oncology drug, cabozantinib. If approved, it will mark the company’s second US-clinical success for the drug, following the 2012 approval of cabozantinib – marketed as Cometriq – in a rare thyroid cancer indication. Revenues from this initial indication have been pretty slow getting off the ground, but with an expanded indication in Europe, and a pending European submission for cobimetinib (approved in the US early last month) just around the corner, this circa $1.3 billion company could be in for some real gains. With this in mind, let’s take a look at the drug in an attempt to gauge its impact on Exelixis’ financials going forward.

Cabozantinib is an inhibitor of what’s called a tyrosine kinase inhibitor – specifically, it inhibits two kinases called c-Met and VEGFR2. The science behind how these drugs work is pretty complicated, but it’s also pretty interesting, so it’s worth going into it in a little bit of depth.

All cells have what’s called an MAPK/ERK pathway, which connects the outer membrane of the cell to the DNA in its nucleus. This pathway is what allows outer stimuli to communicate with the DNA, and initiate some sort of change, or response, in the cell. The process is called signal transduction. A cell expresses many different types of protein on its membrane – these are the receptors that form the outer section of the pathway. When a particular phosphate attaches itself to a receptor, a signal travels to the DNA and elicits the aforementioned response. Tyrosine kinases are the enzymes that facilitate the joining of the phosphate with the surface receptor. The type of enzyme (tyrosine kinase) that joins the phosphate to the receptor determines the response – EGFR, for example, causes replication and proliferation. This is all ok, so long as it is regulated. The problem comes when things don’t run as they should. Think of the EGFR activated receptor as an on/off switch for cell reproduction. In cancerous cells, it is constantly stuck in the on position. This causes the rapid and (to some extent) uncontrollable proliferation associated with cancer cells. Cabozantinib inhibits two specific tyrosine kinases, and in doing so, stops the phosphate joining to the receptor. In turn, this stops the cell from functioning in the way it would if it’s receptor had been activated. We don’t really need to go into the specifics of the two – that’s a discussion for a much longer article – so for now we’ll just say they are called c-Met and VEGFR, and the response they elicit is angiogenesis and, to some extent, cell migration. Angiogenesis is the formation of new blood vessels, which feed blood to the tumor (promoting growth), and cell migration leads to metastasis.

So there we go – that’s the MOA in a nutshell. Now, what about market potential?

Well, Exelixis is targeting a renal cell carcinoma indication, which is the most common type of kidney cancer. There are about 65,000 new cases each year in the US, and about 14,000 deaths. The initial indication is for patients who have undergone one other treatment without success – so we can be very conservative and suggest that the 14,000 is Exelixis’ initial target market (as we can assume that all of these will have undergone at least one other treatment prior to death). We also have some pretty solid reference points for pricing. The company trialed the drug at a 60mg per day dose – ranging up to 140mg at the high end. Let’s use 100mg as a median, as we are looking at the severe end of the patient population. Fourteen doses of the drug for its already approved indication, thyroid cancer, cost $13,000 at the low end of the market. Let’s assume a patient takes the drug for 12 months, meaning they would need circa twenty-six lots of the fourteen doses, costing $338,000 per patient, annually. With an initial target population of the 14,000 patients that die each year, Exelixis could be looking at a $4.7 billion market. Obviously, there is a long way to go before these revenues materialize, and many drugs with potential blockbuster markets fail to meet expectations – but these are not unrealistic numbers.

So what’s the takeaway? Well, that Exelixis has a potential billion-dollar drug in rolling submission with the FDA. With an expedited process (something the company has applied for) we could be looking at a six-month decision deadline. Keep an eye on the individual section submissions (this is what rolling submission allows) as interim insight.

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Two Biotech Companies Rated Strong Buys for the New Year

By
Roger Hannington
-
biotech

Analyst recommendations can be great indicators of a company’s potential. Against the current backdrop of market uncertainty in the biotech space, a highly recommended company can provide a certain level of risk mitigation, and some well needed stability. Here’s a look at two companies that analysts rate as strong buys right now.

Ascendis Pharma A/S (NASDAQ:ASND)

Ascendis is a Danish biotech that you can pick up an exposure to in the US via NASDAQ. The company has a range of indications for a few different types of drugs, but they all revolve around its core technology – TransCon. TransCon is a pretty simple system, which involves an unaltered formulation of a traditional drug being enclosed in what the company calls a TransCon carrier – essentially it’s a C-shaped casing that is designed to release the drug it encloses under and specific temperature and PH conditions. This design translates to an extended, sustained delivery, while maintaining the safety and efficacy profile of the drug being delivered, as there is no reformulation. The company is targeting arterial hypertension, ophthalmology and diabetes with the tech, but its primary and lead indication is growth hormone deficiency (GHD). We got top-line from a phase II in pediatric GHD earlier this year, suggesting efficacy won’t be a problem and reaffirming the safety profile of the delivery system. A multi center Phase III is set to kick off before mid-2016, and should complete within 6 months. Ascendis also completed a phase II for the adult patient population in GHD, but as yet we’ve not got word on when it plans to initiate anything pivotal.

So why do analysts like this one? Well, an approval in the GHD space would open it up to a multi billion-dollar market, and would see the company introduce the world’s first sustained delivery GHD pill. It has a couple of high profile partnerships with industry behemoths Sanofi (NYSE:SNY) and Roche Holding AG’s (OTCMKTS:RHHBY) Genentech, and about $130 million cash on hand against a burn rate of circa $8 million a quarter. With a market cap just just of $18, down on its $19 IPO and a 19% discount on 2015 highs, it looks cheap at current prices.

Five Prime Therapeutics, Inc. (NASDAQ:FPRX)

We covered this company early last month, when Bristol-Myers Squibb Company (NYSE:BMY) announced it had gained clearance for a $350 million upfront deal that saw BMS pick up global rights to Five Prime’s lead candidate, FPA008. The drug is what’s called a CSF1R inhibitor, and is one of the most promising candidates in immuno-oncology, a space that has been at the forefront of biotech investing for the past couple of years, and still draws a lot of attention as its component therapies mature towards commercialization. Since that event, we’ve learnt that the company has dosed its first patient in a secondary, phase I trial with a gastric cancer indication, and Five Prime’s third quarter numbers hit press. When it comes to dev-stage biotechs, net earnings are relatively unimportant – it’s capital on hand that counts. Clinical development is drawn out and costly, and investors will often focus on a company’s the ability to fund the process ahead of its bottom line. From this perspective, and as a direct result of the already mentioned BMS deal, Five Prime looks attractive. At September 30, 2015, the company had a little over $36 million cash on its books. Factor in the $350 million upfront from BMS, and a few million in net receivables, and Five Prime won’t be far off $400 million in the bank. With a burn rate of between $10-20 million, this gives it a run rate of at least five years. Obviously, costs will increase as the company’s pipeline matures, but its still a strong position to be in in – especially in this space. Five Prime’s current market cap sits at $1.18 billion – just 3% off all time highs, but there looks to be plenty of upside on offer going forward as we get interim analysis of the company’s maturing pipeline throughout 2016.

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These Four Gold Miners Can Maintain Profitability at Current Prices

By
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PershingGold

What has happened to gold stocks since 2012 could be called even worse than oil stocks over the last year. The collapse in oil has bankrupted many a small marginal driller, though large companies like Exxon Mobil (NYSE:XOM) are still profitable. The collapse in the price of gold however has made it difficult for almost all producers, big and small, to mine gold profitably. Some analysts predict a near term turnaround, and some are not so optimistic. One thing is certain, however. That is, the seemingly universal agreement that in order to continue existing, gold miners of all sizes need to be able to mine gold at all in sustainable cash cost [AISC] of less than $1,000. Those that can will have a big leg up on the rest of the industry when gold prices finally recover.

With this in mind, here are four small cap gold producers that meet, or look set to meet this criterion.

Richmont Mines Inc.

Richmont (NYSE:RIC) has two primary mines – one in Ontario called Island Gold Mine and another in Quebec called Beaufor. The former is the more productive of the two, and Richmont is currently undertaking a host of drilling programs at the property with the goal of expanding its output. Results to date look promising, and we’ll get further insight into indicated resource figures between now and April next year. At the Beaufor property, Richmont reported AISC of $936 for the third quarter of 2015, on 5,700 oz. produced. At Island Gold, the company produced at $968 AISC on 15,000 oz. mined. Weighted against the respective production levels, average cost comes in at circa $955 –below the $1,000 threshold required to maintain profitability under current conditions, but any further dip in gold prices could put Richmont in jeopardy.

Pershing Gold Corporation

Pershing (NASDAQ:PGLC) remains a promising company in the junior gold space as we head into 2016. It has a fully permitted, ready to go facility at its flagship property Relief Canyon in Nevada. The property sits right in the middle of some already producing mines, and drilling to date has revealed a little over 800,000 oz., measured, indicated and inferred. Pershing’s CEO Steven Alfers reported earlier this year that the decision as to when to hit go on production is an economic one, meaning he’s likely waiting for some gold price strength before commencement.

Estimates suggest, however, that even at current prices Pershing could maintain a profitable operation. Conservative estimates give Relief Canyon an AISC just shy of $870 per oz. More optimistic predictions suggest the property cold produce as low as $725. Whichever of the two predictions proves valid, Pershing should have little problem on the cost end, and even has a little room to play with if the price of gold dips further before recovering.

Sabina Gold & Silver Corp. (OTCMKTS:SGSVF)

In September this year, Sabina reported the results from a feasibility study at its lead property – the Back River project. The study suggested that the company can generate NPV $480.3 million on approximately 250,000 oz. annually for eight years, followed by four further years of 200,000 oz. each. The project will require a little over $415 million to hit production, and the company is yet to submit permitting applications (these can often cause long delays in the gold space), but once production starts, Sabina expects the property to produce at an incredibly low AISC of $620 per oz.

This more than accommodates the current weak gold prices, and leaves plenty of room for gold to slide further while still allowing for potential profitability. The initial capital will be the hurdle in this one – Sabina only had $19 million cash and equivalents on its books at the end of September, and expects this to decline to $17 million by year end – so this is something to keep in mind when considering an exposure. If it can raise the funds, however, and get the site permitted, there could be plenty of upside as we head into the latter half of the decade.

Claude Resources, Inc.

Claude (OTCMKTS:CLGRF) reported its Q3 financials at the beginning of last month. The company reported $5.7 million net income, making it one of only a handful of producers to pull in a positive bottom line. It also raised full year guidance to 75,000 oz., up from the 70,000 reported at the end of the second quarter. AISC at the company’s producing mine comes in at $832 per oz. for the quarter, down from $976 during the comparable period last year and also down on the year to date figure of $896 – suggesting the company could tighten up this figure further going forward. With about $27 million cash and bullion on its books, and results expected early next year from what looks to be a promising exploratory program at its Santoy Gap project, there’s plenty of upside potential on the company’s current market cap of $107 million – just a little over 4X Q3 revenues.

Market Exclusive is a financial portal geared to engaging discussion on current financial topics. Market Exclusive is not an investment advisor. By reading this you authorize that you have read and understood our disclaimer.

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Post-Holiday Action: Movers and Shakers in Biotech

By
Jennifer Aldershot
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oversold

Markets have been a little subdued over the past few days, with the Christmas holidays weighing on volume. A few companies, however, have bucked the wider market quiet, and logged some notable action. Here are two of the biggest movers from across the period.

Cellectis S.A. (NASDAQ:CLLS)

Cellectis closed close to 4% up on it’s same day open on December 24, and premarket looks set to resume this bullish momentum as we head into a fresh day’s trading on December 28. The company has had a tough month, and the recent gains are more corrective than fundamentally driven, but noteworthy nonetheless. Early December, Cellectis held a joint conference call with Pfizer Inc. (NYSE:PFE), during which markets expected an update on the two companies’ joint oncology candidate UCART19. The drug is part of the high profile group of cancer drugs known as CAR-T therapies, which involves ex-vivo reprograming of T cells (the cells in our immune systems responsible for recognizing and neutralizing pathogens) to target cancer cells. Unlike the majority of other CAR-T candidates, however, Cellectis and Pfizer’s offering uses T cells from an outside donor, rather than from the patient being treated. This has two primary benefits. First, and from a development perspective, it makes conducting clinical trials much more straightforward – the drug can be developed in advance. Second, it means Cellectis can prepare the treatment as an off the shelf therapy, which should greatly reduce the cost and time associated with administration.

Getting back to the point, and as mentioned, markets expected an update as to the development timeline, with some analysts even expecting interim from early stage, ongoing trials. These expectations failed to materialize. Instead, the conference call simply reiterated the terms of the UCART19 partnership, outlining the roles of the parties involved. This is a classic case of buying the rumor, selling the fact – something that, in biotech, can dominate early stage expectations. Now things have settled, Cellectis looks like a discounted exposure, and this discount has translated to a correction. Near term, keep an eye on the $42 mark, and beyond that, $47 – the most recent swing high and the 2015 peak respectively. If the bulls remain in control, these are the levels that will close the discount.

WAVE Life Sciences Pte. Ltd. (NASDAQ:WVE)

This is an interesting one. Wave filed for an IPO in October, and under the terms of the 2012 JOBS Act, was able to conduct its offering a little over one month later, going public on Nov 11 and raising $102 million in the process. During the middle of last week, Wave’s market cap gained close to 25% on its IPO price (having initially declined 18% to December lows), but during the shortened session on the 24th, closed 8% off these highs. The reason this volatility is interesting, is that there haven’t really been any updates relating to the company’s pipeline. Indeed, there isn’t much of a pipeline to speak of. Wave has a couple of candidates in pre clinical development, but no clinical trials ongoing. The only explanation for movement is the release of a Q10, which outlined increased research and development costs and an increased net loss – up to $12.1 million for the nine months ended September 30, 2015, from $3.4 million for the same period last year. The ramp up in costs suggests momentum from a development perspective, meaning we could be in for some big announcements early 2016, but as things stand, it looks as though the volatility is purely speculative. Wave has some big names associated with it, most notably Paul Bolno as CEO, the man who previously headed up worldwide business development at GlaxoSmithKline (NYSE:GSK), and it seems investors are willing to get behind the company at its current price based on management’s potential to successfully execute its drug development strategy. Only time will tell whether its lead tech – the so called AntiSense technology – will have the impact outlined in its filings that Wave believes it will in the genetic therapy space, so keep an eye on the aforementioned updates to see where the money is being spent, and in turn, what impact its spending might have on Wave’s chances of success.

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Heron’s Big Day Is Just Around The Corner

By
Jennifer Aldershot
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biotech

The clinical development process can be a long and costly one. For some companies, however, it can be longer and costlier than others. In 2009, Heron Therapeutics, Inc. (NASDAQ:HRTX) submitted an NDA to the FDA, with the goal of getting its post-operative drug Sustol to market. The FDA responded with a complete response letter, and after three years’ worth of additional data collection, the company resubmitted. Fast forward to March, 2013, and the FDA yet again responded with a request for further data. The reasoning behind the request was – among some minor issues – a reevaluation of the data on which the trial was based, in accordance with the (then) new ASCO 2011 guidelines.

After six years of regulatory to and fro, the FDA has set a PDUFA for Sustol of January 17. 2016. Heron has publicly stated (and reinforced the opinion with a fresh data submission) that it believes all of the FDA’s concerns are resolved. IN anticipation of the regulatory agency’s decision, let’s take a look at the drug in question, and see if we can gauge the drug’s potential for approval. Here goes.

So, as mentioned, the drug is called, Sustol, and has target indication of post-operative discomfort. More specifically, it targets (in this indication) delayed nausea and vomiting induced through emetogenic chemotherapy (emetogenic here just means having the potential to cause sickness). The drug is what’s called a 5-HT3 antagonist; it targets the 5-HT3 receptor to suppress the serotonin response that causes the nausea in question. A host of 5-HT3 antagonists are already approved, but they primarily target the nausea and sickness that comes about as an immediate response to chemo. There is a subset of patients that experience sickness a few days after therapy (called delayed onset CINV) and this is what Heron is targeting with Sustol.

So what is the difference this time around? Well, the company has conducted an extended trial called MAGIC, which it believes addresses the FDA’s concerns. Relative to current SOC treatment, Sustol induced a 14% improvement in delayed onset CINV patients, with Sustol showing a 65% complete response rate, versus the 57% of SOC. Safety and tolerability came in on-point, and sustainable production (something that the FDA instructed Heron to revise) has reportedly been resolved. The MAGIC trial included more than 1300 patients – a pretty hefty number for this sort of trial – and so from a scale perspective the FDA should have no issues.

What’s the market potential if Heron gets approval? In the US, there are a little over 7 million chemotherapy administrations dosed each year. Of these, approximately 75%induce nausea and vomiting of the type that Sustol targets. This puts the company’s target market at a little over 5.25 million. Based on a market penetration of 20% (expectations published by the company a few years ago), analysts put a peak sales forecast for Sustol at $420 million – expected by 2023 (assuming approval in January).

So what are we looking for near term, and what is the upside potential in Heron on approval? The company currently trades for just shy of $30 a share, giving it a market capitalization of circa $1 billion. Near term resistance comes in at $42, so expect a test of this level as we approach the PDUFA date of January 17. If the company picks up approval, annual potential revenues come in at circa 50% of current market cap, which gives Heron considerable upside potential on the announcement. We’re looking at a medium term target of $55, with a top end market cap in the $2-2.5 billion range.

The downside? There is, of course, the potential for yet another FDA decline. The agency has requested a renewed NDA on two occasions, and there is every chance that it will do the same this time around. If it does, we might be looking at another multi-year delay before resubmission, or worst case, a dropping of Sustol as lead candidate altogether.

Takeaway – keep an eye on the FDA (and any advance review) as the key driver behind Heron’s valuation going forward. An approval could quickly double the company’s market cap, but its far from guaranteed, given the FDA’s historic approach to Sustol.

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What Medidur’s first success means for pSivida shareholders

By
Rafi Farber
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pSivida

pSivida Corp. (NASDAQ:PSDV) today announced its top-line results for the first of two of Medidur’s phase 3 trials. Medidur is an injectable ocular insert that administers sustained-release corticosteroids into the eye for three years. The insert is designed to treat posterior uveitis, a disease with no known cause that, untreated, causes blindness. The stock is up over 30% since yesterday, December 21st, so investors are obviously happy with the results.

What is significant about the data is not necessarily that Medidur showed efficacy in treating the disease. That was pretty much expected because the corticosteroids used in Medidur are known to be effective against uveitis. What is significant is that after the most recent follow-up, only 3.4% of Medidur-treated eyes compared to 2.4% of control eyes required surgery to reduce intraocular pressure.

Intraocular pressure (IOP) is pressure within the eye that corticosteroids are known to aggravate. The biggest potential problem with Medidur was that sustained release corticosteroids via the microinsert would cause dangerous increases in this pressure. The results show that this is not the case, and though for 3.4% of patients IOP did require surgery, this was not significantly more than placebo.

As a result, Medidur looks likely to succeed in its second phase III trial, after which it plans to submit an NDA to the FDA some time in early 2017.

Medidur’s target market tops 175,000 people a year in the US who suffer from posterior uveitis, which causes 30,000 cases of blindness annually. The cost of the insert is not yet determined, but since pSivida will be marketing Medidur on its own, it will take home all revenues. pSivida already has an older insert that treats uveitis on the market, but since it requires a surgical procedure, it is not very popular. Medidur on the other hand is inserted in an office visit via simple injection, and would address a much larger portion of the market than the older product Retisert.

pSivida is well capitalized for a small company with $25M in cash and receivables, which should be enough to bring it through its second phase III trial for Medidur together with the revenues it receives from ILUVIEN, the same insert as Medidur though for diabetic macular edema. Shareholders can expect another jump like the one we saw today when data from that trial is released in early 2017, assuming it is successful. If the first phase III showed little statistical difference between Medidur and placebo for IOP, it’s unlikely those results will change for the second.

By 2017 if the second and final phase III shows similar results to the first, pSivida could more than double its current market cap.

Disclosure: At the time of writing, the author was long PSDV.

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A Look at the Science Behind Bayer’s Latest Buy

By
Roger Hannington
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biotech

Shortly after markets closed on Monday, Bayer AG (OTCMKTS:BAYRY) announced a $335 million deal that will see it fund the research of a Massachusetts based biotech startup called CRISPR Therapeutics. The company is at the cutting edge of gene therapy, and gives Bayer a direct route to what many believe will be the next revolution in healthcare – gene editing. Let’s take a look at what both companies stand to gain from the partnership, and try to get to the bottom of the science behind what CRISPR is developing.

First then, the deal. It’s a two-part agreement. The first $35 million Bayer will pay upfront to CRISPR, and in doing so, will acquire a minority stake in the company. The remaining $300 million Bayer has earmarked for research support capital, and has committed to pay out to a joint venture, set up as the result of the agreement, in which both companies maintain a stake – initially fifty-fifty – across a five-year period. So Bayer get’s access to CRISPR’s tech and expertise, and CRISPR gets the backing of an industry behemoth.

So what is Bayer paying a third of a billion dollars to gain access to? CRISPR has developed what it calls CAS9. The science behind the technology is pretty complicated, but here’s a much simplified explanation. A large number of diseases (approx. 10,000 at last count) are caused by a mutation in a single gene. Over the last few decades, most treatments target proteins – i.e. the result of the mutation. Gene editing of the sort on which CRISPR is focusing involves targeting the gene at mutation level, rather than the resulting protein. The advantage of this (if it works) is that it can completely cure, or reverse, a disease, rather than just treating it. CAS9 is an enzyme (or endonuclease, as it is referred to in the gene therapy space, that the company has programmed to cut DNA in a specific location. By cutting out a specific part of DNA (namely, the mutation) CAS9 turns a gene from mutated to repaired, meaning it will code for a functional protein, rather than one that causes disease. The company uses a “guide” RNA to instruct CAS9 as to which part of the DNA to cut, and once complete, the DNA uses its own biological mechanism’s to repair and rejoin, minus the edited out element.

As mentioned, the range of potential target diseases is vast, and as yet, we’ve not got any indication from Bayer or otherwise what diseases the joint venture will go after. Indeed, we’ve not actually got any in-vivo examples of CAS9 working in humans – the majority of tests have been carried out in the lab. In light of this, we’re not going to see any human trials until at least the end of next year. Further, its going to be at least two years before we get a target indication – so we’re looking at 2020 before we see any significant trial progress. It’s in Bayer’s interests to be patient, however. We are still in the very early days of gene editing (CRISPR only discovered this process a few years ago), and the underlying technology will likely need refining before it can take on any commercial application, but there are some significant revenues on the table for the company that gets it right. Gene editing is a sort of holy grail in the biotech space, and it could be a game changer in anything from oncology to immunotherapy.

What are we looking for going forward? Primarily, we need to see some advance in the targeting side of the process, and this is the area towards which the majority of resources will allocate near term. We’ve got evidence that the cutting and repairing works – but without being able to target a specific cell (and in turn, a specific gene sequence) there’s no real world application. In light of this, we are looking for any evidence that the guide RNA can be put to use. Keep an eye out for the term “sgRNA” in future updates, and specifically, anything related to its efficacy. If the company announces the successful targeting of cell using sgRNA in humans, not only will it validate the concept, but it will also give us some idea of initial application – if we see an sgRNA successfully target a gene sequence in a cancer cell, for example, it would suggest Bayer is going after the oncology space.

All said, it’s very early days, and this partnership has a good few years to run before it bears any real, actionable fruit. That Bayer is taking the initiative and picking up an early exposure, however, makes for an intriguing play in what could prove a healthcare revolution across the next decade.

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Is Bellicum A Worthy Index/Portfolio Addition?

By
Jennifer Aldershot
-
Stocks buying right now

Here at Market Exclusive, now and again we like to uncover small caps in the biotech space, and put them under scrutiny. Last week, Bellicum Pharmaceuticals, Inc. (NASDAQ:BLCM) announced it had been selected for inclusion in the NASDAQ Biotechnology (NASDAQ:^NBI). The company is very much in the development stage of its growth, but its inclusion on an index like the NBI (for some) will serve as validation of its potential. We know how volatile the space can be, however, so let’s take a look at Bellicum’s lead candidate in an attempt to gauge its potential.

Ballicum’s lead candidate is BPX-501. To get an idea of how the drug works, and what it is designed to treat, we’ve first got to look at what’s called hematopoietic stem cell transplantation (HSCT). For a number of late stage blood and bone marrow cancers, HSCT is the standard of care treatment. Physicians take stem cells from bone marrow (usually a patient’s, but sometimes from a donor) and store them, while the patient undergoes chemotherapy to the point that the stem cells responsible for producing blood cells are completely destroyed. This concurrently destroys the cancerous cells in the blood, and once complete, the physician grafts (reinserts) the previously extracted stem cells, which replenish the patient’s healthy blood cells. Simple. But there’s a problem. More often than not, a host’s own stem cells can’t be used. To overcome this, a type of HSCT called haploidentical HSCT is employed – essentially a physician uses stem cells from a close relative. However, this means the graft is extremely dangerous – it can lead to what’s called Graft versus Host Disease (GvHD), which is where T cells from the relative attack the host’s vital organs. This means that while the treatment is effective, it is often not used due to its associated risks. This is where Ballicum comes in to the picture.

The company has developed what it calls a CaspaCIDe safety switch, and has incorporated the switch into BPX-501. A patient takes BPX-501 after they undergo HSCT, and the drug sits dormant in their bloodstream. If the patient develops GvHD, they take a second drug, rimiducid, which activates BPX-501. When activated, BPX-501 induces apoptosis (programmed cell death) in the non-host T cells, which stops them from attacking the organs associated with GvHD.

The drug is currently undergoing four separate phase I/II trials, in both the US and Europe, having performed well in two trials over the last few years, DOTTI and CASPALLO. Topline is expected during 2017 from the first two trials, and about twelve months later for the second two. If we can get a repeat of the demonstrated efficacy in the ongoing phase I/II, the company will be ready to kick off what will likely turn out to be a pivotal phase II/III, and submit an NDA sometime around 2019. So, with these timeframes, this is a pretty long game allocation. This doesn’t mean, however, that there wont be any catalysts near and medium term. The nature of the trials – one patient, one treatment – offers up the potential for repeat interim data releases. Whether the company will opt for this approach (as opposed to a topline dump post-completion) remains to be seen, but if it does, Ballicum could be a nice volatility play over the coming 24 months.

So what’s the verdict? Is the company worthy of its recent addition to the Nasdaq index? Well, as mentioned, near term it is difficult to make any solid predictions as to the likelihood of approval for BPX-501, and in turn, success for Bellicum. We can say, however, that the drug looks promising, and is a prime candidate for both orphan designation and accelerated approval. Along with the remaining candidates in Bellicum’s pipeline, there is the potential for triple digit million dollar revenues; revenues that wont start to roll in before the end of this decade, admittedly, but the potential is there nonetheless.

As a speculative allocation, Bellicum looks intriguing. There is risk, of course, with the stock being such a long term play. The clinical development space can be unpredictable and, especially when dealing with something as deadly as GvHD, there is plenty of room for slip ups. Having said this, the market currently values the company at a little over $500 million, which looks low when considered against its cash and equivalent number of circa $100 million, on a burn rate of $10 million. One to watch.

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