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Is Bellicum A Worthy Index/Portfolio Addition?

By
Jennifer Aldershot
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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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Clearing Up The Shkreli Confusion

By
Jennifer Aldershot
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shkreli

Shortly before lunchtime on Thursday, Turing Pharmaceuticals CEO, the FBI arrested Martin Shkreli at home, on charges of securities fraud. Much of the media is focusing on his Daraprim price rise, and it seems there exists some confusion as to the driving factor behind his arrest. We’ve got access to the official indictment documents, so let’s try and clear up the confusion.

We’ll begin by saying that, officially at least, the arrest has nothing to do with price hikes. What Shkreli did with daraprim, while questionable from a moral perspective, is perfectly legal and happens all the time in biotech. Having said this, bad press on a global scale makes you a hot target for the authorities, so there is always a chance that, indirectly, the Daraprim situation turned the authorities on to Shkreli and spurred the investigation. That, we will probably never know.

So to the case in hand. It’s all rooted in a hedge fund Shkreli started in 2009 called MSMB Capital. He, his lawyer and an unnamed (but known to the authorities) third party referenced in the indictment as Co-conspirator 1, reportedly attracted investor capital through the misrepresentation of performance records, capital under management and the retaining of an independent auditor.

Under the terms of any investment, Shkreli and partner was set to take a 1% management fee, and the general partner would receive 20% of the limited partners’ (the investors’) net profits for the year in question. The start of the case kicks off with Shkreli inducing a $700,000 investment from four unnamed partners, without disclosing that he had already lost all of the funds from his previous hedge fund, and that he had an outstanding $2.3 million default against him from Lehman Brothers that came about as a result of his previous trading activity.

He then went on to elicit a total of approximately $3 million across a period of about three months from an individual capital partner, having convinced this partner that MSMB had $35 million under management, and that the funds auditors were Rothstein, Kass & Company, P.C. Neither of these claims were true. The fund had no independent auditors at the time, and capital under management was less than $700, with Shkreli having lost the already mentioned $700,000 through his trading activities. Through a series of misrepresented shorts (one notable in Orexigen Therapeutics, Inc. (NASDAQ:OREX) for Shkreli’s misrepresentation to Merrill Lynch that he has located shares to borrow), the funds declined from low single digit millions to less than $60,000 in February 2011.

From here, things get messy. Shkreli starts fabricating performance reports, and sending out emails claiming that the new incarnation of MSMB – MSMB healthcare – now had $55 million under management and that its partners (investors) had all made good returns, when in reality their capital had depleted to practically nothing. This is where Retrophin, Inc. (NASDAQ:RTRX) comes in to the picture. Shkreli used a $900,000 equity investment in the biotech (reclassified as an interest bearing loan) to start transferring funds from Retrophin to MSMB, which he then used for a variety of purposes. Specifically, the repaying of the money owed to Merril Lynch, personal debts and a range of other MSMB liabilities.

It doesn’t end here, however. Over the next 12 months, Retrophin received nearly $5 million in investment from MSMB healthcare (according to the books) but when audited by an accounting firm, no such funds had come from either MSMB capital or Healthcare. The SEC started sniffing around, and Shkreli responded by saying he was shutting MSMB operations down and returning funds to its partners.

This is where things start to unravel. Here Shkreli and his lawyer conspire to pay MSMB investors off using Retrophin capital, recording the payoffs as a combination of Retrophin stock and cash payments listed as “consulting agreements”. By listing as consulting, the pair could avoid reporting the payments in the company financials.

And that’s an outline of the whole situation. Of course, a piece of this length far from does the case justice – the details are fascinating (they include email correspondence between the relevant parties). You can read the whole thing here. Hopefully, we’ve cleared up a bit of the confusion surrounding Shkreli’s situation, however. This is not about rising the price of drugs – it’s about misrepresentation.

As a final note, it’s worth mentioning that this is all as yet unproven, and as things stand the allegations are just that – allegation. It makes for great reading however, and finally offers some insight into the ongoing legal battle between Shkreli and Retrophin we’ve heard so much about over the last few months. Let’s see how things play out.

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Could the FDA Approve Both BioMarin and Sarepta’s DMD Candidates?

By
Roger Hannington
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biomarin

At the beginning of the month, we included BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) and its development stage candidate drisapersen as one of our drugs to watch before the end of the year. The treatment is up for review on December 26, 2015, and the review date will mark the end of a long road to approval for BioMarin; that is, of course, if the drug gets the green light. When we covered the drug briefly a few weeks ago, we promised we’d come back and take a closer look at it ahead of decision day – so, with this promise made, here goes.

We covered the science in a little detail last time, but let’s recap in a little more detail. Drisapersen is a Duchenne muscular dystrophy (DMD) candidate, and is part of a class of drugs known as 2′-O-methyl phosphorothioate oligonucleotides. Dystrophin is a protein that is responsible for providing structural stability in muscle tissue, coded by its eponymous gene, dystrophin. Patients with DMD have a mutation in their dystrophin gene, and this mutation means that higher than normal calcium deposits penetrate cell membranes. Higher calcium levels disrupt signaling pathways, and water builds up in the mitochondria of muscle tissue cells. Mitochondria (you may remember this from school) are the power houses of cells – they produce the energy needed for replication. When water enters mitochondria, the mitochondria bursts, and the cell dies. This creates a gradual, but persistent, degeneration in muscle tissue in DMD patients, which in turn causes the classic symptoms – awkward mobility, fatigue, falls, skeletal deformities, etc.

Drisapersen targets the dystrophin gene at its RNA phase, and alters it to stimulate the production of a partially functional dystrophin protein. In doing so, BioMarin hopes it can reverse, and improve going forward, the severity of the disease in DMD patients.

So what’s the issue? Well, the drug failed to meet its primary endpoint in the phase III on which BioMarin hoped to base its NDA. Further, in an FDA advisory review, the drug got severely criticized. A number (the majority, in fact) of the review panel refused to accept any benefit over placebo, and argued that the progress in the treatment arm (as measured by the distance a patient can walk in six minutes) fell in line with the standard progression of the disease. Additionally, a number of the panel pointed to the drug’s toxicity as reason enough to discourage approval.

However, in a presentation to the FDA, BioMarin presented pooled results from three separate trials that suggested efficacy. Further, we got a number of guest appearances at this presentation from parents of children involved in the trial. Two of these sets of parents represented children that had discontinued treatment. The first assumption before the presentation was that they would rather submit to the degenerative nature of the disease, than force their child to suffer the AEs associated with drisapersen. In reality, however, these parents merely switched to a alternative dev stage treatment, etiplirsen, which is up for review in January following an NDA submission by Sarepta Therapeutics, Inc. (NASDAQ:SRPT) earlier this year. We also got anecdotal evidence from parents whose children are part of the trial, suggesting that the drug is effective, and has a negligible AE profile – one for which the benefits vastly outweigh the costs.

So what is likely to happen come the 26th? Well, there are plenty of arguments against approval, not least of all the panel review, which pretty much flat out stated the FDA shouldn’t even consider approval. The FDA doesn’t have to listen to the panel, however, and we’ve got to remember this is a serious condition for which – at present – there is no real effective therapy that addresses the underlying cause of the disease. Anecdotal evidence from trial participants can be effective in swaying the FDA’s decisions, and this may come in to play when the agency comes to a conclusion. As a prediction, the FDA will approve the treatment, with the necessity for follow up data going forward. It will also approve Sarepta’s candidate, and let the open market decide which safety vs efficacy profile it prefers to accept.

All said, this is a real interesting one, and is likely to be one of the biggest market moving decisions of the year in the biotech space. Risk averse investors might want to avoid the DMD space outright over the next six weeks. For those with a little speculative capital they can afford to lose, however, there is plenty of reward on the table for the right call. Bring on the 26th.

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Array is Sitting on a Billion Dollar Melanoma Blockbuster

By
Roger Hannington
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biotech

Before the markets opened on Wednesday, Array BioPharma Inc. (NASDAQ:ARRY) reported the top line results from its lead pipeline candidate – binimetinib. The results come off the back of a phase III, which kicked off in partnership with Novartis AG (NYSE:NVS) in July, 2013. With a target indication of NRAS mutant melanoma, the drug has the potential to be a real blockbuster for Array, if the FDA gives it the green light and commercialization is a success. Here’s a look at what approval might mean from a revenues perspective, alongside a detailed look at binimetinib’s mechanism of action.

First then, let’s address the science. As we have said, the drug targets NRAS mutant melanoma. If you are familiar with the biotech space, and in particular with the oncology side of the space, you will likely have heard the term BRAF mutation. BRAF mutation steals the limelight in oncology when it comes to gene mutated cancer, primarily because of its prevalence – just shy of 50% of melanomas (melanomas are primarily skin cancers, but can also occur in the mouth, eye or intestine) harbor a BRAF mutation. Close to 25% of melanomas, however, harbor a NRAS mutation. There is rarely a crossover – i.e. a melanoma having both a BRAF and a NRAS mutation – but physicians estimate that 20% of BRAF mutations give up their mutation and take on an NRAS mutation at late stage cancer development. Anyway, back to the point. The letters here (NRAS, BRAF) simply refer to the gene that harbors the mutation. So, in the instance of this indication, the NRAS gene harbors a mutation which is vital to tumor cells being able to proliferate. You can think of it as that the tumor feeds on the mutation. Binimetinib is what’s called an MEK inhibitor. In our cells, we have something called the MAPK/ERK pathway, which is the string of proteins that allow signals to pass from the outside of a cell to the inside. One of the key elements of this pathway is the mitogen-activated protein kinase enzyme, MEK1, and to a smaller extent, MEK2. Binimetinib inhibits these enzymes, and in doing so, both stops cell proliferation (replication) and induces a type of programmed cell death called apoptosis.

The beauty of being able to inhibit MEK is that the pathway in which the enzyme plays a crucial role is not limited to melanoma. It plays a part in a wide range of cancerous cell proliferation, meaning binimetinib has the potential to treat an equally wide range of indications. Let’s not get ahead of ourselves though.

Sticking with melanoma, what data will form the basis of the company’s NDA? The primary endpoint was progression free survival when compared to dacarbazine, a commonly used single agent drug in melanoma, which Bayer AG (OTCMKTS:BAYRY) developed initially but that is now available generically. The drug hit statistical significance, with PFS coming in at 2.8 months for the Array treatment versus 1.5 months for the dacarbazine arm. We’ll get further insight over the next couple of months, but we know that the drug was well tolerated across the trial, so we expect the further data to relate purely to secondary endpoints – i.e. no big deal, just data that will support the approval if positive, but not negate the approval if negative.

So, let’s get to the numbers – what’s the market potential for the drug on approval? Every year, around 75,000 melanoma cases are diagnosed in the US. We’ve used the 25% NRAS mutation figure above, but let’s be conservative (estimates vary) and say 20% have an NRAS mutation. This puts us at circa 19,000 cases each year. The average cost of melanoma treatment is around $1,800 per patient, but we have a mitigating factor at play here – NRAS is primarily associated with poor prognosis (i.e. it is much more serious, and often later stage when diagnosed, than BRAF). As melanoma advances, average costs rise to $170,000, with the later stage costs often accounting for more than 90% of total treatment cost. It is not unreasonable to assume, therefore, that Array could put a conservative price tag of $100,000 on this treatment, if approved. This would give it potential revenues of $1.9 billion, based on the NRAS mutation figures. We mentioned earlier that Novartis funded development, but in a stroke of luck for array (and in a very unusual deal), Novartis paid Array $85 million to bow out of the agreement last year, returning global rights to the latter.

The takeaway? That Array could be sitting on a close to $2 billion blockbuster, having avoided the capital outlay to develop it to phase III. Dates to watch? NDA submission is expected during the first half of 2016, which would give us a PDUFA date somewhere in the first half of 2017.

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Atara’s Discontinuation Paints it as a Potential Short

By
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Atara

Before the markets opened on Monday, Atara Biotherapeutics, Inc. (NASDAQ:ATRA) announced its plans to discontinue the development of its lead candidate, PINTA 745. The drug was a phase II candidate with a target indication of protein energy wasting (“PEW”), a symptom associated with end stage renal disease (“ESRD”). On the news, the company lost more than 36% of its market capitalization, suggesting markets feel that the drug accounted for a large portion of its pipeline’s market capitalization. The question now is, can the company recover, or does the latest discontinuation present Atara as an intriguing short as we head in 2016? Let’s take a look.

First, let’s quickly address PINTA 745. The drug is what’s called a peptibody. It is a combination of a peptide and an antibody, and Atara hypothesized it could reverse the inflammation (and in turn muscle wasting) that comes about as a response to dialysis. As mentioned, the drug was in a phase II before Atara decided to halt development, with an endpoint of percent change from baseline in Lean Body Mass (“LBM”), as measured by what’s called DXA, 12 weeks into treatment. Needless to say, the drug missed the endpoint, as well as missing a number of secondary endpoints including controlling inflammation and improving physical function. In short, it didn’t work. On the bright side, the company has only spent $10 million from inception to discontinuation. When viewed against the backdrop of the company’s cash position – $334.3 million at last count – its not the deep financial setback that a similar discontinuation may be for a company in a more fragile financial position (something we often see at this stage of biotech dev).

Having said this, without a promising secondary candidate to direct its cash towards, there is little room for recovery from its current position. So, on this note, what has the company got up its sleeve?

Well, Atara’s development pipeline is split into two distinct categories – molecularly targeted and t-cell candidates. PINTA 745 is an example of the former, and its discontinuation, for now at least, puts an end to that side of its pipeline (the other candidate is STM 434, currently phase I, not expected to complete before the second half of next year). The real action is on the t-cell side, on which Atara has two candidates, each in phase II trials for two separate indications.

The first is EBV-CTL – a drug targeting Epstein-Barr Virus (“EBV”) malignancies. The two trials, NCT01498484 and NCT00002663 are investigating these malignancies in NHL patients and individuals with leukemia. Preclinical and phase I data shows promise, but the problem with this drug is it takes a long time to trial. The first trial kicked off in 2011, and is set to close in December next year. Assuming a phase III will require extended analysis (normally the case), we are looking at a 5-7 year trial time post phase II – meaning it could be 2023 before the company can file an NDA. The second trial is even more lengthy – it kicked off in March 1995, and should finish March 2016.

The second drug is CMV-CTL, with a target indication of cytomegalovirus infection. This one has a large patient population, if it can reach the commercialization phase of development. An estimated 50-60% of the US population come into contact with CMV at one point or another, and while symptoms are not all that serious in many cases, a large portion of sufferers seek treatment. Again, however, the problem here is time to market and, further, competition. In the two lead trials, completion dates are mid 2016 and early 2017 respectively. Add a five year trial time to end phase III, and assuming no complications, the best we can hope for is, again, a 2023 NDA submission. From a competition perspective, things look tough. Current SOC is marketed by Hoffmann–La Roche and Roche Holding AG (OTCMKTS:RHHBY). In order to gain approval, Atara will likely have to demonstrate stat-sig improvement over these two SOC therapies, and even if it does that, will then need to outdo the marketing efforts of two industry behemoths if it is to capture any sizeable portion of the market.

So what’s the takeaway? Well, the company has plenty of cash on hand – this gives it some breathing room. However, it is going to be at least 5 years before we see an NDA, and by that point Atara will need to raise funds for marketing. There is every chance its long tail pipeline could generate revenues for the company, but not before 2025, and investors in biotech are rarely that patient. As such, there is likely further downside in the company going forward, at least near term, as investors cut losses and pull out of their long exposures.

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Monday’s Movers and Shakers in Biotech

By
Roger Hannington
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biotech

As we head into a fresh week’s trading in the biotech sector, which companies are experiencing the most volatility and why? Let’s take a look.

ProQR Therapeutics N.V.

First up, ProQR Therapeutics N.V. (NASDAQ:PRQR). At the end of last week, this company traded for a little over $13 a share. At today’s open, you can pick up an exposure for just $7.40 – a 43% discount across a three day period. Why the decline? Well, ProQR’s lead candidate, QR-010, is currently in trials in both the US and Europe, with a cystic fibrosis indication. Data from both trials was scheduled for release before the end of the quarter, and until the end of last week, the company gave no indication that this was set to change. On November 23, however, and alongside the announcing of a $6.3 million net loss for Q3, ProQR stated that it was revising its topline expectations, putting the data back nearly a full year to Q3 2016. In the biotech space, a year isn’t necessarily that much – but considering the trial is just a phase 1, it doesn’t bode well for the drug. The reasoning behind the delay is a lower than expected enrollment rate. The company had hoped to pick up the pace of its enrollment during Q3, but (and as stated) due to a glut of CF trials currently ongoing, it has struggled to meet its own expectations. So what does this mean going forward? Well, the biotech sector is an impatient one, and delays like this, while not necessarily indicative of a drug’s efficacy, can negatively affect market sentiment. Sometimes, however, and due to this impatience, the markets can oversell and translate to opportunity. QR-010 performed well preclinically, and if the company can get its enrollment schedule back on track, the recent decline might quickly recover. We expect an update during Q1 2016, so keep an eye on ProQR’s releases as the new year rolls in to get an idea of the revised schedule and, in turn, the likelihood of said recovery.

Raptor Pharmaceuticals Corp

Next, Raptor Pharmaceuticals Corp. (NASDAQ:RPTP). We covered this one in a focus piece last week, so if you are one of our regular visitors you will already be aware of the company’s lead candidate, RP103. For those that aren’t, it’s a Huntington’s disease drug, with an MOA rooted in genetic engineering. Raptor reported 18-month data last year, which suggested statistical insignificance and – in turn – a discontinuation of its lead trial. However, the company gave us an update at the end of last month that suggested efficacy at 36 months, based on a continuation of the initial trial that saw a placebo group switch to live treatment. On Friday last week, Raptor reported further data from this trial, and revealed that RP103 had missed one of its primary endpoints, specifically an improvement from baseline in what’s called Total Motor Score (TMS), which is a sector-standard measurement in Huntington’s. Again, however, and to reiterate the opinion we presented on this company last week, there may be an opportunity here. The company took a close to 20% hit on the release of its latest data, but alongside the announcement, stated it intends to move the drug forward in development in both the UK and Europe. How is this possible? Well, the trial had two primary endpoints. One was the aforementioned TMS, the other was what’s called an independence scale – essentially a measurement of a patient’s ability to function independently. The independence scale measurement came in with a statistically significant improvement, and this will form the basis of discussions with the EMA and the FDA as far as initiating a pivotal trial in the respective regions is concerned. We expect both pivotals to kick off before the middle of next year at the latest, and if all goes well, we subsequently expect a recovery in the company’s market capitalization. Of course, taking a position at this stage is very risky. Raptor may be continuing the development of RP103, but we can’t forget that it has essentially failed a trial, and this paves an uncertain path going forward. For the risk tolerant, however, it might be one worth keeping an eye on.

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The Latest Raptor Announcement May Be More Positive Than Markets Think

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Raptor

Yesterday, Raptor Pharmaceuticals Corp. (NASDAQ:RPTP) announced it would be advancing its lead development candidate, RP103, into a pivotal trial designed to test the drug’s safety and efficacy in a Huntington’s disease indication. The company has already had some bad luck with the drug in another indication earlier this year, and in its earlier phase Huntington’s trial, RP103 missed its primary endpoint of statistical significance. Under normal circumstances, the failing of a primary in a phase II would put a stop to its development. In this instance, however, the company is forging ahead with the goal of the pivotal trial forming the basis of an NDA on completion. It is a risky strategy – pivotal trials can be expensive – but a look at the data supporting the move suggests there may be a high enough potential for reward to warrant the risk. Further, a look at the company’s current market capitalization suggests wider markets disagree with this thesis, and as such, there may be an opportunity for a contrarian entry in support of the company’s expectations. Here’s why.

First, let’s take a quick look at the drug and its target indication. Huntington’s is a genetic disorder that affects certain parts of a patient’s brain. We don’t really understand the exact mechanisms through which it inhibits brain function, but we know that what’s called an autosomal dominant (just means the first allele, non sex-related chromosome) mutation causes the hungtingtin (yes, this is spelled right) gene to create a faulty version of the huntingtin protein, which over time damages brain cells. This damage leads to initial loss or impairment of motor functions, and eventually, degradation of mental capacity and dementia. RP103 helps (theoretically) in a few primary ways. First, it inhibits pretoein aggregation, which should serve to reduce the pace of degradation. Second, it improves the level of transcription of heat shock proteins, which are the proteins responsible for the “clearing out” of unwanted proteins – in this instance the faulty huntingtin proteins. Finally, based on preclinical trials, the drug increases the production of what’s called brain derived neutrophic factor, or BDNF. BDNF supports growth and functionality of healthy brain cells.

So, what happened in the trials, and where does the doubt lie? Well, the initial trial ran for 18 months, with a primary endpoint of change from the baseline of the Total Motor Score, or TMS. At 18 months, RP103 treated patients showed a change from base of 4.51, while placebo showed 6.68. This is clinically relevant, but not statistically significant, and so the trial missed its endpoint. Fast forward 18 months, and the company reported the 36-month data. At this point, all trial participants were in the RP103 arm, with placebo patients converted to RP103 treatment at the 18-month mark. This is where things get interesting. At 36 months, data shows that patients treated for the full 36 months showed a 25% slower disease progression than those with the delayed start. In a completers analysis, the data was even better, showing a 35% slower rate of decline as measured by TMS.

What’s the point here? Well, it demonstrates that long term, RP103 is effective in slowing the rate of decline. It may not have been stat-sig at 18 months, but maintaining therapy improves the numbers, and the 36-month data supports this hypothesis. In an indication where very little treatment options exist, this is exactly the type of data the FDA looks for when considering approval. One thing to note is that, at 18 months, there had been a few adverse events, including a suicide. At 36 months, there have been 3 suicides. This, however, is nothing to be alarmed about. 25% of Huntington’s sufferers attempt suicide at least once, and the condition accounts for up to 7% of all suicides in the US. In other words, the suicide AEs fall in line with the wider population rate. Additionally, in a number of other RP103 trials (in other indications) there have been no suicides.

So there we go. We’ve got a company with a lead candidate that missed an endpoint, but has demonstrated clinical relevance in a severe and debilitating condition. Further, we know that over time, efficacy improves, and that the drug is (when taken in context) safe. Raptor is down more than 65% on 2015 highs, and is a company well worth a risk tolerant investor’s consideration as a potential small scale allocation.

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Two Approvals Mark a Busy Week at the FDA

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FDA

The FDA has been busy this week, approving both Vonvendi, Baxalta Incorporated’s (NYSE:BXLT) Von Willerbrand disease treatment, and Bendeka, Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) and Eagle Pharmaceuticals, Inc’s (NASDAQ:EGRX) oncology drug. Both approvals initiated some upside in the companies involved, so let’s take a look at the drugs in question in an attempt to put a dollar value on their impact on revenues.

First then, let’s look at Vonvendi. As mentioned, the FDA approved the drug for a Von Willerbrand disease indication, which makes it the first recombinant (just means produced through genetic engineering) treatment for the disease. VW is a condition that causes insufficient blood clotting, which in turn causes abnormal bleeding in a patient. It comes about as a result of a patient having a deficient (or not having at all) something called the Von Willebrand factor (vWF), which is a protein vital to the platelet adhesion process (this process is at the root of the blood clotting process). It’s a pretty common condition, affecting up to 1 in 100 people in the US, but severity ranges pretty widely, so Vonvendi won’t go out to a large portion of the potential patient population; of course, however, it still has a pretty big market. The science behind this one is pretty complicated – gene therapies normally are – but in a nutshell, the treatment is a mix of proteins that aid the clotting process. As such, it is an on demand treatment, rather than an ongoing therapy, designed to treat specific and real time episodes of heavy bleeding.

So what’s the potential for the drug from a financial perspective? Well, with an indication like VWD, its all about education. Globally, there are only 16,000 (approx.) individuals currently receiving therapy for the condition. For a disease that has an incidence rate of 1 in 100, a figure as low as 16,000 suggests a massive under-diagnosis. As a result, Baxalta is embarking on a mission to educate physicians and patients, before it fully commits to a launch. With this strategy, the company expects a slow start, with forecasts of $15 million revenues in 2016 and $30 million in 2017. However, once the company is able to market the drug to the total population (currently it is just 18 and over, and a large portion of sufferers are children) analysts forecast peak sales of $400 million.

So, moving on, let’s look at our second approval – Bendeka. This one came about as a result of a colab deal inked back in February between generics king Teva and Eagle Pharma. The deal saw Teva take over commercialization responsibility, while Eagle developed the drug to approval, with the former paying the latter a $30 million upfront fee and earmarking $90 as milestones – the vast majority for which Eagle has now presumably become eligible. The FDA approved the drug in two oncology indications – chronic lymphocytic leukemia (CLL) and B-cell non-Hodgkin lymphoma (NHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. The drug is a rapid infusion reformulation of a drug already approved in the cancer space, bendamustine (rapid infusion just refers to a one-off, IV administration that usually takes about 10-15 minutes). It is what’s called a nitrogen mustard – the same compound found in mustard gas – and targets tumor cells with the goal of inducing apoptosis.

From a financial perspective, once again, this one is not so straightforward. The current formulation of bendamustine is a Teva product, so the new formulation is effectively competing with Teva’s already commercialized product. Having said this, with the rapid infusion, it is likely Teva will convert all of its bendamustine indications (the drug is used across a range of cancers outside of CLL and NHL) to the new formulation. With the current indications, analysts forecast revenues of circa $750 million in the US. An undisclosed portion of net sales will go to Eagle, but even with the royalty payments, if Teva can expand the approval base beyond the US (these cancers both have a higher incidence rate in Europe than they do in the US) the company could easily be looking at a $1 billion blockbuster with this approval.

At time of writing, a few hours before the Thursday opening bell, Eagle is trading at a 5% loss across Wednesday’s session, Teva is up 1.2% pre market and Baxalta is up 0.6% on yesterday’s open.

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Movers and Shakers: The Week so Far

By
Roger Hannington
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bluebird

The biotech space rarely fails to disappoint from a volatility perspective, and this week has been no different. Here are a couple of the week’s biggest movers – bluebird and Global Blood Therapeutics – with a look at what’s driving the action in each.

Global Blood Therapeutics, Inc. (NASDAQ:GBT)

First up, Global Blood Therapeutics. The company is developing GBT440, its lead pipeline candidate for sickle cell anemia (SCA). SCA is a genetic disorder that results in the production of what are called HbS, or sickle hemoglobin. Hemoglobin is essential for carrying oxygen in the blood stream, but HbS, when deoxygenated (i.e. has no oxygen molecules attached) can “sickle”, which basically means they become rigid and change shape. GBT440 is designed to help hemoglobin maintain its oxygenated state, meaning it (theoretically) should prevent sickling.

The drug is in an ongoing phase I/II, and Global reported data from this trial late Sunday evening, followed by a presentation American Society of Hematology (ASH) Annual Meeting and Exposition yesterday morning. On the face of things, the data looked positive. Primary end point is a reduction in median sickle count, and across two doses (500 mg and 700 mg) median sickle count decreased. Despite this, however, GBT is down 25% pre session today.

So why the decline? Well, its all about variability. There lower dose caused a higher reduction in sickle count than the higher dose (56% versus 46%), and the reduction is not as high as we saw in the initial phase I. Markets seem concerned that this variability suggests unreliability. One think to keep in mind here, however, is that the trial is only very small (12 patients). The first trial was half the size. With such small sample sizes, there is always going to be inconsistency of results. Just because the two doses performed inverse to expectation at this trial size doesn’t mean we wont get some a more as-expected performance in a larger trial. Additionally, the data only represents results 30 days into treatment. The trial is expected to go on far longer than this, and this could also smoothen out the data. If either of these scenarios come in to play, the current decline could be an oversell and, in turn, an opportunity for discount.

bluebird bio, Inc. (NASDAQ:BLUE)

Staying in very much the same arena, we move on to bluebird. The company also presented data from its lead blood disease candidate at the same conference as GBT. This time, however, things were a lot more straightforward. The drug in question is LentiGlobin BB305 – a lentiviral vector with an initial target indication of beta thalassemia. This disease is similar to SCD, in that it impacts the ability of hemoglobin to transport oxygen to vital organs around the body.

The company closed out last week at a little over $83 a share, having traded pretty much flat for the last few months. At Monday’s close, however, you could pick up stock for just $52 a share – a close to 40% decline across the session. Why? Because bluebird reported it is being forced to redesign the ongoing BB305 trial, as the drug is not performing as expected. Specifically, it is not having the desired effect in severe form patients, and is producing a different response from one patient to the other in less severe form patients. We are yet to learn exactly how the company plans to alter the trial to accommodate this scenario, but regardless of its actions, a reshuffle will lead to delays at best, failure at worst.

bluebird had a great start to the year, primarily based on expectations of BB305 hitting markets at blockbuster pace. Now, however, it looks as though the drug has a limited market potential (if it can only treat non severe cases) and may not even make it to market at all if the company cannot demonstrate consistent efficacy across a decent size patient population.

While the decline in GBT looks to be a potential discount opportunity, the decline in bluebird could easily continue as we head into the middle of the week. Look for more info on the redesigned trial as a potential reversal catalyst, but don’t expect too much upside even on the reshuffle.

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Novartis Reaffirms its CAR T Dominance

By
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Novartis

The CAR T-cell space is one of the hottest spaces in biotech, and probably the most important space in oncology, at present. A number of companies, including Juno Therapeutics Inc. (NASDAQ:JUNO), Cellectis S.A. (NASDAQ:CLLS) and Celgene Corporation (NASDAQ:CELG) are pushing candidates through the clinical development process, but none is as advanced as Novartis AG’s (NYSE:NVS) lead CAR T offering – CTL019. The company just released an update on a ongoing phase II, investigating the efficacy of the drug in a non-Hodgkin’s lymphoma indication. So, what did the update reveal, and has Novartis managed to maintain its advantage in the space? Let’s take a look.

First then. Let’s run through the science. CAR T stands for chimeric antigen receptor T-cells. T cells are a type of white blood calls that differentiate from other types of white blood cells by expressing receptors on their surface. These receptors are responsible for recognizing antigens (on the surface of infector cells) and signaling an immune response that kills the cells. In CAR T therapy, physicians extract T cells from a patient and use a viral vector (just a biological delivery method) to introduce CAR DNA. This primes the cell for attack by “training” them to recognize tumor cells, and in doing so, is theoretically a highly selective, targeted method of killing cancer cells.

So what did the latest Novartis issue tell us about the potential future of this therapy? Well, primarily, they look to reinforce its potential. The trial is pretty small, with just 26 patients tested (15 diffuse large B-cell lymphoma (DLBCL), and 11 follicular lymphoma patients) but should easily be enough to carry forward to phase III if the company can demonstrate efficacy. Of the DLBCL patients trialled, 47% saw a reduction in cancer across a three-month period, while of the follicular subgroup, 73% saw a reduction. Non Hodgkin’s is notoriously difficult to treat, and the Novartis trial is investigating efficacy in patients that have not responded to other treatments. This sets the bar pretty low for meeting the endpoint of the trial – overall response at a statistically significant level.

So with the latest update, what can we expect from Novartis going forward? Further, is this a good time to pick up an exposure to the CAR T space? Well, the data keeps the company on track for a 2017 commercialization target – a target that relies on an NDA submission earlier in the same year. The company has suggested a list price of up to $450,000 per treatment, justifying the high price through by highlighting the first-to-market element of its campaign. DLBCL, which will be the target indication on approval, causes more than 10,000 deaths each year, and about 25,000 new cases arise in the US annually. If Novartis can capture just 20% of the new diagnosis market, CTL019 would be generating $2.2 billion at its suggested list price. Further, the competing therapies (those being trialed by the aforementioned Juno, Cellectis and Celgene) aren’t set to hit markets before 2020, meaning Novartis could enjoy three years plus of exclusivity in the space. With an effective commercialization strategy in DLBCL, and an expansive strategy in the clinic that sees CTL019 target further oncological indications, the drug could easily generate $5billion plus revenues. Novartis generates circa $50 billion revenues annually, but has a bunch of drug with patent expiries coming up over the next few years, so at these levels CTL019 is going to be a big revenues driver for the company going forward if approved.

Finally, lets talk about milestones. The closing of the current trial is an obvious near term catalyst. We can expect results early next year, and from these results, we can infer the likelihood of approval. The latest results mirror those reported at the end the phase I for the same indication, so we should expect a similar mirroring to be enough to form the basis of an NDA (assuming an expedited development process). After that, an NDA acceptance and the accompanying setting of a PDUFA date will translate to strength. For those looking for some collateral exposure, and in turn, some diversification to CAR T as a whole, each of these events will likely also boost the market capitalizations of Juno and Celgene.

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