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What’s The Market Potential Of Takeda’s Latest Approval?

By
Jennifer Aldershot
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Takeda

At the end of last week, the FDA announced its approval of multiple myeloma drug Ixazomib. The drug, marketed as Ninlaro by Takeda Pharmaceutical Company Limited (OTCMKTS:TKPYY), is the latest in a wave of quick FDA approvals in a cancer indication, and could be a real blockbuster for Takeda if the company executes an effective marketing strategy. There is a misconception in biotech that the only way to draw benefit from the drug development process is to get in ahead of an FDA decision. While there is merit in this approach, for a company like Takeda, which already has numerous marketed products, picking up an exposure post approval ahead of commercialization can offer just as much upside potential. With this in mind, here’s a look at the science behind the drug in question, alongside an analysis of its market potential assuming a well strategized marketing approach.

So, the science. Multiple myeloma is a type of blood cancer that affects white blood cells – specifically a type of white blood cell called plasma cells. In a healthy system, plasma cells produce the antibodies that protect us as part of our immune system. In multiple myeloma, these plasma cells become cancerous, and their ability to produce antibodies compromised. In all eukaryotic cells (eukaryotic cells have membranes and contain organelles, as opposed to bacterial cells which are prokaryotic) there are protein structures called proteasomes. These proteasomes perform a range of different tasks, bit their primary function is the regulation of the cell life cycle – i.e. replication, proliferation and – eventually, apoptosis. Ninlaro is a proteasome inhibitor; it selectively inhibits the ability of a proteasome called proteasome subunit beta type-5 (PSMB5). It stops this proteasome from producing certain enzymes that aid cell growth and replication, and in doing so, reduces the proliferation of multiple myeloma cells. This reduction stops the build up of cancerous cells in bone marrow, and in turn, reduces the side effects associated with the disease.

In the phase III that formed the basis of the NDA for which Ninlaro received approval, Takeda demonstrated a prolonged survival rate in patients taking Ninlaro in combination with lenalidomide and dexamethasone (two current SOC cancer treatments) than patients receiving placebo and one of the two aforementioned combos. The figures came in at 20.6 months for the former, versus 14.7 for the latter.

So what’s the market potential for the drug? Well, the FDA has given the green light for administration in patients who have received at least one other type of therapy. More than 11,000 people die in the US of multiple myeloma each year, and it is reasonable to assume that each of these has received treatment and – in turn – would be eligible for Ninlaro administration. Official pricing hasn’t been reported yet, but w can assume it will be in the same ballpark as Takeda’s other blood cancer drug, bortezomib. Bortezomib comes in at between $4,000 and $8,000 a month. Using the low end and averaging out across a full year, this comes in at just shy of $50,000 annually per patient. At $50,000 a year, across 11,000 patients, we get a very conservative estimate of $550 million revenue potential annually. An optimistic forecast could easily put these numbers in the $1 billion range. Takeda generates circa $16 billion a year, meaning Ninlaro (assuming the company can successfully commercialize the drug) will account for between 3-6% of the company’s annual revenues.

So what are we looking for going forward? Well, wed love to see Takeda report some insight into its saturation expectations, as well as a price point. If the company prices Ninlaro competitively (at the low end of the bortezomib range), physicians will likely be eager to administer it as part of a standard response to inefficacy of a previous treatment, and it is this kind of willingness to administer as standard that drives a drug’s success. Keep an eye on updates from Takeda, and look to Q1 2016 financials to get an idea of Ninlaro’s impact on the company’s bottom line.

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Protalex Could Be an Early Stage Buyout Target come February

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Protalex

In the rheumatoid arthritis (RA) treatment space, Humira is king. The drug generated $11 billion revenues for AbbVie Inc. (ABBV) during 2014, accounting for more than 60% of the company’s total revenues and forecast to generate between $13 billion and $18 billion by 2020. The drug is a TNF inhibitor – it binds to tumor necrosis factor-alpha (TNFα), stopping the TNFα from binding to TNFα receptors – the process that initiates the inflammatory immune response and causes RA.

Humira, however, is not the first line treatment for RA, despite its lead in revenues. First line is a drug called methotrexate. Methotrexate is a systemic treatment, which means it targets the entire immune system, whereas Humira targets a specific element of the immune system. When taken alone, Humira has no real benefit over methotrexate, and methotrexate has a huge price benefit – coming in at $13-$85 a month versus Humira’s $1662 price tag. When taken in combination, however, the two drugs become far more effective than as single entities. This is what makes Humira a bestseller.

Abbvie’s forecasts for Humira notwithstanding, the drug’s patent expires at the end of 2016. This will open it up to generic, biosimilar competition. As illustrated by a number of recent buyouts and collaboration agreements, Big Pharma is scrambling to enter the space with an alternative.

On October 9 Roche Holding AG (RHHBY) bought Adheron Therapeutics in a deal potentially worth $508 million. The buyout sees Roche acquire Adheron’s lead candidate SDP051, a biologic that serves as an antibody to Cadherin 11, which is a protein that plays a part in initiating the immune response that leads to RA.

Just last week, Five Prime Therapeutics, Inc. (FPRX) got HSR clearance for a $350 million upfront collaboration with Bristol-Myers Squibb Company (BMY); a collaboration that will see the co-development of Five Prime’s lead RA candidate, FPA008. FPA008 inhibits the stimulation of macrophages that produce interleukin-6 (IL6) – a protein that attracts and activates inflammatory cells in RA sufferers.

Both of these candidates are yet to reach phase II, meaning Roche and BMS are willing to bet big on very early stage alternatives to Humira; alternatives that target a specific element of the immune system mechanics of RA (more specifically a step in the inflammation process), but a different element to that of Abbvie’s blockbuster.

Abbvie targets TNFα. Roche is targeting Cadherin 11. BMS is targeting IL6. Markets are on the lookout for the next big deal in the space, and there are several companies with early stage candidates that, just like FPA008 and SDP501, target a different element of the inflammatory process that leads to RA. One especially promising is a drug in development called PRTX-100.

PRTX-100 is the lead candidate of Protalex Inc. (PRTX), a development stage biotech based in New Jersey. The drug has completed two phase I trials to date, one in South Africa that concluded in 2013, and one in the US that concluded at the end of last year. The science behind PRTX-100 is as follows. There are two kinds of macrophages active in the immune system. One is inflammatory, the other anti-inflammatory. Protalex is attempting to stimulate macrophages in the immune system that are anti-inflammatory, meaning they counter the effect of macrophages that are inflammatory.

The mechanism of action is rooted in a protein called Staphylococcal Protein A (SpA), of which PRTX-100 is a highly purified formulation. It is composed of five “binding domains”, each of which bind to an associated element of an antibody called IgG. Nobody really knows exactly why, but when you introduce SpA to human serum that contains excess IgG, the two bind to form a small complex. This newly formed complex induces what the company refers to as regulatory anti-inflammatory macrophages.

Rheumatoid arthritis occurs when the immune system induces an inflammatory response in joint tissue, which leads to inflamed and painful joints. By mitigating this inflammation with the SpA/IgG complex induced anti-inflammatory macrophages, Protalex believes it can use PRTX-100 to treat the disease.

Do the already completed trials support this hypothesis? So far, yes. RA response to treatment is measured using what’s called the American College of Rheumatology Response [ACR] rate. The standard response is ACR20, which is defined as a 20% improvement in both the tender joint count and the swollen joint count in a patient. ACR50 and ACR70 are self explanatory – a 50% and 70% reduction in the same.

In a phase Ib with primary endpoints of ACR20, ACR50 and ACR70, 31% of 29 patients had an ACR20 at day 29 versus 12.5% of a placebo arm, 32.1% had an ACR50 at day 57 versus 12.5% on the placebo arm, and 10.7% had an ACR70 at day 57 versus 0% in the placebo arm. A phase 1a demonstrated concurrently that PRTX-100 is safe and tolerable, with the vast majority of adverse events being grade 1 and 2, with two grade 3 AEs presenting themselves – one unrelated influenza and one related arthritis worsening.

So what is the market potential if Protalex can get the drug through to commercialization? At this stage, it’s impossible to put a precise number on it, primarily because there are a number of biologics currently available, and we’d need a better idea of the drug’s efficacy and safety profile to see where it would fit into the current landscape in terms of physicians and patients weighing up clinical benefit versus side effects. There is one element of PRTX-100 that we can consider, however, in an early attempt to gauge market potential.

Specifically, it will likely cost far less than its competitors. Because it is a purified protein formulation produced by bacteria, PRTX-100 can be produced by bacterial cell culture. In contrast, drugs like Humira are created using genetic recombination – a process that involves the bringing together of genetic material from various sources. This is much more expensive, hence the higher cost. The difference in production cost should translate to a cheaper end product and in turn, should make PRTX-100 more attractive to patients and insurers – assuming comparable efficacy and safety profiles.

According to an analysis report conducted back in 2013, the market potential for PRTX varies from a low end of $300 million to an upper limit of $4 billion. This is obviously quite a disparity, but as data from forward trials comes in, we should be able to use it to further pinpoint PRTX-100’s position in the space, and in turn, narrow the potential revenues window.

On that note, what are we looking at from a time to market perspective, and what milestones should we be on the lookout for as potential upside catalysts for Protalex? The company is currently undertaking a continuation trial from its phase 1b, evaluating the continued response rate of twelve of the patients that took part in the study we have already discussed. This is a six-month phase I/II study, and was announced in March, with a primary completion date of February 2016 – enrollment is ongoing. Data from this trial should offer insight into the extended response rate as well as continued safety and tolerability – primary endpoint is safety and the secondary endpoint is ACR28 – so expect some upside momentum if the trial can replicate, or improve upon, the results demonstrated in the phase Ib.

Beyond that, the company expects to initiate a phase II in the RA indication during the first half of 2016. Again, this could be an upside catalyst, especially against the backdrop of positive phase I/II data in February. If phase II completes successfully, Protalex has a scheduled start date for a phase III of early 2017, meaning time to market assuming everything runs smoothly is circa three years, somewhere around late 2018, early 2019.

The next question is, has the company got enough money to take PRTX-100 through to phase II completion? The answer is, probably not, at least as it stands now. The company isn’t generating any revenues, and is running at an operational loss of $3.5 million based on Q3 2015. Further, it has debt of around $12 million, and less than $1 million cash on hand. Protalex agreed on a $5 million credit facility at the end of last year, but reported in June that as of May 31, it had used $3.3 million of that facility, meaning it has likely burnt out by now.

Inevitably, then, Protalex must undergo some sort of financing to carry it forward. This may be as part of a share issue, which may dilute early stage holdings, or a collaboration agreement such as those we mentioned in the introduction to this piece. The latter, of course, would likely be the more attractive option for Protalex and its investors. Big pharma looks willing to bring triple digit millions of dollars to the table for early stage alternative approach biologics for RA indications – and PRTX is one such alternative approach.

Which brings us to our closing remarks. At a glance, Protalex is a risky allocation. It has a very thin balance sheet, and is moving into the second and third phases of clinical development, both of which are notoriously drawn out and costly. However, and as illustrated by a number of recent deals, it is part of a subsector of potential Humira competitors that is attractive to some of the large players in the space at present. Its candidate has demonstrated efficacy in a RA indication in phase I, just as has those of Adheron and Five Prime, and the company will be actively seeking collaboration given its current financial standing.

As a standalone investment, Protalex looks to be too risky. But the chances of an early stage Big Pharma buyout, especially if the phase 2 extended results come February are a success, cannot be ignored. Whether Big Pharma takes notice remains to be seen, but we’ll have a better idea come February. We do know big players have one eye on the space, and Protalex looks to tick the boxes required to draw their attention.

The way the deal Roche/Adheron deal was structured made most of the cash contingent on milestones. This is how most early stage acquisition deals are structured, saving the bigger company the risk if the drug fails later trials – they don’t have to pay the milestone payments obviously. If PRTX-100 gains the attention of Big Pharma come February, we can expect a similar style deal, one contingent on milestones. If, however, serious side effects are discovered among long term patients, it could be devastating for Protalex, and investors should keep this in mind despite promising data to date.

Protalex is a $136M company right now, and an early buyout on the level of Adheron could potentially quintuple that. Watch out for the coming phase 2 results come February. If they are positive and PRTX-100 shows no side effects and significant efficacy, I’d say that an early stage acquisition is even likely, given Humira’s coming patent expiration leaving the RA market more open than it’s been in years.

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Today’s Movers and Shakers in Biotech

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valeant

Yet again the biotech sector has given us plenty to talk about, with a number of companies logging double digit shifts in market capitalization over the last 24 hours. Here are two of the biggest movers as we head into the end of the week.

Valeant Pharmaceuticals International, Inc. (NYSE:VRX)

Valeant has had a tough few months. Having maxed out at all time highs of $262 a share back in August, the company declined more than 73% to close out last week at just $70. Why the decline? Well, research organization and short side specialist Citron issued a report last month suggesting Valeant had falsified some of its financials. Essentially, Citron suggested that Valeant had recorded products transferred internally as sales, and that the company’s revenues, as a result, were inflated. Additionally, reports that Valeant had recorded stock held in Eastern Europe as goods sold exacerbated the situation. On Thursday, however, Citigroup released a report stating that the market response to the allegations was over zealous, and that we should remember that Valeant is a cash rich, fundamentally sound company. Additionally, Valeant responded to the allegations on both counts, denouncing their validity in a manner that looks to put the issues to bed.

On the back of the Citigroup recommendation, Valeant stock closed out Thursday’s session at just shy of $85 a share, a 20% gain on lows, and is already up 3% at time of writing, mid session Friday. Whether the gains will continue into the week’s close remains to be seen, but what looks probable is that this marks the beginning of a longer term turnaround for the company. As Citigroup stated, it seems markets are done pricing in any uncertainty, and at less that $30 billion market cap, Valeant looks to be an intriguing, oversold company available at a discount to its peers.

KaloBios Pharmaceuticals, Inc. (NASDAQ:KBIO)

Next up, KaloBios. This is something of a controversial one. Most reading this will be familiar with Turing CEO Martin Shkreli – he’s the guy that overnight became the face of the biotech pricing scandal. Enough about that, however – we’ll let mainstream media debate the virtues of that particular situation. Now Shkreli and a couple of other investors have bought a controlling share in KaloBios, just as the company was unwinding into administration. On the news, its stock gained close to 800%, and is up nearly 20%at time of writing. It’s still a small company, valued at circa $80 million at current rates, but it has a couple of what look like promising oncology candidates in early stage development, and this (Shkreli claims) served as motive for the buyout. This claim could, of course, be a rouse to mask ulterior motive. There has been speculation that Shkreli has bought KaloBios to offer a vehicle through which he can take his other company, Turing, public via reverse merger. Such a move would greatly reduce the time it takes to go public, and would negate the usual scrutiny associated with an IPO. Reverse mergers in biotech are often viewed as suspicious, for the latter of the two aforementioned reasons, but this doesn’t necessarily mean they are. If Shkreli is using KaloBios as a reverse merger vehicle, it may just be to gain access to the financing option being listed on a public market brings, sooner than an IPO would afford. Regardless of motive, the company has rocketed, and looks set to gain further strength as we head into the weekend. A short squeeze? Yes. Large numbers of traders will have undoubtedly been short KaloBios pre-buyout, and we are already hearing stories from the unfortunate sell-siders. One in particular stands out, which you can see here.

We’ll be watching KaloBios closely going forward. We’d love to see Shkreli carry its pipeline into continued development – irrespective of motive. One to keep an eye on.

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This Company Could Be The Next Big Autoimmune Buyout Target

By
Roger Hannington
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autoimmune

Vitae Pharmaceuticals, Inc. (NASDAQ:VTAE) just released topline data from the first part of its phase I clinical trial of VTP-43742 – an autoimmune therapy with an initial target indication of psoriasis. Autoimmune therapy is a real hot topic at the moment, and after a string of recent collaborations and buyouts from big pharma, early stage success has the potential to draw big name attention. While the recent data is only dose escalation, it paves the way for the second part of the trial – an efficacy endpoint in its lead indication. Ahead of the commencement of part two, let’s take a look at Vitae’s candidate and see where it fits into the AI therapy landscape.

VTP-43742 is a biologic that works to inhibit what are called T helper 17 (Th17) cells. Th17 cells mediate a select number of cytokines called interleukins – specifically IL17A, IL17F, IL21 and IL22. All of these interleukins are responsible for a particular element of the human immune systems effect on cells – inflammation, for example, or in the case of psoriasis, excessive cell proliferation. VTP-43742 (hypothetically) stops, or at least reduces the rate of, interleukin production. In doing so, Vitae believes it can be an effective treatment across a range of autoimmune disorders. For those interested in this sort of therapy (as we’ve said, its hot right now) take a look at Roche Holding AG (OTCMKTS:RHHBY) new candidate (picked up as part of the $580 million Adheron deal) – SDP051.

In its latest announcement, Vitae reported that across a patient sample of 40 volunteers, its candidate demonstrated safety and tolerability across all dose levels, with all patients completing the full ten-day dosing schedule without adverse events. Its worth mentioning here that these are healthy volunteers – not psoriasis sufferers – but 40 is a relatively large sample size at this stage of development, so the chances of something revealing itself in psoriasis sufferers that doesn’t crop up across 40 healthy volunteers are minimal.

Perhaps more interestingly, the company conducted some ex-vivo tests to try and pick up a proof of concept. Ex vivo basically involves taking a blood sample from a patient, introducing the treatment to the sample, and recording the response. Vitae was looking for reduced IL17A levels, as this would suggest that its candidate is successfully inhibiting the production of this interleukin. Ex vivo, the company saw a 90% suppression for 24 hours post dosing, across all doses except the lowest. That the suppression didn’t show up in the lowest dose isn’t necessarily a bad thing – it demonstrates dose dependence, something that can be a great leading indicator of efficacy.

So what’s next? Well, as mentioned, this is the first part of the trial. We’ve got an ex vivo proof of concept, but in order to carry the treatment through to phase II, Vitae will need an in vivo POC. This is where part two comes in. The company is kicking off a POC phase I continuation in psoriasis sufferers, and expects top line during the first quarter of next year. If we get a replication of ex vivo in vivo, topline release could be a real upside catalyst for Vitae’s market cap.

The company has had a pretty tough year. VTP-43742 is its secondary pipeline candidate; VTP-34072, a biologic in colab development with Boehringer Ingelheim is its primary. However, in a phase II that completed earlier this year, the drug missed its primary endpoint in a diabetes indication. It remains to be seen whether the psoriasis indication can reverse Vitae’s fortunes, but if we get POC early next year, we should definitely see some strength – purely based on the market potential that would come with commercialization. Psoriasis affects close to 8 million individuals in the US alone, and a biologic such as this would qualify (assuming efficacy and safety can be proven) for both single and combination administration. Looking at the other side of the coin, cost could come into play on approval. Biologics such as these (i.e. those that target select immuno-functions) are expensive to produce. Current therapies such as corticosteroids are far cheaper – meaning we will need to see a considerable efficacy advantage over the currently available treatments to warrant the high price that will inevitably filter through to end users. The takeaway? That autoimmune buyouts are closing left and right, and the vast majority seem to be on the back of phase I data. With top line from its psoriasis trial due early next year, Vitae is definitely one to watch as we head into 2016.

 

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This Company Could Be About To Disrupt A Million Patient Market

By
Jennifer Aldershot
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Arrowhead

This week, Arrowhead Research Corp. (NASDAQ:ARWR) reported data from a phase IIa clinical trial for its lead pipeline candidate ARC-520 in a hepatitis B indication. The company picked up a bit of strength on the announcement, but has since discounted to trade low single digit percentage points below its last Friday close. The data demonstrated efficacy, and so a decline seems counterintuitive. Is this, then, an opportunity to grab an exposure at a discount, or have markets picked up on a counterweight to the expected upside? To try and answer, let’s take a look at the science behind ARC-520, and decipher the trial results and their implications. Here goes.

So, the science. To understand how ARC-520 works, we’ve first got to look at how hep B is treated currently. Basically, there are two types of treatment – interferons and nucleotide analogues (NUCs). The former are naturally occurring signaling proteins that tell cells that surround virally infected cells to heighten their anti viral response. These can be effective therapies, but have some pretty bad side effects. The more commonly used therapies are NUCs, which attack virally infected cells by breaking down reproduced cells. This reduces replication and inhibits or slows increased levels of infection, but isn’t really an effective cure. ARC-520 is what’s called a simple interfering RNA (siRNA). It attacks hepatocytes (just another word for the cells that make up liver tissue) at the mRNA level. mRNA is the stuff responsible for the translation process in cells, which to simplify considerably, is the process through which amino acids that perform cell functions are created. By interfering with the mRNA, translation doesn’t happen and the virally infected hepatocyte breaks down, rather than replicate. In other words, ARC-520 attacks the core process through which a cell creates its own functionality; in doing so it can hypothetically be an effective cure for hep B.

Did the trial results support this hypothesis? In a word, yes. When a physician diagnoses hep B, he or she takes a blood test and looks for what’s called HBV surface antigens. These are expressed on the surface of infected cells, and are a sign that a patient is infected. In its trial, Arrowhead measured the reduction of these antigens as a primary endpoint. At 57 days’ post treatment, the drug presented a 99% maximum reduction in HBV surface antigens and a mean reduction (across 58 patients) of 96.8%. On top of this, Arrowhead reported safety and tolerability, reporting no serious adverse events, no discontinuations, and modest occurrence rate of 23%.

So why the decline? Well, it looks as though the decline has come from a couple of recent sell ratings issued by other publications.  Mainstream publications will often induce near term volatility as they affect public sentiment, and without any real adverse events, its looks as though that’s what has happened here. The next question, why the sell ratings? They look to be based on weak earnings and revenue growth. In development stage biotech, however, especially at this stage of development, financials can be misleading. It costs a lot to bring a drug through the FDA trial process, and small caps generally run at a loss and debt finance through share issue to fund trials. As such, judging a company like this on its trailing revenues can give an inaccurate representation of its potential future financial position. Of course, this is the risk we take when investing in biotech. Many companies like Arrowhead fail because they debt finance and don’t achieve approval for their pipeline.

So what’s the verdict and takeaway on this one? Well, first up, we’ll say Arrowhead is a risky allocation. The company is relying on two early stage candidates to justify its market cap (currently circa $330 million), and has only demonstrated efficacy across a small patient sample. Up to 1 million people die each year in the US from hep B (it is the leading cause of liver cancer by a long, long way, and such proliferation will certainly translate to the FDA requiring a far bigger trial before it thinks about accepting an NDA. However, risk aside, there is also potential. ARC-520 has performed well in an albeit small trial, and as we just said, there is a potentially huge market for the therapy if it can replicate this performance going forward. A discounted exposure at current rates? Perhaps.

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Tuesday’s Biggest Movers in Biotech

By
Jennifer Aldershot
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biotechnology

Yet again we’ve seen some considerable volatility across certain areas of the biotech space this week. Here’s a look at the movers and shakers so far, alongside a discussion if what’s driving the action.

Biotech 1: Clovis Oncology, Inc. (NASDAQ:CLVS)

This is the big biotech news of the week. Clovis just announced an FDA request for more data on the efficacy of one of its lead pipeline candidates, CO-1686, or rociletinib. This is a common occurrence, and Clovis has announced that it has the data prepared, so it wont need to initiate any further trials and add cost to the development total. So why is it an issue? Well, because the data the company has prepared reveals a drop in efficacy of nearly 20 base percentage points from the initial data submitted as part of the drug’s NDA. The difference is rooted in the disparity between confirmed and unconfirmed response rates. Anything interim, i.e. recorded before the trial evaluation period completes, is classed as unconfirmed. Many companies will submit an NDA based on unconfirmed responses, especially in indications granted priority review, as Clovis did with rociletinib. However, the request by the FDA suggests it is not willing to approve the drug based on unconfirmed data alone. At US open on Tuesday, Clovis is down more than 70% on its market capitalization last week, having lost nearly $2.8 billion on the news.

So what’s next? Is this an opportunity to pick up an exposure at a discount? Well, probably not. Not only has the confirmed data slashed the efficacy rate of a drug that just last week looked like a great candidate for approval early next year, it has also made it inferior to a direct competitor – AstraZeneca PLC (NYSE:AZN) – who’s drug got a surprise FDA approval just a few days ago. This could play into the FDA’s opinion as it considers whether or not to approve rociletinib. If there is already a comparable therapy approved, for an identical indication, with superior efficacy, why approve Clovis’s candidate? There are arguments against this suggestion, including the FDA’s desire to introduce competing therapies to market to encourage lower prices, but it all builds onto the newly introduced uncertainty as to rociletinib’s future. Expect further downside as we head into the middle of this week – this situation is unlikely to blow over for Clovis any time soon. We’ve already gotten word of lawsuits springing up, with the suggestion seemingly being that Clovis should have disclosed the confirmed data to investors, and these could further impact the company’s market capitalization going forward.

Biotech 2: Lipocine Inc. (NASDAQ:LPCN)

Moving to the other end of the biotech spectrum, Lipocine is a small cap with a market valuation in the region of $260 million at time of writing. On November 12, 2015, Lipocine closed out the session at a little of $10 a share. At US open on Tuesday, it traded at $14.38 – a 40% gain across the period. Why? Well, as ever with these development stage companies, it comes down to its lead pipeline candidate – LPCN 1021. The drug is a testosterone treatment with a target indication of testosterone replacement therapy (TRT). Every month in the US, pharmacists serve up more than half a million TRT prescriptions to patients. However, the vast majority of these prescriptions come with a black box warning – essentially, the side effects of each are so severe that the FDA requires specific and obvious label warnings at biotech commercialization. The primary reason behind the warnings is that most therapies are intravenous, which makes for obvious risks. LPCN 1021 is an oral candidate, which removes a large art of the risk associated with TRT. If approved, therefore, the company believes it can capture a large part of the TRT market very quickly. We got efficacy and safety in the phase III on which Lipocine based its NDA, which the FDA accepted on November 12, the day that kicked off the 40% gains we have seen since. A PDUFA date is always an upside kicker for a biotech, even more so for one of this size, and therein lies the market cap inflation. Often we’ll get an FDA advisory committee meeting and review ahead of PDUFA, but not on this occasion, with the FDA already having confirmed this as unnecessary. This is likely a positive indication, but it extends the time to next catalyst by a month or so. The date to watch is June 28, 2016, so a good few months away yet, but keep an eye out for any follow up data from Lipocine that supports the efficacy argument as potential catalysts leading up to the FDA’s decision.

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A Closer Look At Bristol-Myers Squibb’s Latest Collaboration

By
Jennifer Aldershot
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bristol-myers squibb

During the middle of last month, junior biotech Five Prime Therapeutics, Inc. (NASDAQ:FPRX) reported it had inked a deal with industry behemoth Bristol-Myers Squibb Company (NYSE:BMY); a deal that will see the latter foot the bill for the development and commercialization of Five Prime’s lead candidate FPA008. The announcement injected some immediate upside strength into Five Prime, and further strength came at the end of last week, when the company announced it had received HSR clearance for the collaboration. Five Prime is up close to 90% on the agreement, suggesting the BMS deal adds real value to its development efforts – $350 million upfront value to be exact, with further milestones in excess of $1 billion. The question is, what does BMS get for its money? $350 million up front seems a lot to pay for development rights, when pre announcement Five Prime only had a market cap of circa $450 million. The company must see promise in FPA008, so let’s try and figure out why.

In our bodies we have something called the colony stimulating factor 1 receptor (CSF1R), which is a protein found on the surface of cells. Its main roll is to bind to a cytokine called CS1, which then signals to the immune system promoting the production of, and controlling to a certain extent, macrophages. FPA008 is a CSF1R inhibitor. It blocks the receptor from binding with the CS1 cytokine, and in turn, halts the production of macrophages. But macrophages are good, why would we want to inhibit their production? Well, this is where Five Prime’s two lead indications come in to the picture. The first is a rheumatoid arthritis indication. Some macrophages are responsible for inflammation – one of the primary causes behind RA. Through inhibition of the CSF1R receptor, Five Prime believes it can reduce inflammation and, in turn, treat RA. The second indication is oncology. When a patient has a tumor, it creates what are called tumor-associated macrophages. The number of these types of macrophages generally correlates with the severity of the cancer in question – primarily because they suppress the immune response to the tumor cells. Again, through CSF1R inhibition, Five Prime believes it can reduce the number of tumor-associated macrophages, and in turn, the severity of the cancer. BMS was already actively involved with Five Prime in its cancer indications, on the back of a deal agreed in November last year that saw the initiation of a phase Ia/Ib trial combining FPA008 and BMS’s Opdivo, across a range of cancers, including lung cancer, melanoma and pancreatic cancer, among others. As a quick side note, the latest agreement will cover the continuation of these trials to maturity, with BMS bearing any ongoing costs.

So have we got any evidence of efficacy for FPA008? Well, the oncology trial is not scheduled to complete until late 2019, so from an oncology perspective, we’ve only got preclinical to go on. All this offered us was proof of concept. For RA, however, we’ve got something we can use. Just last week the company announced prelim data from its ongoing RA phase I at the American College of Rheumatology’s annual meeting. The trial is an open label dose escalating study, wit ha primary endpoint of safety and tolerability. As such, efficacy is not really the focus at this stage, but we can use the results to gain some insight nonetheless. First, across the issued dose, CSF1R inhibition induced by FPA008 translated to an increased level of CSF1 in serum. Basically, this shows that the drug is actively inhibiting CSF1R, as it is stopping the CSF1 from binding to the receptor, as illustrated by the higher concentration of the cytokine in serum. Second, FPA008 causes a dose dependent reduction of an inflammatory monocyte called CD16+, which is one of the monocytes associated with inflammation in RA. From a safety perspective, as yet things look promising. Low grade adverse events that fall in line with what’s expected from CSF1R inhibition (namely, eyelid edema) are the only real noteworthy negatives, and these should far from inhibit the trials continuation.

To answer the initial question then, regarding the value of the deal to BMS, we believe there is promise in Five Prime’s pipeline, but it will be a slow burner. The real value lies in the oncology indications, the trials for which wont complete for another 4 years (primary completion March 2018, study completion August 2019). The RA indication does have value, and if the two companies can push through a phase II that demonstrates efficacy we could see some strength, but BMS’s ROI will come if it can prove FPA008 enhances Opdivo.

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High Risk, High Reward on Telesta’s Panel Review

By
ME Staff
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telesta

On June 29, 2015, Telesta Therapeutics Inc. (OTCMKTS:BNHLF) reported that the FDA had accepted its Biologics License Application (BLA) for its lead pipeline candidate – MCNA. The FDA will review the BLA with a priority designation, giving it a PDUFA date of February 27, 2016. This is three months away you say – why are we talking about it now? Well, on Wednesday next week, an FDA panel will sit down and discuss the BLA, and report its recommendation. If it recommends approval, it greatly improves the chances of a positive outcome for Telesta come February, and as such, could be a strong upside catalyst for the company’s market capitalization. Of course, if we get a negative recommendation, upside turns to downside. Let’s have a look at the treatment in question, its target indication, and figure out what a recommendation of approval might mean for the company.

So, MCNA. The drug is a biologic, meaning it derives from mammalian cells rather than just being a mix of certain chemicals (as is the case with traditional drugs). Biologics are extremely complicated, but let’s have a go at a simplified explanation. Biologics are incredibly complex proteins that – as humans – we are unable to produce manually (we lack the sophistication). Luckily for us, cells make proteins very efficiently, as instructed by the genes in their composition. By inserting specific genes into cells, we can turn that cell into a protein making machine. Scientists insert the combination of genes into a cell that is required to create the complex protein (the biologic) and voila. Again, this is extremely simplified, but the truth is even the scientists often don’t know why this process works – only that it does.

So MCNA is a what’s called a cell wall nucleic acid composition – the constituent components have been shown to elicit an immune response to cancer cells in patients and, additionally, mediate proliferation. In other words, the drug makes the immune system attack cancer while also stopping tumor cell replication.

The company completed a phase III earlier this year for a target indication of non-muscle-invasive bladder cancer (NMIBC). Interestingly (in light of the BLA acceptance) the trial missed its primary endpoint, showing a 1-year and 2-year overall disease free survival rate of 25% and 19% respectively versus a primary endpoint of 40% at 12 months. This said, Telesta demonstrated the safety and efficacy of the drug, reporting majority mild to moderate adverse events and just a couple of discontinuations across a sample of 129 patients. Post completion, the company sat down with the FDA and both parties agreed that 25% 12 months DFS was significant enough to warrant a BLA submission, and that’s where things stand.

What’s the market potential for the treatment if approved? Well, there are six separate stages of bladder cancer, the first three of which are classed as non muscle invasive (i.e. the cancer is confined to bladder and connective tissue). These are the three target stages for MCNA. Standard of care for these sufferers is BCG treatment, but many patients fail to respond. After this, there is only one available current alternative – cystectomy, which is basically a ripping out of the bladder and some surrounding organs. Very dangerous and obviously invasive. This is where MCNA comes in – Telesta is pitching it as an alternative to cystectomy.  With premium oncology pricing (the company has stated it expects no reimbursement issues at premium cost), Telesta believes it can hit peak US market sales for MCNA in excess of $400 million. Globally, the company slates a similar revenue potential; the company has partnerships already in place with Ipsen S.A. (OTCMKTS:IPSEY) globally (excluding Japan) and Endo International plc (NASDAQ:ENDP) in Canada and Mexico for distribution and commercialization on approval in the respective regions.

So what’s the takeaway? Well – there is risk here, there’s no question about that. The drug failed to hit its primary in the phase III on which Telesta has based its BLA, and that makes for an increased likelihood of the FDA requiring further data before it approves MCNA. These are long term trials, and any such requirement could push approval back by a couple of years at the low end. However, as always, there is also potential for reward. Telesta currently comes in at less than $200 million market cap, and if it gets approval, it could be generating annual revenues at a two times multiple of this cap with just one indication. All eyes on the 18th. If the panel recommends approval, expect some instant upside momentum and a continuation of this expansion as we approach PDUFA.

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Here’s Why Markets Overlooked Idera’s Financials

By
Jennifer Aldershot
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idera

On August 6, 2015, Idera Pharmaceuticals, Inc. (NASDAQ:IDRA) reported a third quarter loss of $11.3 million. Despite the loss, the company gained strength, and is currently trading at a circa 10% premium to its pre-announcement market capitalization. At first glance, this seems counterintuitive. However, a closer inspection reveals the market’s reasoning, and presents an intriguing opportunity for an exposure to the oncology and rare disease space. Here’s why.

First, what’s Idera. The company is a clinical stage biotech with a current focus on using toll like receptor antagonists in oncology indications. Its primary pipeline candidate is called IMO-8400. As mentioned, it is a TLR antagonist, which means it inhibits the signaling pathway of TLRs. TLRs are what are responsible for initiating an immune response in a wide variety of situations, so why would you want to inhibit this process? Well, in the indications Idera is targeting, the immune response is to create more cytokines – toxic cytokines – that cause the cells of whatever is causing the damage to replicate. By inhibiting the TLR signaling pathway in pathogenic tissue, the immune response doesn’t happen and the initial cells don’t replicate. That’s the essence of it anyway.

Idera is currently trialing IMO 8400 in a phase 1/2 clinical trial for a Waldenström’s Macroglobulinemia (WM) indication. WM is a rare type of B-cell lymphoma that is – at present – totally incurable. The day before the financials announcement, the company announced it is set to present data from the trial at the 2015 American Society of Hematology annual meeting, which is set to take place from December 5 to December 8 in Orlando. That Idera intends to present the data at the meeting suggests it is positive (otherwise there is no incentive to parade it in front of sector experts), and this suggests we could see some demonstration of efficacy from the trial. The company has said it also intends to bring safety and tolerability into the presentation, meaning we will be able to get an idea of the all round profile of the drug – a good thing at this early stage. It is only a small trial, 19 patients enrolled and dosed, but in a rare disease like this (1000-1500 new cases a year) small trials will often be enough to get a drug to the next stage of the development process, purely based on the fact that there is not a large enough patient population sample to conduct a bigger trial.

Just this week, Idera also announced it had kicked off the enrollment phase of a phase 2 for a second indication – dermatomyositis. Dermatomyositis is an inflammatory skin and muscle disease, in which the immune response elicited by the TLRs translates to an overproduction of inflammatory cytokines, adding to the inflammation. By inhibiting the production of these inflammatory cytokines, just as with its WM indication, the company hopes it can reduce and negate the symptoms of the disease. This one has a larger patient population in the US – somewhere circa 20,000 – and so the sample size for the trial is larger at 48 patients across 20 US centers. We don’t know exactly when top line is expected, but the trial is 24 weeks’ worth of dosing. Taking into account time necessary for recruiting the patients, we are probably looking at top line somewhere during the second half of next year – likely fourth quarter.

So that’s why the company is gaining strength. It got hammered over the last few months in the wake of the wider market decline, but with the data presentation a near term catalyst and the initiation of a fresh indication trial, there is plenty to keep it in the spotlight going forward. If it can maintain a positive track record in the ongoing trials, we could be looking at a phase 3 in its initial indication (WM) before second quarter next year. It’s a rare disease, currently with no available treatment, making it eligible for both orphan and breakthrough designations. If we get these, keep an eye on status updates as potential upside catalysts. Keep in mind that the company may need financing to complete a phase 3, if we get to that stage. Cash on hand comes in around $35 million, down from $92 million at the end of second quarter, and costs are likely to inflate in the wake of the second indication trial. Any financing will likely dilute the holdings of an early stage investor – not something that should necessarily negate an investment (it happens a lot in biotech) but something to consider when weighing up the risks. Roll on December.

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Two Potential Approvals to Watch Before the End of the Year

By
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FDA

In development stage biotech, FDA decision dates are what everything leads up to. Interim and top line data releases will always impact the near term capitalization of a company, but nothing makes or breaks its fortunes like an approval or a decline. Here are two companies with approval dates scheduled for before the end of the year, alongside a discussion of the treatments in question.

Eagle Pharmaceuticals Inc. (NASDAQ:EGRX)

On April 14, 2015, the FDA reported its acceptance of an NDA for bendamustine, Eagle’s lead pipeline candidate with an indication of chronic lymphocytic leukemia and non-Hodgkin’s lymphoma. The drug is an alternative version of an already approved therapy, Treanda, currently marketed by generics king Teva Pharmaceutical Industries Limited (NYSE:TEVA). Eagle has a pretty unique business strategy. Basically, it targets the date at which the first generic drug becomes available for a particular indication, and attempts to improve on the reference drug with an improved delivery system. In this instance, it is seeking to provide a prepackaged, pre-mixed version of Teva’s Treanda, which is what the company calls “rapid infusion” – i.e. it takes 10 minutes to administer rather than than traditional 30 minutes.

The great thing about this approach is that the company is not altering the administered compound, so efficacy is much easier to demonstrate in a clinical trial setting. As is safety and tolerability, assuming dosing remains comparable. All the company needs to show is that its new delivery system can demonstrate efficacy as defined by non-inferiority to the treatment it is looking to replace.

Interestingly, and of considerable note, is that back in February Teva picked up the commercial rights to Eagle’s rapid infusion bendamustine for $30 million up front and up to $90 million milestone. Why is this interesting? Because it shows that Teva feels Eagle’s version of its own Treanda could be a real threat to Treanda’s ability to generate revenues. If it didn’t view it as a threat, it wouldn’t have paid triple digit millions to commercialize it.

The PDUFA date (i.e. the date on which we will get the FDA’s decision) is December 13 – so keep an eye on the company’s press releases between now and then. We will likely get a panel recommendation before the end of November, and this will offer insight into the likelihood of approval. One to watch.

Merck & Co. Inc. (NYSE:MRK)

At the beginning of this week, we learnt that an FDA panel had recommended the approval of Merck’s drug sugammadex – a treatment used to reverse the effects of muscle relaxants used in patients undergoing surgery. The treatment is already available in close to 100 countries across the globe, but the FDA keeps rejecting it through concerns of its safety profile. This is the fourth time Merck has submitted an NDA for consideration, and the FDA has set a PDUFA date of December 19. There are a few of these sorts of drugs around, but they have pretty dangerous risk profiles and severe adverse events are common. The current options require the co-administration of what’s called a muscarinic receptor antagonist, and it is this element of the administration that leads to complications. Merck’s treatment does not, and so if approved, could be a real blockbuster product for the company.

As mentioned, the FDA advisory panel recommended approval (unanimously) but don’t take this as an indication of a sure fire marketing go-ahead. An advisory panel recommended the FDA approve the drug last time around (April 2015) and the same could easily happen again. What its going to come down to is whether the FDA believes that the safety issues associated with this treatment are fewer, or less severe, than the safety issues associated with the alternatives. According to the FDA, allergic reactions and bleeding are two of its primary concerns. Merck will have no doubt included data in its NDA that it hopes will alleviate these concerns – perhaps comparable data that shows higher levels of these reactions in alternative treatments. If it can demonstrate higher or similar levels of both allergic reactions and site bleeding in the currently available co-administered relaxant reversals, sugammadex could be in with a real chance. Again, keep an eye on December 19 for this one. If approved, Merck expects annual revenues in the region of $500 million by 2020, so a long awaited approval could translate to a moderate, but still significant, upside catalyst in the company’s market capitalization.

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