Facebook Linkedin Tumblr Twitter
Home Blog Page 14615

INSYS is Targeting a $700 Million Market With Syndros

By
Jennifer Aldershot
-
biotech

On December 1, 2016, US biotech INSYS Therapeutics, Inc. (NASDAQ:INSY) is set to present at the Piper Jaffray 27th Annual Healthcare Conference in New York. The company has had a pretty volatile month, with the resignation of its CEO preceding the release of some better than expected financials, but the presentation will likely set the tone for December. The company submitted an NDA for its lead pipeline candidate back in June, and the FDA subsequently accepted the filing in August. This NDA will likely form the basis of the presentation, so in anticipation of the event, let’s take a look at the drug in question in an attempt to examine the implications of an approval for INSYS and its shareholders.

The treatment is called Syndros, and is an oral solution formulation of dronabinol. Dronabinol is a lab-produced version of THC, the active ingredient of cannabis. Its target indication is two-fold as per the latest NDA – anorexia associated with weight loss in patients with AIDS, and nausea and vomiting associated with cancer chemotherapy. How does it work? Well, just as with any cannabinoid therapy, dronabinol interacts with the endocannabinoid system in our bodies. We’ve got a range of cannabinoid receptors (which combine to form the aforementioned system) in our bodies – the two most well known are CB1 and CB2. CB1 is generally associated with the brain, while CB2 generally the central nervous system. When cannabinoids enter our bodies they lock with the receptors, and induce the pain killing and nausea reducing effects commonly associated with their use. Additionally, they induce hunger, which is the basis of the anorexia indication we mentioned a little earlier. In this form, the treatment is a spray form that a patient administers under their tongue.

So how did the drug perform in trials? The trial on which the NDA is based compared Syndros to Marinol, which is the current standard of care prescription for dronabinol. It won out across a range of comparison points. The primary focus was absorption and rate of absorption, with Syndros demonstrating detectable plasma levels (an indication of absorption) at 15 minutes in 100% of patients, versus less than 25% for Marinol. Bioequivalence from an efficacy perspective came in on par, so at a glance there seems to be no reason why the FDA won’t approve the therapy.

What about market potential? The AIDS indication accounts for circa 45% of prescribed dronabinol, while the cancer indication accounts for the remaining 55%. The market is very concentrated, with only 8,000 physicians responsible for more than 70% of total prescribed dronabinol. Why is this important? Well, it reduces the cost of pitching the treatment for INSYS if it only has to pitch (and in turn sell) the benefits of Syndros to a small physician base. The company expects to send out a sales force of 40-50 reps, with a goal of converting more than $500 million annual revenues from current SOC to Syndros. Additionally, INSYS slates an expansion of more than $200 million on this initial $500 million convert. This puts a total market potential for Syndros of $700 million annually, with an expected 5% CAGR over the next five years.

So what are we looking for near term, and when will we find out if the FDA has approved the treatment? PDUFA (decision date) is April 1, 2016, so this is the date to keep an eye on. However, in the run up to that date, we will likely get an FDA advisory panel review, and this will offer insight into the chances of approval going forward. The FDA doesn’t always agree with the opinions of its advisory teams, but more often than not, an advisory panel nod will indicate a corresponding nod from the agency.

If the company gets approval, and can successfully implement its commercialization strategy, the treatment could be a real game changer. INSYS generates less than $100 million a quarter from its currently approved therapies (specifically its Subsys cannabinoid pain management product) meaning Syndros has the potential to more than double the company’s revenues on its initial convertible market. As such, it’s definitely one to watch going forward.

Keep an eye on the presentation for any updates, and expect some upside potential on the coverage. You can check out the live webcast here.

Story continues below

What are the Implications of Eli Lilly’s FDA Black Box?

By
Roger Hannington
-
Eli Lilly

On Wednesday, the FAD announced its approval of Eli Lilly and Company’s (NYSE:LLY) latest cancer drug, necitumumab. Marketed as Portrazza, the drug will target squamous non-small cell lung cancer (NSCLC), but with a caveat – it is only available for patients who have not undergone any other form of medication specifically for treating advanced lung cancer. Additionally, Portrazza will carry a pretty severe black box label, warning patients of its severe side effects, including cardiac arrest, sudden death, and hypomagnesemia. While the approval is good news, the box warning and the restrictions on administration are a real downside for Eli. Markets have recognized this, and the company’s market capitalization has edged downwards since The FDA announcement. Let’s take a look at the drug and try and figure out both why the FDA felt the warning and restrictions are necessary, and what the warning means for its revenues potential.

First then, what’s Portrazza? The drug is part of a family of oncology treatments called monoclonal antibodies, which are antibodies derived from a single parent cell that target a specific antigen. Because they target a specific antigen, they can be used to selectively target cancer cells, rather than affect surrounding cells (as with traditional chemotherapy and radiation). The drug binds to the epidermal growth factor receptors on its target tumor cells (in this instance NSCLC cells) and blocks them, meaning Epidermal Growth Factor (a protein) cannot bind to the receptor. EGF is responsible for the proliferation process – so through the inhibition of the binding process, Portrazza stops tumor cells from replicating.

So why the warning? Well, it’s a case of cost-benefit. The drug has what the industry refers to as a “marginal” benefit – in trials it extended survival by a matter of weeks over alternative chemotherapy options. At the same time, a few patients discontinued based on the aforementioned (and now labeled) side effects. In light of this, the FDA is saying to physicians: it’s risky, and may only add a couple of weeks onto overall survival, but its an option. This, in turn, begs the question, why approve it at all? Well, as Eli Lilly CEO John Lechleiter stated, weeks is a long time for many cancer sufferers. It’s easy to denounce such a short period of time as void of benefit, but for patients with this sort of prognosis, any extra time, however short, can make a big difference. There is also a current trend with the FDA for quick oncology approvals – even those with marginal benefits and severe side effects. Ely itself has been the benefited from this trend, with the FDA approval of Cyramxa back in April. The current opinion of the agency seems to be that giving physicians, and in turn patients, as many options as possible, even if there is some question over risk benefit balance, is better than restricting choice.

So how has the label limit impacted the drug’s revenue potential? Well, there are two sides to the coin. In one sense, the fact that physicians can only administer the therapy to patients that have not received any other type of treatment is a disadvantage, as it limits the the patient population that qualify as eligible. On the other side, it paints the treatment as a first line therapy. This puts it in the picture as a drug that physicians will offer on diagnosis, which gives it a chance to compete with current standard of care first line. With its (albeit small) OS extension, it may have the advantage when pitched like for like. In light of this, analysts put the potential for the drug at top end $500 million, based on a little over 220,000 new diagnoses each year in the US, with approximately 25-30% squamous (just meaning the cancer affects squamous cells, which are most commonly found in skin but also line the lungs, among other auctions).

So what’s the takeaway? Well, markets have sold off Eli in response to the labelling and restricted administration, but this is likely as a result of overbuying in anticipation of approval without limitation. Bottom line is that Eli has its second marginal benefit cancer therapy of the year approved, and with effective commercialization, could have just added half a billion dollars in annual revenues to its portfolio. There is also, of course, the potential for extended indications. The FDA has set the bar pretty low with this approval, and Eli will likely only need to demonstrate similar marginal efficacy in an equally aggressive oncology indication to extend the potential patient population of Portrazza.

Story continues below

Why Big Data Needs Some Roll-Up

By
-
bigdata

Big Data is in a serious pickle. On the one hand, the smaller data analytics and processing companies, while enjoying growing revenues, are struggling with razor thin margins and just don’t have the economies of scale to achieve escape velocity into consistent profitability. On the other hand, the big recognized names in data processing like IBM (NYSE: IBM), Hewlett Packard Enterprise (NYSE: HPE), and Cisco Systems (NASDAQ: CSCO) are all struggling. All three have seriously underperformed the Nasdaq over the last decade (counting HPE as part of HP), and recovery looks far off.

The silver lining is that given Big Data is growing at an exponential rate (over 90% of the data ever created was created since 2011), the solution to these growth problems can seemingly be found there. Indeed, Big Data is IBM’s fastest growing segment, spurring $26 billion of investment, $17 billion of which was spent on 30 acquisitions in total. A full third of IBM Research’s spending is on Big Data.

It’s a similar story with Cisco and HPE. Cisco’s Data Center has been its fastest growing major product category for the last five years. The historic HPE split from HP earlier this month was itself an attempt to isolate the faster growing data services sector from HP’s (NYSE: HPQ) bread and butter PC and printer business.

Given that the most recognized names in Big Data are struggling or even shrinking overall but growing in that Big Data segment, and that the smaller companies are growing but do not have the economies of scale that the larger firms enjoy, it seems inevitable that we will see further roll-up in this sector over the next few years. Here are 3 possible acquisition prospects for IBM, HPE, and Cisco.

Datalink

A look at Datalink Corporation (NASDAQ: DTLK) is a perfect illustration of what is going on with the smaller companies in the Big Data space. Revenues have grown 28% since 2012 and 2015 looks on pace to grow 20% more since last year. And yet, Datalink’s bottom line has been struggling mightily, and that has taken a major toll on its share price in 2015. Year to date, Datalink is down over 40%.

Datalink has made some notable acquisitions in the past, most recently Bear Data late last year, but these have not spurred sufficient growth as hoped. The Bear acquisition made Cisco Datalink’s largest OEM, which could mean that Cisco is the best choice for suitor here since there is already considerable overlap. A takeover by Cisco would mean lower cost of revenue and higher margins on Datalink’s revenue stream, and likely lower SG & A expenses as operations could be streamlined.

Sysorex

Much like Datalink, Sysorex Global Holdings Corp. (NASDAQ: SYRX) has a rapidly growing top line, but as it stands, margins are too small to maintain profitability. Revenues have grown remarkably from just over $4 million in 2012 to over $63 million by the close of 2014, with growing gross margins as well.

Sysorex was founded by an IBM employee and what is notable about it is the speed and accuracy of its technology. Sysorex’s security product billed AirPatrol has the ability to pinpoint the location of wireless devices to within 10 feet, accuracy which is unmatched by any competitor. Its other main product, LightMiner, is an in-memory off-hard-drive data storage solution that is cache-free and runs 100x faster than competing systems.

With both growing revenues and top of the line data processing technology, Sysorex could be an attractive acquisition for any of the three Big Data companies. While Sysorex has no earnings yet, annual revenues are four times its entire market cap. Sysorex could be acquired very cheaply at these rates for anyone who believes its tech could give a leg up on the competition.

CSP Inc.

CSP Inc. (NASDAQ: CSPI) is another data solutions company treading water. Very generous to its shareholder though with a 7.5% dividend, it is not giving up despite razor thin margins and steep competition from the bigger players. That generosity may be the company’s saving grace as the stock began to rise from the pit once dividends were announced in 2012.

Like Sysorex though, CSP struggles with a very low valuation of only $20 million compared with its high annual revenues of over 4 times that. Most data companies in this tier are struggling with the same issue – revenues are there, but growth in earnings is not. CSP competes directly with many of the companies who manufacture its third-party products, and these include IBM, HPE, and Cisco. While the competition is great for customers, it is making the sector almost unprofitable, as CSP looks set to record a net loss this year.

If this is going to change for any of the smaller companies, and any of the big players that have been struggling over the last decade, operations will have to be streamlined in order for margins to grow. Cost of revenue needs to come down and administrative expenses need to be slashed. On the other side, HPE, IBM, and Cisco all need a shot in the arm to show the markets they are still capable of growth. In the case of Big Data, it seems that roll-up could be a viable solution, and better now while valuatioms are low before the amount of data being created doubles or triples again in the next few years.

Story continues below

This Company Could Be An Opportunity To Buy Into A Dramatic Oversell

By
Jennifer Aldershot
-
Repros

Most of the time, when we look at the development end of the biotech space, we focus on small cap stocks with a valuation of between $250 million and $1 billion. Six weeks ago, Repros Therapeutics Inc. (NASDAQ:RPRX) fit nicely into this bracket. As things stand today, however, the market values Repros at just $42.5 million – a close to 80% decline on its October 19 close. The driver behind this decline was the cancellation of an early November advisory committee meeting that would have seen a review team report its opinion on Repros’s lead candidate, enclomiphene, in a secondary hypogonadism indication.

The FDA is set to report its final decision today, however the likelihood of a decline is high. The regulatory agency cited questions concerning the bioanalytical method validation used in the trial as the reasoning behind the cancellation. Apparently, the method used could affect the interpretability of pivotal data on which the drug’s NDA was based. Any doubt over the credibility of pivotal data almost always translates into a non-approval. With this in mind, today could mark another steep decline in Repros’s market capitalization. Of course, some level of sentiment towards the PDUFA will already be priced into Repros stock, but not all.

With this said, the cancellation of an advisory meeting might just be a forerunner to an extension on the clinical phase of enclomiphene. The FDA defines bioanalytical method validation using six broad categories – accuracy, precision, selectivity, sensitivity, reproducibility and stability. The thing is, as bioanalytical processes advance, the way in which these categories are applied changes. If the FDA concerns relate to an element of the process that can be modified easily (which we will gain insight into today), and the data can be alternatively presented in a way that supports the initial hypothesis, approval might not be that far away.

Additionally, while enclomiphene is the company’s lead candidate, it also has another drug in mid to late stage trials that has the potential to generate revenues to the level of, or even higher than, its lead counterpart. Markets seem to have overlooked this candidate in favor of a dominant sell bias. The drug is a uterine fibroid therapy called Proellex. Uterine fibroids are non-cancerous growths that form in the uterus, which have a range of symptoms including heavy menstrual bleeding, pelvic pressure and constipation. As much as 75% of women will develop uterine fibroids during their lifetime, and while a portion of these will go undetected through a lack of any real symptoms, many have symptoms so severe that they necessitate a hysterectomy. Repros is targeting the symptomatic patients, with the goal of reducing the need to undergo this serious operation. Top line is expected from a phase IIb during the first half of next year, and positive results could be a turning point for the company – that is, assuming positive developments surrounding enclomiphene haven’t already initiated an upside reversal.

So what are trying to say here? Well, that Repros has taken a hammering over the last couple of months based purely on expectations of an FDA decline. However, these expectations don’t necessarily mean the end for enclomiphene, as the FDA may report today that it only requires additional data, or even better, an alternate relevance analysis of the current data. With topline from a late stage phase II also coming early next year, we could see both a revised FDA decision and some encouraging trial data contribute to a reversal market sentiment surrounding Repros within a relatively tight timeframe – specifically April-June 2016.

In the development stage biotech space, speculator sentiment is king. When a company has little or no revenues to speak of, its valuation generally relies on trial data and FDA updates. Both the interpretation of trial data and the implications of updates are qualitative, not quantitative, and as such, have the potential to induce over (or under) reaction. In this reaction lies opportunity, and in this instance there may be an opportunity in an oversell of Repros. One to watch going forward, with a strong focus on today’s FDA announcement.

Story continues below

A Billion Dollar Decision Is Just Around The Corner For Alexion

By
Roger Hannington
-
Alexion

Back in September, the FDA reported it was pushing its PDUFA review date for Kanuma, Alexion Pharmaceuticals’ (NASDAQ:ALXN) Lysosomal Acid Lipase Deficiency (LAL-D) candidate, back by three months. The agency cited a request for more information relating to chemistry, manufacturing and controls – essentially how Alexion plans to consistently produce and store the drug. Those three months are almost up, and with a PDUFA date set for the beginning of December, now is a great time to take a look at the therapy in question, in an attempt to see what impact an approval might have on Alexion going forward. So, here goes.

First then, a look at the drug and its indication. As mentioned, Kanuma is targeting LAL-D, which is a rare condition that causes a deficiency in the production of lysosomal acid lipase. LAL is an enzyme that breaks down fat in humans, and if there isn’t enough, fatty deposits build up in organs and cause, eventually, liver failure. Kanuma is a recombinant (just meaning it was made in a lab, rather than occurring naturally) form of LAL called sebelipase alfa, which is an enzyme targeted at replacing LAL in deficient patients. It performs exactly the same function as LAL (i.e. breaks down fatty material) and has demonstrated in trials that it can be an effective, safe replacement and – as a result – treatment.

The drug got approval in Europe back in September, about a week before the FDA requested the additional data. Approval in another region, especially one with an agency as stringent as the EMA, can be a great leading indicator for a drug’s approval in the US.

So with what did Alexion need to provide the FDA to bolster its NDA? As we’ve said, the FDA only specified publically that the info related to chemistry, manufacturing and controls, which is a predefined requirement section on any NDA. For the majority of the trial period, Alexion produced Kanuma in-house; well, at facilities previously owned by Synageva – the company from which Alexion picked up Kanuma as part of the latter’s acquisition of the former back in June. However, Synageva also stated that a third party had produced the drug in anticipation of approval. The enzyme comes from the egg white of GM chickens, meaning it can be produced and stored (or at least, the raw materials can be) a long time in advance of administration to patients. These latter two factors are likely the driving force behind the FDA’s additional info request. Specifically, the agency is likely asking for info that a) proves the third party facility can produce the drug to the standards of the product used in trial and b) that the already manufactured product is of this aforementioned standard.

So if Alexion gets approval for Kanuma, what’s its market potential? Well, LAL-D is a rare disease, occurring in approximately 1 in 40,000 individuals in the US. This rarity, however, does not mean the drug can’t be a blockbuster for Alexion. Its primary revenue generator, Solyris, also targets a rare disease, aroxysmal nocturnal hemoglobinuria (PNH) – the key is in the price. Soliris is the most expensive drug in the world, coming in at $500,000 annually in most regions. Alexion doesn’t need to price Kanuma that high to hit $1 billion in sales, but we don’t expect it to be cheap. Indeed, Barclay’s (NYSE:BCS) analysts put its peak revenues at an expected $1.5 billion, suggesting the drug will hit these sales levels within three years. For a company that generates the vast majority of its revenues (circa $2.2 billion during 2014) from its flagship drug, a new blockbuster would really shore up Alexion from an investor’s perspective. There have been concerns as late that a drug being developed by Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) could threaten Soliris’ dominance in its target indication (theories have arisen as to whether this threat caused Alexion to overpay for Synageva, but that’s a story for another day), and diversifying away from overreliance on a potentially threatened treatment mitigates some exposure risk.

The date to keep an eye on? December 8th. That’s the three-month threshold to which the FDA pushed back the PDUFA, and assuming no further delays, it’s the date on which we will hear whether Kanuma has a commercialization green light. Expect some immediate upside in Alexion’s market cap if the news is good.

Story continues below

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

By
Jennifer Aldershot
-
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.

Story continues below

Protalex Could Be an Early Stage Buyout Target come February

By
-
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.

Story continues below

Today’s Movers and Shakers in Biotech

By
-
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.

Story continues below

This Company Could Be The Next Big Autoimmune Buyout Target

By
Roger Hannington
-
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.

 

Story continues below

This Company Could Be About To Disrupt A Million Patient Market

By
Jennifer Aldershot
-
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.

Story continues below
1...14,61414,61514,616...14,629Page 14,615 of 14,629

EDITOR PICKS

POPULAR POSTS

POPULAR CATEGORY

© Market Exclusive 2019