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Here’s Where The Money Is Being Spent In Biotech

By
ME Staff
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GALT
GALT

October has been a hot month for money changing hands in biotech. Billions of dollars have been spent on collaborations, mergers, acquisitions and partnerships, across all areas of the sector, between companies large and small. Here’s a roundup of some of the key deals in the biotech space from the last couple of weeks.

Roche and Adheron – $105 million upfront, $475 million milestone

On October 9, 2015, Roche Holding AG (OTCMKTS:RHHBY) announced its acquisition of Adheron Therapeutics. The incumbent biotech and big pharma company is set to pay the latter $105 million cash, with a further $475 million set aside for milestone and royalty payments going forward. Adheron has created a proprietary technology that inhibits what’s called Cadherin-11, a protein that the company has proven plays a role in a range of conditions. The condition Adheron is focusing on as an initial indication is rheumatoid arthritis, for which Roche will be footing the bill for a phase II starting during the first half of next year. We saw some pretty promising preclinical and phase I data released earlier this year, and Roche clearly believes it can carry SDP051 – the treatment in question – through to approval. One to keep an eye on going forward.

Immunomic and Astellas – $300 million upfront

Mid month, we learnt that Astellas Pharma (OTCMKTS:ALPMY) had closed a deal with privately held Immunomic Therapeutics. According to the terms of the deal, Astellas will pay $300 million upfront for exclusive rights to develop Immunomic’s LAMP technology, which is a platform that enhances DNA vaccination. DNA vaccination is a big deal in biotech at the moment, and this deal is an extension of a previous agreement penned back in January this year, which saw the companies collaborate on the same tech in a Japanese, ongoing clinical trial. The initial deal remains in place, and Astellas is looking to target a peanut allergy indication as its initial application for the technology. With an estimated 1.5 million US individuals suffering from peanut allergies, the right price point could translate to a billion-dollar market for the LAMP peanut indication. 10% of net sales will head back to Immunomic as part of the terms of the agreement.

Johnson and Johnson, Novera and enGene – CAD450 million, CAD441 million upfront, undisclosed milestones

On October 14, Johnson & Johnson (NYSE:JNJ) announced a collab deal with Novera (alongside the Ontario Institute for Cancer Research) that will see the two companies codevelop Novera’s pipeline of oncology candidates. We didn’t get the numbers, but we know there is an upfront payment involved alongside tiered royalties of up to CAD450 million. Novera is the commercial arm of the OICR, set up to facilitate exactly this sort of deal with the goal of bringing biotech oncology candidates discovered in the lab to market. There’s not much info out there on what the company’s pipeline involves specifically (all we know is that the target will be hematological), but it wont be long before we get word from J&J on which elements of Novera’s pipeline will be its initial focus. J&J has been pretty active in oncology over the last few years, and this move looks to be an extension of that activity. Again, this is one to watch as we head into the beginning of 2016.

Concurrent to the Novera deal, J&J also penned a deal with EnGene – another Canada based company that targets an indication of inflammatory bowel disease (IBD) with its aptly named Gene Pill and enema delivery tech.  Again, we didn’t get the details of the upfront payment (though we know there is one involved), nor did we get a figure on the royalties EnGene is set to receive on commercialization (again, we know there are royalties involved) but we did get the numbers on the milestone payments – up to CAD441 million spread throughout the clinical phases. The company is looking to initiate a phase 1/2a study for EG-10, its lead IBD candidate at the beginning of next year, so any clinical updates could be near term catalysts for J&J stock if we get an indication of efficacy.

Nipro and Sinocare – $273 million upfront

Last week, Nipro Corporation (TYO:8086)  announced it was selling off its diagnostics arm – Nipro Diagnostics  – to Chinese biotech behemoth Sinocare (300298.SZ). The deal sees Sinocare pay $273 million cash upfront to Nipro, in return for the latter’s diagnostics assets – primarily a bunch of diabetes and blood glucose level monitoring tools. The two companies are leaders in the field, Nipro in the US and Canada and Sinocare in China, and this move consolidates their biotech operations and gives the Chinese organization a real strong footing in the space in the US. As a quick aside, Nipro is headquartered in Japan, but most of the facilities and assets associated with its diagnostics arm are located in the US and Canada. Keep an eye on the second quarter of next year, which will be the first time we get a consolidated financial statement that incorporates the sale, to get an idea of the quantitative implications of the arrangement.

 

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Why the SciVac VBI Merger Makes a Lot of Sense

By
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frost

Opko Health (NYSE:OPK) CEO Dr. Phillip Frost just cemented another merger involving another of his Israel-based companies. Back in 2013 it was his Prolor Biotech that merged into Opko. The current merger between one of his new projects, SciVac Therapeutics (OTCMKTS:SVACF) with VBI Vaccines (NASDAQ:VBIV) actually looks very similar in strategy.

VBI and SciVac have complementary technologies and their merging makes a lot of sense. SciVac up until now was a single product vaccine company. Its vaccine is Sci-B-Vac, a 3rd generation hepatitis B vaccine already approved in parts of Europe and already administered successfully to half a million patients. Sci-B-Vac is proven 98% effective overall, and 100% effective on newborns. Compared with the 90% effectiveness of GlaxoSmithKline’s (NASDAQ:GSK) Engerix B, which is the currently mass-administered HBV vaccine in the US, Sci-B-Vac is a much needed leap towards final eradication of the hepatitis B virus.

Clinical success and superiority of Sci-B-Vac notwithstanding, it still needs to be approved in the US, and from there to compete with Engerix-B as well. One product does not a successful company make, which is why the merger with VBI makes sense in context. VBI is an earlier stage vaccine company than SciVac, but with compelling vaccine technology that handily complements SciVac’s own.

VBI Pipeline

VBI’s pipeline is centered around two main vaccine platforms. The first is called eVLP, or enveloped virus-like particle. eVLP is not a vaccine itself, but a way of administering a vaccine so that the body recognizes it and produces an immune response without risk of infection. Currently, the three most popular methods of administration are attenuation, whole-kill, and sub-unit. Attenuation weakens a virus to the point it is no longer infective. Whole-kill kills the virus, and sub-unit presents only certain critical parts of the virus to the immune system.

eVLPs by contrast can be thought of as dummy viruses, shaped like the viruses they seek to build immunity against with matching antigens on its coat, but with no infective ability. Preclinical trials have been completed successfully using eVLPs as vaccination vehicles for cytomegalovirus, or CMV, a common virus that is the leading cause of delayed infant development. As of yet, there is no effective CMV vaccine because attenuation, whole-kill, and sub-unit presentation do not work with CMV. VBI has shown in preclinical trials that the eVLP approach can work with CMV and is proceeding to human trials shortly. If it can theoretically work with CMV, then it may work with other more serious viruses as well.

VBI is currently pursuing eVLP application with several as of yet undisclosed virus candidates.

Complementarity with SciVac

As for complementarity with SciVac, that can be seen in VBI’s second platform called LPV, or Liquid Particle Vaccine. LPV is a vaccine storage technology that enables vaccine to survive through temperature fluctuations for long periods of time. These vaccines would otherwise need to be transported and stored via cold chain, a time consuming and costly process that makes vaccines more expensive and less available where they are most needed due to logistical constraints. LPV has also successfully completed preclinical trials, demonstrating vaccine efficacy in mice with product stored for a year in temperatures ranging from 4o to 40oC, an environment which would normally render a vaccine ineffective. VLP can be used in existing vaccines as well as monoclonal antibodies. It works by suspending the active vaccine in a synthetic lipid cushion, preventing protein aggregation and stress on the active protein molecules of the vaccine.

For SciVac, this could mean a pathway towards successfully competing with Glaxo and Engerix B once Sci-B-Vac gains FDA approval. Successfully integrating LPV into Sci-B-Vac can potentially eliminate the need for cold chain transportation, giving it a competitive edge in both cost and ease of distribution.

Notable Additions to Staff and Board

In addition to Dr. Frost operating in the background and who through Opko will be the combined company’s largest shareholder, VBI-SciVac will be chaired by Dr. Steven Gillis, founder of Immunex which was acquired by Amgen (NASDAQ:AMGN) in 2002. Dr. Gillis is also on the board of bluebird bio (NASDAQ:BLUE) and Shire PLC (NASDAQ:SHPG).

CEO of the combined company will be Jeff Baxter, a former Senior Vice President of research and development at Glaxo, so he knows the hepatitis B vaccine competition very well.

Watch Opko

Opko’s new drug application for one of its lead candidates Rayaldee has already been filed with the FDA, and the company is preparing for a product launch in the next few months. Aside from the Frost connection and Opko being VBI-SciVac’s largest shareholder, SciVac’s Chairman Steven Rubin is also an Executive Vice President at Opko. Meaning, the companies are already merged by executive personnel if not legally, and Opko has a substantial vaccine pipeline of its own.

There has been no indication that further roll-up is Opko’s or Frost’s, or Rubin’s intention for that matter, but with these players such moves are quite possible. Depending on Opko’s position after the launch of Rayaldee, such a move would be more of a possibility if Rayaldee is a success for Frost’s main company.

In the meantime, the two catalysts to watch for VBI-SciVac will be start of a phase III Sci-B-Vac trial in the US, and the launch of a phase I trial for VBI’s CMV vaccine next quarter.

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Today’s Movers and Shakers in Biotech

By
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biotech

Once again we’ve had a busy start to the week in biotech. A host of news has hit markets, and translated to some dramatic volatility across companies in the space, large and small. Here’s a look at some of Tuesday’s movers and shakers in biotech, and the drivers behind their action.

CytomX Therapeutics, Inc. (NASDAQ:CTMX)

First up, a new kid on the block – CytomX. This biotech company gained 11.4% during yesterday’s session, having closed an initial public offering this time a couple of weeks ago. The IPO missed expectations, having been priced at $12, and CytomX participants haven’t had much to cheer about since, with their holdings currently trading at just shy of $11 a share. However, yesterdays rally came on the back of an announcement that the company will present promising preclinical data at the upcoming International Conference on Molecular Targets and Cancer Therapeutics in Boston, early November.  Of we get a continuation of the action seen yesterday during today’s session, expect a breakout through the IPO price, with a near term upside target of $15 a share if the bulls hold out. For those who missed the IPO, CytomX is an oncology company with a pipeline focused on what are called “Probodies” – essentially antibodies that are designed to target tumor tissue exclusively, unlike some alternative antibody oncology therapies that are not selective in their targeting. The company is young, risky and likely not one to consider without careful due diligence – but the upcoming conference could draw investor attention, so its one to keep an eye on going forward.

Ardelyx, Inc. (NASDAQ:ARDX)

Next up, Ardelyx. This is one we have covered a number of times in the past, but if you’ve not yet read our coverage, Ardelyx is a biotech company that develops gastrointestinal tract therapies, and treatments for blood diseases, with its two lead candidates in each of these respective areas being an IBS therapy and a hyperkalemia treatment. This one has a far more advanced pipeline than CytomX, with a phase III for its flagship IBS therapy set to kick off this quarter, and a phase IIa well underway in its hyperkalemia indication. Premarket on Monday, the company announced it was appointing William Bertrand Jr to its board of directors – a long standing expert in the compliance and legal arena in biotech, with companies such as MedImmune (subsidiary of AstraZeneca PLC (NYSE:AZN)) and Valeant Pharmaceuticals International, Inc. (NYSE:VRX). Markets have viewed the HR addition as a reinforcing of the strength of Ardelyx’s pipeline, and the company gained a little over 5% during Monday’s session, and is up nearly 3% premarket on Tuesday. Compounding the action, and likely to boost the gains already seen from the HR announcement, is the announcing of intentions to present clinical data at an upcoming American College of Gastroenterology conference in Hawaii. The abstract from the conference suggests we are set to see a demonstrated sustained response in a double blind phase II for tenapanor, its lead IBS candidate. If the results support a phase III initiation, expect the biotech conference to serve as a medium term upside catalyst.

BioDelivery Sciences International, Inc. (NASDAQ:BDSI)

This time last year, BioDelivery Sciences traded at just shy of $18 a share. Fast forward 12 months, and the company hit annual lows last week at 5.28 – a more than 70% decline across the period. The declines have come against a wider backdrop of biotech strength, primarily as the result of a rocky road to approval for one of its lead candidates. The candidate in question is Belbuca – a buprenorphine film with a chronic pain indication. Buprenorphine is a well established opioid treatment for this indication, and BioDelivery have combined it with a novel delivery system (the aforementioned film) to bring this new treatment to market. On Monday, the FDA announced it had approved Belbuca for its chronic pain indication, and BioDelivery gained close to 10% on the announcement. Premarket on Tuesday, the company is up another 1.5%, suggesting the bullish momentum is set to continue for today’s session. The company has a market capitalization of a little over $300 million, a fraction of what was once a billion-dollar biotech, but markets believe this approval could be the catalyst behind a longer term turnaround. Look for a continuation of the current strength throughout the next couple of quarters, as the company moves the therapy into commercialization, and confirmation of this biotech turnaround.

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Clearing Up The confusion: Here’s What Imprimis Is Really Doing

By
Jennifer Aldershot
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immy3

The whole Martin Shkreli, Daraprim debacle has dominated biotech news over the last few weeks, and has even served to filter what is traditionally a relatively insulated industry into more popular mass media. At the end of last week, we learnt that Imprimis Pharmaceuticals, Inc. (NASDAQ:IMMY) was pitching to offer an alternative treatment to Daraprim – one that would retail at $99 per pack of 100 pills (for reference, the same size pack of Daraprim would cost between $76,500 and $83,500 depending on which of the chain pharmacies you purchased from). As Imprimis no doubt expected, the news caught on in popular media reporting, and the company gained strength on the announcement. There is, however, some confusion as to the details. Just as those outside the biotech space believed Daraprim to be an AIDS treatment (its not, it treats toxoplasmosis, which affects individuals with a compromised immune system such as those with AIDS), many believe Imprimis is offering a less-than-one-dollar-a-pill Daraprim generic. Let’s try and clear up the confusion.

Imprimis is offering what’s called a compounded drug formulation to patients as an alternative therapy to Daraprim for the treatment of toxoplasmosis. A compound drug formulation is the mixing of two separate drugs, with the goal of achieving the same outcome (or a similar outcome) as the initial single formulation. Daraprim is the commercial name for pyrimethamine, a DHFR inhibitor initially developed as a malaria treatment back in the 1950s. By inhibiting the DHFR enzyme, pyrimethamine stops (or at least slows) the synthesis of what’s called tetrahydrofolic acid – a key component in the DNA reproduction in infectious organisms. A common side effect of pyrimethamine administration is bone marrow depression, which is essentially the reduced capability of the bone arrow to produce blood cells. As a result, physicians will generally administer folinic acid alongside Daraprim, which serves to reverse this side effect. So that’s what we need to know about Daraprim, what about Imprimis’ alternative?

Well, first, lets look at compounding. As we have said, it is the mixing of two separate drugs to treat an indication. However, what’s important to realize, is that a compounded treatment is not approved to treat the indication of the therapy it seeks to replicate. This has long been a grey area for the pharma space. Legally, a physician can (pretty much) prescribe any treatment for any indication he/she sees fit. Imprimis’ alternative is a combination of pyrimethamine and leucovorin (a type of folinic acid), so essentially the dame therapy as Daraprim, but available as a customizable combination of the two. This is what sets it apart from Daraprim, and what allows it to bypass Daraprim’s marketing rights. Unlike Daraprim, if a physician prescribes the compounded treatment, a patient must send off the prescription to be filled by Imprimis Care – the company’s in house compounding facility. Imprimis Care will produce the treatment according to the customized requirements of the individual (this can mean anything from dose to proportions of the compounded ingredients in the pill) and send the pills to the patient.

So why don’t more companies offer compound alternatives? Well, primarily because of the supply chain. There are only a handful of compounding pharmacies across the US, and the hassle that’s involved in customizing a patient’s prescription, having them send it to these pharmacies, and being forced to wait for the compound to be created and delivered is not worth it when a commercial, pre formulated version is readily available. There have also been examples of legal issues with this sort of thing in the past. For a drug like Daraprim, however, that has just undergone a price increase of 5000%, the cost benefit will likely outweigh the hassle of waiting for a customized compound.

Investors have recognized this fact, and as we mentioned in the introduction to this piece, are buying into Imprimis and its compound Daraprim alternative. The company traded up 22% during the latter half of last week, on volume 3,500 times higher than its 3-month daily average. If the company can successfully implement its Imprimis Care infrastructure (designed to reduce the friction and hassle of a compounded therapy’s prescription and delivery) it could be the spearhead of a new movement in the biotech space, and in turn, could be set for further upside revaluation going forward. This said, we are yet to see if physicians take up the company on its compound. With a reasonable Medicare plan, 100 Daraprim cost the end user anywhere between $50-90 a month. The vast majority of the cost is borne, therefore, by the insurer. This could play into Imprimis’ success or failure. Watch this space!

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Here’s An FDA Inspired Opportunity In Hyperkalemia

By
Roger Hannington
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hyperkalemia

On Wednesday, we learnt that the FDA had approved Veltassa, an oral suspension (dissolved in water) treatment targeting hyperkalemia. Despite the approval, shares of Relypsa, Inc. (NASDAQ:RLYP) are down on heavy selling volume, the exact opposite of the response we would have expected on approval. Concurrently, the stock of another company in the space – ZS Pharma, Inc. (NASDAQ:ZSPH) is up nearly 4% on no real news. There is a connection to this seemingly counterintuitive action however; a connection that brings with it an opportunity for a near term biotech play. Let’s take a look.

First then, Veltassa. The drug targets Hyperkalemia, which is the presence of higher than normal levels of potassium in the blood. The effects of the condition can be minimal, as small and insignificant as general malaise or muscle weakness, but they can also be very serious as the high potassium levels can, in some patients, impact heart rhythm. Veltassa is what’s called a potassium binder – essentially it binds to potassium in the digestive system and stops it being absorbed through the GI wall and into the bloodstream. Relypsa submitted an NDA for the drug in October last year, backed up by eight clinical trials, and as mentioned received its approval notice this week. So why is it down? Well, alongside the approval, the FDA stated it required a box warning that recommends taking the drug 6 hours either side of any other oral administration, rooted in the fact that Veltassa binds a host of other drugs and – as a result – would render them ineffective if taken in correlation. There are a number of symptoms associated with Hyperkalemia that require the taking of oral dosages, and this warning will surely limit the ability/desire to prescribe Veltassa by physicians. The FDA also stated it should not be used in life threatening cases (i.e. those cases where the heart rhythm is affected) because of its long onset efficacy.

Now where does ZS Pharma play into it? Well, the company has developed its own treatment for Hyperkalemia, again a potassium binder, that traps potassium ions in the GI tract and removes them by way of excretion. The company submitted an NDA based on a phase III earlier this year, and is working on a PDUFA date for the treatment – ZS-9 – of May 26 next year. So why will this one be any different? If Veltassa got a box warning, and they are both potassium binders, surely ZS-9 will do so as well? Well, not necessarily. ZS-9 is a selective potassium inhibitor. This means it traps potassium ions, but allows other ions to pass through it freely. This means that – theoretically at least – there will be no need to spread it out from other orally administered drugs, so long as they are not potassium based, as it should have no effect on their bioavailability. In turn, therefore, there should be no need for an FDA box warning. Price points for the two therapies are likely to be similar, and so when it comes to a physician prescribing one or the other, they will likely choose ZS-9 over Veltassa based on the selectivity feature alone. This could severely limit the potential market for Veltassa in its hyperkalemia indication.

All this, of course, assumes FDA approval of ZS-9. There is no guarantee, despite strong phase III data, that ZS-9 will ever reach commercialization. In that sense, and for now at least, Relypsa has the upper hand in the hyperkalemia space. Come May, however, this could quickly change, if we see an approval without a box warning. And therein lies our opportunity. This development has essentially opened up the entire market to ZS if it can get approval, whereas prior to the approval announcement it was pitching to compete directly for market share with a treatment that would have had circa 8 months’ head start on commercialization. A risk tolerant investor could take a position in ZS now (as we have seen some do, illustrated by the intraday gains) in anticipation of approval and relatively exclusive access to the hyperkalemia potassium binder market.

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Gold and Oil Stocks Lead the Way In the Face of a Strong Dollar

By
Rafi Farber
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Golden Oil

There are days and there are days. On some days the gold bugs index (^HUI) just can’t catch a break, and the mining ETFs (NYSEARCA:GDX) look for every excuse to break down. We’ve seen that twice this week.

But on other days, the miners act like a spring being pushed back, looking for any excuse to jump and resisting down ticks in gold. Yesterday was that kind of day. This kind of double-edged mood swing behavior almost makes it seem as if these stocks have a consciousness all their own. You never know what kind of mood they’ll be in on any given day.

And despite the mood swings, gold stocks are still handily outperforming gold itself (NYSEARCA:GLD) nearly 7:1. Let’s put that number in perspective. The rally in gold stocks from 2008 to 2011 was the largest and most aggressive since 1978-1980. Still, gold equities only outpaced gold 1.7:1. The night is young as they say and the rally is only a month old, but so far it still looks like a solid beginning.

It was the action in oil stocks yesterday that make another leg up in the next week or two more likely, for both oil and gold. Oil (NYSEARCA:USO) was up only 0.5% on the day, and yet Exxon Mobil (NYSE:XOM) was up 3.3%. Chevron Corporation (NYSE:CVX), typically a more leveraged play than Exxon, was up 2.5%. For the first time since bottoming on August 24th, oil stocks are outpacing oil, another sign that gold and oil may have bottomed together.

The next leg up may already be starting as spot gold is up $8 this morning on the Comex. Unless we see one of those typical and suspicious multi-thousand futures contract dumps in the premarket, gold stocks should be up strongly at the open.

Gold 50WMATechnically things are looking good as well. If and when the new leg up begins, gold will have broken through its 50 week moving average (WMA). There have been false breakouts before that quickly fell right back through it though. If this breakout is to be real, we’ll have to see some consolidation just above that line as gold hugs the top of the 50 before attempting a run at the 200 WMA.

The strongest sign today that the new baby bull is intact though, is that despite an enormous day for the US dollar which rocketed up 1.5% (NYSEARCA:UUP), gold and oil stood firm. Normally, in a bear market, the bears would take that opportunity to sell hard into the dollar breakout. Yesterday, there was no sign of that at all.

Prepare for the next leg up.

Disclosure: The author was long gold and XOM at time of writing.

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Biotech 101: Patents, Exclusivity and Generics – What’s it all about?

By
Jennifer Aldershot
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NDA

As if the biotechnology space isn’t convoluted enough, there is a very important aspect of t that we, as biotech investors, must take into consideration before putting our hard earned capital at risk. It is an element that, while relatively simple in concept, is often misunderstood, even by seasoned participants in the space. We’re talking about the legal side of the industry – patents, market exclusivity, branded drugs and generics. Where do they all fit in with each other, what do the terms mean, and why are they in place? Let’s take a look.

Patents

A common misconception is that the FDA grants a patent to a drug development company on approval of that drug. This is not the case. Instead, the company in question must apply for a patent with the patent authority in its respective country (the United States Patent and Trademark Office in the US, for example), requesting patent protection for a particular element of its development program. More often than not, in biotech, this element is the science and technology behind its candidate’s mechanism of action. If granted, a patent will generally last for 20 years from grant date, although this can vary. The key thing to remember here is that a company will generally pick up a patent on its drug very early on in the development process. As a result, and as is so often wrongly believed in the space, a drug is not under patent protection for 20 years from approval. If the company picks up a patent during preclinical, and it takes 16 years to take the drug through to approval, it will only have 4 years left of patent protection. Which brings us nicely on to…

Market Exclusivity

Unlike patents, the FDA grants market exclusivity on approval of a drug. The timeframes associated with exclusivity differ (we’ll get to this in a second) but the concept is the same regardless of timeframes – the FDA will not approve a treatment that is biosimilar to the treatment in question during the period of exclusivity. There are a few different types of exclusivity – Orphan drugs get 7 years, new chemicals get 5 years and pediatric exclusivity (where a company carries out further studies in children for an already approved drug) gets an extra 6 months tagged on to the end of its initial exclusivity period. There are a few other predefined exclusivity criteria, which you can read about on the FDA’s discussion on the topic here. Outside of these predefined examples, the FDA can grant exclusivity at its discretion to any approved therapy.

Generic Drugs

As soon as market exclusivity expires, a company can submit an abbreviated new drug application (ANDA) to the FDA. This is basically an NDA that demonstrates it can create, produce and supply a drug that is identical to an already approved drug. It must demonstrate noninferior efficacy, a similar safety profile and be chemically identical. A company can challenge the patent of a particular drug it is looking to develop a generic treatment for, but not the exclusivity. To challenge, a company goes to a court to try and get the patent overturned. If successful, and assuming the exclusivity period for the treatment in question has expired and the FDA approves the ANDA, the company can commercialize its generic treatment. Because of the reduced cost of developing an identical version of an already developed drug, generics are far cheaper to the patient than branded drugs. There are a number of companies, Teva Pharmaceutical Industries Limited (NYSE:TEVA) for example, that operate solely in the generic drug space, primarily to avoid the cost and time it takes to develop drugs from scratch.

Why does the FDA grant exclusivity?

One word, incentive. As we have said, it costs an awful lot to develop a drug. If Pfizer Inc. (NYSE:PFE) knew that as soon as the FDA approved its latest cancer drug that it spent $100 million and 12 years creating would start getting patent challenges and generic versions created as soon as approved, it would likely not spend the money to do so in the first place. This would mean we didn’t get the latest cancer drug, however, so the FDA needs to offer exclusivity to incentivize Pfizer to spend the money on development.

 

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A Closer Look At The Biogen Alzheimer’s DoubleDown

By
Jennifer Aldershot
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biogen

Premarket today, alongside its third quarter revenues financial report, we learnt that Biogen Inc. (NASDAQ:BIIB) is set to initiate a corporate restructure that will cut workforce and elements of its R&D in order to free up $250 million from its current annual run rate of operating expenses. In the statement that accompanied the release, the company reported the areas of its operations to which it hopes to reallocate the freed up funds, and one area in particular stands out more than any other – Alzheimer’s. The potential market for an Alzheimer’s therapy is huge, but it is notorious for high profile failures. Reports suggest that the failure rate for Alzheimer’s candidates in clinical trials is as high as 99.9%, with only five having been approved by the FDA in history and none since 2003. The last to be approved was Namenda, developed by the then Forest Pharma, which was subsequently taken over by Actavis which in turn was taken over by Allergan plc (NYSE:AGN). Why all the failures? Well, we don’t really know what causes Alzheimer’s. We know what it is – it’s a shrinking of the of the cerebral cortex (the outer layer of the brain) and the resulting and concurrent buildup of protein, referred to as amyloid plaque, which results in a reduction in neurotransmitters activity. Biogen is seeking to change the face of the space, with its three lead candidates. Here’s a look at all three.

First up, Aducanumab. Biogen picked this one up as part of a licensing collaboration with Neurimmune back in 2010, and has since gone on to carry the drug to an ongoing phase III. The treatment is a monoclonal antibody that, to simplify, binds to the amyloid buildup and in doing so, clears up the plaque in patient’s brain. The theory is that this clearing up will restore neurotransmitter activity, or if not restore, at least halt the regression of. Back in July we got a bit of a setback, with the treatment failing to replicate early efficacy demonstrations at higher dosages, but with the latest phase III in full swing, and Biogen’s restructuring to focus on the candidate, it looks as thought a setback was all it was. There has long been an argument that Alzheimer’s is dose dependent, and if this is true, the failure at the higher dose at least gives us a cap as to the effective dose to work with going forward.

Next, BAN2401. This one targets Aβ protofibrils, which are (again simplified) a key building block of the amyloid plaques. The treatment is, again, a monoclonal antibody, which binds to the Aβ protofibrils and halts their development. The company kicked off a phase II last year in collaboration with Eisai Co., Ltd. (OTCBB:ESALY), which is ongoing and expected to last 18 months. Topline date should hit sometime during Q4 2016, and could be a huge determinant in the near term fortunes of Biogen, especially in light of the recent restructure. By focusing on protofibrils with BAN2401, the company is sort of hedging its bets. Aducanumab and BAN2401 are two very different approaches, and it is likely one will be far more effective than the other. In some ways, this mitigates the risk associated with going after an Alzheimer’s indication. Having said this, it will translate to wasted spend (probably) in at least one of the targets.

Finally, the third candidate is E2609. This one inhibits BACE (β-secretase enzyme inhibitor) in an attempt to stop the clumping of the amyloids that form the plaques. Again, this is in phase II – slightly behind BAN2401 from a to-end-of-trial perspective. Also again, this is an example of the company hedging its bets – for want of a a better phrase: seeing what sticks. We’ll likely get data from this one (top line, at least) during the first quarter of 2017. However, near term catalysts will be updates on the various dosing cohorts, and a reiteration of the safety and tolerability (the notorious root of many an Alzheimer’s trial halting) over the coming 12 months.

So there we have it – three treatments, one that tries to break down plaques, one that targets their building blocks, and one that tries to stop them from clumping. The hope is at least one of these approaches will demonstrate efficacy through to phase III completion. If it does, the company’s restructure will be vindicated to the extreme. As stated in the introduction to this piece, however, there is a large amount of risk involved. With so many failures to date, is this too much of a risky refocus for Biogen, or will it pay off? Keep an eye on these three candidates to find out.

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Two Of This Week’s Movers And Shakers In Biotech

By
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biotech

Last week was another big week in biotech, as a host of key data releases coupled with a few major earnings reports injected some considerable volatility into the space. As we head into a fresh week, what are the movers and shakers in the sector? Let’s take a look.

Neos Therapeutics, Inc. (NASDAQ:NEOS)

First up we’ve got Neos. Back in July, Neos submitted an NDA to the FDA for its lead development pipeline candidate, NT-0202. The treatment is an oral amphetamine designed to target attention deficit disorder (ADHD). The treatment has dogged Neos for a while now, with the company initially filing an NDA for its consideration back in late 2012, and receiving a complete response letter stating the company need resubmit with extra pharmacokinetic and supply line data. For those not familiar, a complete response letter is basically the FDA’s way of saying “not this time, but try again”. Shire plc (NASDAQ:SHPG) also sued Neos over a reported patent infringement on the drug back in 2014, but this was pretty quickly overcome. Anyway, on Monday evening, we got word that the FDA had notified Neos of some deficiency related to the labelling of the product in its NDA – not what specifically, but a deficiency nonetheless. The review date is set for January 27, 2016, and if the deficiency is a serious one, the FDA could push the drug back to Neos and either a) decline it outright or b) demand a fresh (or at least amended NDA). Either option would be a disaster for Neos, as investors are already losing patience with a treatment that should have been approved in 2013. The company has one thing going for it, however, it already generates revenues from its generic version of Tussionex (essentially a souped up cough medicine). That said, the revenues (circa $0.5 million per quarter at last count) are not enough to fund further investigation into NT-0202, if demanded by the FDA. The company is down close to 25% on the latest announcement, and looks set to fall further during today’s session. There may be an opportunity to get in at a discount if the labelling deficiencies are minor and amendable before the fixed PDUFA date, but before we get more detail, this is a very risky play. Watch this space.

Horizon Pharma plc (NASDAQ:HZNP)

Going slightly larger cap now, let’s look at Horizon. During Monday’s session, Horizon lost more than 16% of its market cap to bring it to trade a little ahead of $16 a share. The decline comes as the latest in a string of similar declines, with the company already having lost close to 50% of its market cap in September, and about 28% between mid Jul – mid Aug. The interesting thing here, is that nobody really knows what’s driving the dips. Obviously we have seen some overarching bearish momentum in the biotech space, but Horizon is down 50% across a period during which it announced a spate of positive releases, and is pushing an aggressive takeover, of which it seems to be under control. We got record Q2 financials reported earlier this year, with the company pulling in $31 million net income on $172.8 million net sales – a 254% and 161% change on over the comparable period a year earlier respectively. Shortly before this, the company announced a $33 per share offer for DepoMed Inc. (NASDAQ:DEPO) – a company that pulled in a net income of $131.7 million. Despite resistance, meetings have been set up between Depomed shareholders and Horizon management that could see the hostile takeover complete before the end of the year. In short, this looks to be a real opportunity to pick up a cheap exposure to a company that not only has strong financials, but is also set to expand its operations through a hostile takeover. All this, and we haven’t even mentioned its development pipeline. The company announced earlier this year that it was kicking off a phase III for one of its lead candidates – Actimmune – with a target indication of Friedreich’s Ataxia sufferers (the latter is an inherited disease that does nerve system damage). The treatment is fast tracked by the FDA, which means the company can submit bits of data as they come in. This not only means that we could get a quicker approval when it comes to submitting the NDA (assuming trial success, of course) but also that we have the potential for a spate of upside catalysts over the coming quarters. Again, this is a stock down more than most, and could be a great opportunity to get in cheap ahead of some upside. There may, of course, be something we are missing. The company’s CEO has been relatively quiet in the wake of the decline, and it might be worth seeing what he has to say at the upcoming special shareholder meetings (if we can get access to what’s discussed) before picking up an exposure.

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What Now for Gold?

By
Rafi Farber
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Gold Bug

It wasn’t a pretty day for gold bugs. The four year old gold bear has seen many days like this before. Gold (NYSEARCA:GLD) barely down but gold stocks plunging. Is the bounce over, and will the bear resume its course yet again?

There is no definitive answer at this point, but consider that days like this happened quite often during even the fiercest parts of the last gold bull market as well. The bounce out of the October 2008 bottom exhibited plunges in the Gold Bugs Index (^HUI) very similar to what we saw today, on very minor down days for the metal itself. Even the final big run from July to September 2011 saw days where gold miners dropped 4%.

If the bear is intact, look for a break in the HUI to below 115. That is the most recent support zone that should stay solid if we are in a new bull market. There may be a brief break at that level just to clear sentiment and throw technical traders off who put all their apples in the support/resistance cart, but if the break is marginal and quickly reversed, we can continue higher from here to around 150 before the next resistance zone is tested.

HUI

Days like this being quite familiar to gold traders in the last four years, we should see bearish sentiment increase rather quickly and the 14 day RSI drop near 50 on the assumption the bear has resumed. This should give some running room for the next leg up by the end of this week or early next.

Keep in mind that the 115 level on the HUI index is also now the same as the upturning 50 day moving average. A new bull market should stay above that line in the sand, whereas a bear market really should have it turn back down again so the 50 cannot move above the 200. That type of move would be the ultimate confirmation of a new bull market, and we have a while to go before we get near that point.

The most important thing to watch on a daily level for now is what kind of move the HUI makes on the next up day for gold. Gold stocks need to be up big when the next up day hits. Otherwise, this could just be another bull trap.

 

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