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This Undervalued Company Has Huge Potential In The Bacterial Resistance Space

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cempra

Between July 28 and Oct 22, Cempra, Inc. (NASDAQ:CEMP) lost 66% of its market capitalization. Over the last couple of weeks, however, the company has gained 80% on its October lows, and looks to be set to continue these gains as we head into the middle of the week. Despite the last two week’s gains, however, the stock is still discounted on highs, and we believe this discount represents a great opportunity to get a cheap exposure to what could be a high growth biotech over the next 24 months. Here’s why.

Cempra’s Pipeline

First, the company. Cempra has two clinical stage candidates in its pipeline: Solithromycin and TAKSTA. The former is its primary and the latter its secondary focus. Both are antibiotics, and both have the potential to be real blockbusters in their respective indications. Solithromycin’s primary indication is community acquired bacterial pneumonia. (CABP). The drug is what’s called a macrolide – which is a gram positive therapy that physicians prescribe to treat respiratory tract and soft tissue infections (both of which are associated with CABP). There is a real problem with resistance in the antibacterial space. A pneumococcus is (essentially) just another word for a bacterium that causes pneumonia. Pathogenic pneumococci are the harmful type (most bacteria is harmless) and more than 40% of pneumococci are resistant to the currently available antibiotics. Cempra is hoping to fill this 60% differential with solithromycin.

The drug has already proven efficacy in two phase III trials, and a third is currently underway – data from which the company presented at the CHEST event at the end of October. Once again, the treatment has proven efficacy. We are now at the stage where the only real gating to an NDA submission for this indication is – as stated by the company in its latest earnings conference call – time. Cempra has priority review, meaning it can submit portions of its NDA as and when they complete, rather than having to wait for the full thing to complete before submission. As the company processes the data from its trials, it can submit it to the FDA for review. By the time the company completes the final elements of the submission, therefore, the FDA will already be well aware of the safety, tolerability, pharmacokinetics etc. of solithromycin, and we could get a quick approval.

The second pipeline treatment, TAKSTA, is just as promising. The drug is already approved across the majority of Asia, Europe, Canada, South Africa to name but a few (not as TAKSTA, but instead as various formulations of TAKSTA’s active compound fusidic acid). Cempra has exclusive rights to the drug in the US, and the company is currently preparing to kick of a US based double blind phase III for an acute bacterial skin and skin structure infections (ABSSSI) indication. The ABSSSI trial should start before the end of the year. In phase II for this indication we saw excellent efficacy and there were very limited adverse events – something we expected due to the nature of the already approved in any countries therapy.

Opportunity

Basically, we have a company here that has two products that have the potential to be billion dollar therapies; Cempra has stated it will price both in the hundreds of dollar range, which is lower than some recently approved antibiotics, but the market is so huge that the company doesn’t need to price high to generate big revenues. This is a space that a number of the big names – Pfizer Inc. (NYSE:PFE) and Baxalta Incorporated (NYSE:BXLT) to name two – have trued and failed in, so there may also be the potential for a partnership on the commercialization aspect of both drugs as big pharma has already expressed interest in exposure to the non-resistant antibiotics. Cempra has stated that it doesn’t require a partnership (i.e. it can fund and staff the commercialization itself) but if the terms are right, the backing of a big player won’t hurt its chances).

Catalysts

So what are we waiting on as near term catalysts? Well, we’d like to see the topline from the data presented at CHEST – when the company reports this formally we will likely see some upside momentum. Also, the kicking off of the aforementioned phase IIIs (one before the end of the year and one during 2016) should do similar. All said, definitely one to keep an eye on – especially at its current valuation of a little over $1.2 billion.

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Nascent Gold Bull Still Intact

By
Rafi Farber
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Gold Bug

The gold market has been rough ever since the Federal Reserve for all intents and purposes forced itself to raise interest rates by 25 basis points come December. That was on October 28. The language of that meeting included the phrase “by next meeting,” when discussing raising rates, and the Fed is almost never that specific. That language caught gold bulls by surprise and tore the metal down.

Since then, gold (NYSEARCA:GLD) has fallen 4.2%, which by itself does not look good. However, two things indicate an imminent short term bottom. First, silver (NYSEARCA:SLV) is outperforming gold since the decline, only down 3.6%. In bear markets, silver typically doubles gold’s decline. Second, the gold mining stocks (NYSEARCA:GDX) are only down 6.9%. If the last rally were only a bear market rally and this decline a continuation of the bear market, then we’d see gold stocks getting hammered by much more than 10%. Less than 7% during a 4.2% decline for the metal itself is hardly a rout.

In fact, the last two trading days have been even more pronounced in terms of outperformance by the miners. While gold has fallen over 2% in the last two days, the miners remain unchanged. This indicates an imminent bottom for gold, and once that is reached, the miners should spring higher and top their recent high at $17 over the next run.

As for gold itself, holding above $1103 would be a good sign, as it would indicate the pattern of higher lows remains intact. Right now we are trading at $1120 an ounce. That gives us $17 of breathing space before gold needs to reverse to keep the pattern of higher lows intact.

Gold TechsUnless gold stocks are giving us false signals here, which is always possible, the next bottom should be in by the end of the week.

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

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Here’s Why These Three Biotech Giants Just Gained Strength

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AbbVie

Yesterday was a big day for a number of the big names in biotech. A host of announcements hit markets, and we got an influx of volatility, both bullish and bearish. Here’s a look at there of the biggest movers in big pharma, and the drivers behind the action.

AbbVie Inc. (NYSE:ABBV)

First up, AbbVie. AbbVie closed out last week at 59.55. By the time the session kicked off on Monday morning, the company was trading at 61.59, and closed on the day at 63.38 – a circa 6.5% gain across US trading. The driver behind this action? A revised guidance from Morgan Stanley. There has been a lot of concern as late as to the future of Humira – AbbVie’s runaway blockbuster that generates in the region of $10 billion a year for the company. Humira consistently ranks at the top of the biggest global sellers list, but AbbVie’s Humira patent (or at least some of the most important elements of it) expire at the end of next year. If the company cannot successfully mount protective cases to avoid generic competition, a large portion of its revenues (circa 50%) could be at risk. This concern has put pressure on AbbVie’s market capitalization over the last 12 months, but the company has consistently reiterated it believes its patent scope to be strong enough to mitigate any generic risk. Obviously, it is in AbbVie’s interests to maintain this position. The company surged yesterday as Morgan Stanley came out in support of the company’s opinion, and revised AbbVie to overweight, primarily based on Stanley’s in-house analysts’ opinions of its patent case.

Pfizer Inc. (NYSE:PFE)

Next we’ve got Pfizer. Pfizer gained close to 4% during Monday’s US session, and pre-session looks as though it is set to reiterate that strength today. There were some reports that suggested the driver behind these gains was a positive thesis outlined in an article on Barron’s, but in reality, the gains likely came as a result of trial data reported pre-session on Monday relating to the company’s rheumatoid arthritis treatment – Xeljanz. The drug is what’s called a JAK inhibitor, and is currently approved for treatment of rheumatoid arthritis. At the moment it only generates around $100 million a quarter for Pfizer (comparably small when considered against a number of the company’s other commercialized therapies) but the latest announcement suggests Pfizer is set to ramp up these revenues going forward. The company submitted an NDA for a psoriasis indication earlier this year, and yesterday announced it will present 20 abstracts relating to safety and efficacy in the RA indication, each of which could easily bolster its sales and marketing efforts when pitching to physicians. They will also likely highlight efficacy in combination therapies, which in turn could add to the approved indications of the drug going forward. You can check out the full list of abstracts here, but as far as we are concerned, the ones to watch are the post-hoc analyses of the drug in RA therapy. Pfizer expects to present data from six of these, and each could imply expanded Xeljanz revenues.

Valeant Pharmaceuticals International, Inc. (NYSE:VRX)

Finally, Valeant. Again, Monday’s session proved a winner for Valeant, with the company gaining more than 7% on the session open to close at 100.47, then gain a further 4% after hours to bring today’s open price to a minimum of 104.5. This one is an interesting one. Basically, there has been a considerable short interest for Valeant over the past year or so – primarily driven by the hypotheses of short seller Andrew Left – head of short selling firm Citron Research. The hypothesis revolves around so called “improprieties” in Valeant’s accounting – improprieties that Valeant has strongly denied. Markets expected Left to elaborate on the nature of the improprieties yesterday, in support of its short side bias. Instead, Citron released a statement that implied it would not be elaborating on the situation – something that markets look to have interpreted as suggesting there is nothing to worry about. Citron did state they would continue to investigate Valeant, but as yet they have not come up with any clear cut evidence to back their claims. It will be interesting to see how this plays out. If Citron reports something damaging, we could see a collapse in Valeant’s market capitalization in a very short period of time. If the whole thing dies down, we may see a steady upside revaluation for the company before the year draws to a close. Definitely one to watch going forward.

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Here’s What Dyax Means For Shire

By
Roger Hannington
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Shire Hemophilia

Premarket on Monday, we got word that Shire plc (NASDAQ:SHPG) is set to buy US biotech Dyax Corp. (NASDAQ:DYAX). The news comes as a bit of a surprise to markets, as the former is currently locked in an aggressive buyout tussle with Baxalta Incorporated (NYSE:BXLT), and the $5.9 billion it is coughing up for Dyax could hinder its capacity to fund the deal, despite management suggesting otherwise. Dyax is up more than 30% ahead of the US session bell, whereas Shire is down a little over 1% on the London session. Here’s a look at exactly what Shire is getting for its money, and a discussion of the implications of the asset acquisition for Shire’s financials going forward.

First then. Lets outline the terms of the merger agreement. As mentioned, Shire will pay $5.9 billion for Dyax at a per share rate of $37.30 – a circa 35% premium on the company’s Friday close. There is also an additional $646 million earmarked for issue on the approval of Dyax’s lead pipeline candidate, DX2930, which we will take a closer look at shortly. If everything runs according to plan, the two companies expect to close out the deal during the first quarter of next year, though there may be some delays rooted in Shire’s portfolio of drugs that already treat hereditary angioedema (HAE) – targeted indication of DX2390.

So – what is Shire getting for its money? Dyax has a few drugs in its trial pipeline, and a number of licensing deals that generate small number revenues, but the two primary assets Shire looks set to acquire are the aforementioned DX2930 and an already commercialized drug called Kalbitor (again, this one is an HAE therapy). As a quick note, for those not familiar with HAE, it is a blood disorder that causes rapid swelling of extremities and the face (and genitals, in rare instances). It’s very rare – affecting as few as 1 in 50,000 in the US. Looking at the science, it is caused by excessive levels of what’s called bradykinin, a peptide that is generally responsible for vasodilation and blood pressure reduction. Excessive bradykinin creates leakages in blood vessels, translating to swelling. Kalbitor inhibits the process that produces bradykinin. From a financial perspective, Dyaz reported Q3 2015 revenues for Kalbitor of $17.8 million – down from $20.3 million during the same period a year earlier.

The second asset is DX2930, which is also a therapy that inhibits the the production of excessive bradykinin. The key difference between the two drugs are Kalbitor is on-demand, it is taken as a response to an attack. DX2930 is a biweekly ongoing treatment targeted at preventing attacks from happening (the active ingredient is the same in both treatments, but the latter has a half life twice that of the former, allowing for it to be an ongoing preventative). The only other drug available as a preventative for HAE currently is Cinruyze, marketed by (you guessed it) Shire. This is the root of the antitrust issues we alluded to earlier that the companies may run into before the deal closes. The company reported promising data from a phase Ib earlier this year, and has just closed on the final protocol for a pivotal phase III with the FDA. If successful, we should see an NDA filed late 2016, early 2017.

And what about revenues? Well, Shire believes it can ramp up the Kalbitor revenues based on its ability to leverage its already successful dealings in the HAE space. If DX2930 is approved, analyst expects annual global sales of circa $2 billion. Taking into account the $646 million owed to Dyax on approval of DX2930, if Shire can meet its projections it should make back the debt financed total cost of the acquisition before the decade is out. This, of course, is an optimistic projection. The antitrust issues alone are enough to set back development if they come into play, so we must consider these before picking up an exposure to Shire based on its Dyax acquisition.

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Gilead’s Expansion Treatment Could Open Up A Billion Dollar European Market

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gilead

Presession on Friday, we got the news that Gilead Sciences Inc. (NASDAQ:GILD) had submitted an NDA to the FDA seeking approval of a fresh combo therapy that incorporates one of its currently approved treatments, Sovaldi, and a nucleotide called velpatasvir. The company is targeting an indication of Hepatitis C – an indication for which Gilead already has two approved treatments. So why this extended indication? Well, for exactly that reason. Its currently approved therapies only treat a narrow spectrum of Hepatitis C patients, whereas this refreshed combination (if approved) will treat a much wider scope of sufferers. With this said, let’s take a look at the drug itself, try and figure out how it differs from the currently available therapies (and in turn why it can treat all patients rather than a limited scope) and consider what it might mean for Gilead from a revenues perspective going forward.

First, its important to address what is meant by hep C genotypes. Because hep c is a virus, it is able to mutate into numerous different forms – similar to subspecies of a particular species of animal (think lions and tigers). Each of these forms is a genotype, and there are currently eleven identified genotypes. Most available treatments target a specific genotype (1,2 etc). The therapy Gilead is proposing will target 1 thought 6. The vast majority of sufferers in the US are hep C genotype 1, but in Asia, Europe and Africa the majority of patients are 2 through 6. The company’s current treatment, Sovaldi, inhibits the RNA polymerase of the hep C virus in genotype 1 – basically meaning it cannot replicate and, in turn, the infection subsides. Velpatasvir is what’s called a NS5A inhibitor, which means it inhibits the structural form of a replicated virus – again, inhibiting its reproduction. The difference between the two is substantial from a scientific perspective, but from a non-scientific viewpoint, all we really need to know is that they both stop hep C virus replication, the former in hep 1 genotype patients and the latter (in combination with the former) in hep 1-6.

So what are the chances of approval? Well, Gilead has conducted four phase III trials across patients in the 1-6 genotype, and the combo therapy met its primary endpoint across all four trials. Hep C drug efficacy id measured by what’s called an SVR12 rate – basically a measurement of the infection prevalence at 12 weeks post treatment (this used to be 24 weeks – SVR24 – but has recently reduced to 12). An average SVR12 rate of 95% across the four arms of the trial proved efficacy, and with no higher rate of adverse events seen between a double blinded placebo arm and the treatment arm, there looks to be no reason why the FDA wont approve the combo.

And what would approval mean for Gilead? The company generates between $2-3 billion a quarter from Sovaldi, at a price point of between $84-95,000. If the FDA approves the treatment, it will target about 10% of US sufferers, but it is the wider global market that will be the real money maker for the company. An FDA approval would pave the way for an EMA approval, which if Gilead achieves, could open up a similar size market as that of Sovaldi in the US for the new combo therapy in Europe – circa $2 billion. Gilead has stated that it intends to submit an NDA to the EMA before the end of 2015.

Near term catalysts? Look for an advisory panel recommendation from the FDA as a near term upside catalyst out of the US, and a confirmation of the NDA, EMA submission as an upside driver out of Europe.

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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

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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

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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
-
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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