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Sanofi Has Just Become a $14B Stem Cell Play

By
Jennifer Aldershot
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Sanofi

Last week we covered a number of market moving deals in the biotech space. At the top of the list were two major deals by AstraZeneca PLC (NYSE:AZN) in the immuno-oncology arena, both of which reached triple digit millions of dollars. Now as we head into a fresh week in the biotech arena, another partnership announcement has hit press – this time involving fellow bio incumbent Sanofi (NYSE:SNY). The latter announced on August 7, 2015, that it had entered into an agreement with Germany-based Evotec, with the goal of developing a beta cell replacement therapy using stem cells to treat diabetes. The arrangement is the latest in what is has proven a controversial area of biotech over the past decade or so, stem cell research. However, if successful, it could give both companies exposure to a condition that currently affects just short of 400 million patients worldwide, and is – despite this enormous prevalence – as yet to receive anything close to a one-time treatment. So, with this said, let’s take a quick look at the deal, what the science involves, and what it could mean for both companies.

First, a look at the terms of the deal. From the looks of things, this is very much a 50-50 situation. Often we see mega cap bios provide the capital resources in a collaboration such as this, but – while there are funds earmarked – risk looks to be shared pretty equally. Sanofi will offer a €3 million upfront payment, and put aside a further €300 million marked for development and trials etc. Capital aside, however, both companies are contributing large amounts of human resource and Evotec looks set to put forward the lion’s share of the expertise in the stem cell arena.

What does the science look like? As we have mentioned, the companies are going after type I diabetes. People with type I diabetes don’t produce enough insulin. This means that – once the blood sugar (glucose) rises – the body is unable to use the glucose effectively. The things that produce insulin in the body are called beta cells, and they are found in what’s called a pancreatic islet – a small bunch of cells found in the pancreas. The traditional way to treat type I diabetes (regular insulin shots aside) is a pancreatic transplant. This basically means taking a transplant from a deceased donor and introducing it to a new host. Obviously, this is very risky, not only because it involves serious surgery, but also there is no guarantee that new host body will take up the pancreas. Further, there is no guarantee that the pancreatic islets in the new pancreas will produce insulin effectively. What Sanofi intends to do, is to take pancreatic islets from stem cells and introduce these into diabetes sufferers pancreas. Less than 92% of the pancreas is related to the production of insulin, and so the benefit to the avoidance of transplanting a full pancreas is obvious. If it works, the collaboration between the two companies could present a much safer, simpler and more effective method of treating type I diabetes. For those interested, there is a great background on this sort of treatment (which incidentally has been around since the 70s but as yet not been taken full advantage of) here.

So what is the market potential for the treatment, if the two companies can demonstrate efficacy in trial? The current market size for type I diabetes (indication for this treatment) is around $6.6 billion. However, market data suggests that via a compound annual growth rate of 7.6%, we could be looking at a market of around $14 billion by 2023. As a quick side note, Sanofi saw its type I diabetes treatment Toujeo approved earlier this year, within just one month of the patent on its top-selling Lantus insulin product expiring. The latter contributes around 20% of Sanofi revenues, and so the Toujeo approval came at a good time for Sanofi shareholders. Additionally, the move into stem cell diabetes treatment research suggests that rather than looking for an upgraded alternative to Toujeo (which is essentially just insulation administered via an epi-pen), Sanofi expects to move into a different class of diabetes treatment when the aforementioned hits expiry (February 2027).

More from Market Exclusive:

  1. What Is the Real Cost of AstraZeneca’s Eye Cancer Flop?
  2. Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

  3. AstraZeneca Might Just Have Tapped Into 90% of a $13BB Market

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AstraZeneca Might Just Have Tapped Into 90% of a $13BB Market

By
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Astrazeneca

There has been no shortage of oncology related developments in the biotech space over the last six months, as a number of the incumbent pharmas have looked to shift into what could turn out to be the next blockbuster arena. We have seen complete turnarounds in strategy, IPOs targeted at funding cancer immunotherapy trials and headline acquisitions already this year, and on August 6, 2015, we got yet another of the latter. On this day, AstraZeneca PLC (NYSE:AZN) announced a fresh partnership with Heptares, the developmental biotech unit of Sosei Group Corporation (SOLTF), that will see it gain exclusive global rights to HTL-1071, a novel adenosine A2A receptor antagonist targeted at immuno oncology. The announcement comes just a couple of days after AstraZeneca announced it was expanding its partnership with Isis Pharmaceuticals, Inc. (NASDAQ:ISIS), and – while the company’s stock gained on the second of these announcements, we are down premarket on Friday. So, with this said, what’s involved in the deal, and what might the treatment mean for all parties involved if it gets to market? Let’s take a look.

So first, let’s have a look at the deal. From what we can see, the deal is two-pronged. The first side will see the two companies in-license a drug designed to increase the efficacy of an investigational anti-PDL1 immune checkpoint inhibitor, durvalumab (MEDI4736), currently being developed by MedImmune, AstraZeneca’s global biologics research and development arm. For those not familiar with the term, in-licensing basically means the pooling of resources between two companies (more often than not pharmaceutical companies) in order to take advantage of each other’s expertise and/or capital. In this instance, it looks as though AstraZeneca is set to provide capital resources and Heptares knowledge and expertise. On the other side of the deal, and as we mentioned in the introduction, AstraZeneca will receive exclusive global rights to HTL-1071. From a financial perspective, AstraZeneca will pay an upfront $10 million, with a further $500 million earmarked for development and commercialization milestones.

So what’s this treatment all about? Well, over the last few years, we’ve seen a number of university studies suggest that the expression rate of adenosine correlates with tumor proliferation (growth). More specifically, the higher level of the former found in a patient, the higher the level of proliferation. This has led to a number of investigations into the correlation, and has borne the hypothesis that tumors use adenosine to interfere with an immune system response, effectively blocking T cells from attacking cancerous cells. HTL-1071 is all about blocking the A2A receptor of adenosine, to inhibit tumor’s ability to use adenosine (as the antagonist slows down its production) in this immune system interference.

So what’s the potential for this treatment if it does hit markets? Well, the cancer immunotherapy market is forecast to see 29% annual growth over the next eight years, and be worth 13.3 billion annually in revenues during 2023 (globally). Checkpoint inhibitors (of which the aforementioned MEDI4736 is one) will account for between 85% and 91% of the immunotherapy market by 2023, with the figure varying depending on which analysis you consider. Adenosine A2A receptor antagonists such as HTL-1071 can theoretically work with any type of checkpoint inhibitor, and so the natural conclusion is that this therapeutic type could be used in more than 85% of a $13 billion market by 2023.

So what’s the takeaway here? Well, Astrazeneca has on a couple of occasions been regarded as a late, to the immuno oncology space – based on a number of popular news media reports. However, while this may be the case, it now looks as if the company is willing to go full force into the field, and is doing so not just from a general treatment perspective but also from a combination therapy perspective – something that effectively doubles the potential market revenue over the next ten years. This is definitely one to keep an eye out for as things progress, with interim trial data scheduled before the end of this year a likely near-term volatility driver in the stock of both Astrazeneca and Sosei.

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Zynerba Stumbles Out Of the Block when Compared with 2014 IPO Data

By
ME Staff
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Zynerba Pharmaceuticals

Over the past 24 months, two sectors of the investment landscape have been more active than pretty much any others. The first, the marijuana space. A number of states in the US have now legalized recreational marijuana, and many more are scheduled to do so over the coming five years. This legalization led to a skyrocketing of certain marijuana associated companies (and some with no association at all as it!) during the latter half of 2013, and an ensuing crash during the majority of 2014. The second, biotech. Biotech ETFs are up nearly 500% on the last half decade, and despite many analysts calling the rise a bubble, both incumbent entities in the space and new and developing companies seem to be gaining market capitalization as we head into the latter half of 2015. As a result of the gains in the latter of these two sectors, IPO announcements have been rife. We have seen the biggest biotech IPO ever with Axovant Sciences Ltd. (NYSE:AXON) $315 million raise based on its dementia treatments. We’ve had oncology biotech Aduro BioTech, Inc. (NASDAQ: ADRO) double in price from an IPO of $17 a share to close on a 147% gain at $42 before session end. Now we’ve got another IPO that looks nicely positioned as a marijuana industry candidate in the biotech space to draw benefit from the high levels activity in both. That company is Zynerba Pharmaceuticals (NASDAQ:ZYNE).

On August 4, 2015, the company announced the pricing of its IPO of 3 million shares of common stock at an offer price of $14 a share. On top of this, the company announced that it had granted the underwriters an option to purchase 450,000 further shares of common stock at this $14 a share offering price minus the underwriting discount. The IPO hit markets at New York open on August 5, and holding $42 million at its mid-range target price. This looks a reasonable introduction, and should go some way to funding the company’s activity throughout the latter half of this year, but when compared with average IPO numbers last year, looks a little lackluster. 76% of the biotechs that hit markets in 2014 raised more than $50 million, with a further 27% clearing $100 million. Comparatively then, Zynerba is already behind on last year’s figures. However, this does not mean it is not a candidate for gains before the end of 2015. As we have said, the company is positioned in a couple of hot sectors, and these could come together to boost its market appeal. In order to try and gain some insight into its potential, let’s have a quick look at the science behind its lead candidates.

As mentioned, the company waiting cannabinoids and specifically, cannabinoid patches.  Both of its current lead pipeline candidates are in preclinical stage, with the first, ZYN001, a prodrug of THC targeted at patients with fibromyalgia and peripheral neuropathic pain, and the second, ZYN002, a synthetic CBD, targeted at patients with refractory epilepsy, Fragile X syndrome and osteoarthritis. Both are prodrugs – meaning that they are delivered through the epidermis via during which the process converts the prodrug to a different form through a normal metabolic process. The best way to think about this is (using the example of the patch in this instance) the patch being the prodrug, and the final delivery being just a drug, with the “pro” element of it being the patch gel that is absorbed in the epidermis.

ZYN001 uses THC to target can upload receptors in the brain, which are involved in a range of psychological and physiological processes including pain sensation, mood and nervous system action. ZYN002 is the same, with a similar mechanism of action, but uses synthetic CBD, a manufactured cannabinoid rather than THC. So where is this company’s advantage over the more “traditional” marijuana biotech? Well, through the prodrug administration, Zynerba’s candidates can (or so is hypothesized) deliver cannabinoids much more efficiently. The reason for this is that they avoid a “first pass” liver metabolism – something that oral and oral mucosal delivery methods do not.

So what should we be looking at from a timeframe perspective? Well, the company expects to initiate a phase I for ZYN001 mid-2016, and a phase IIa trial during the first half of 2017. Things will happen a little sooner with ZYN002, with the company expecting a phase I trial initiated during the second half of this year, and a phase IIa the same time next year. The recent capital raise should fund the first three of these trials (i.e. the ZYN002 phase I, IIa and the ZYN001 phase I). So these are the primary drivers we will be looking for to boost capitalization short to medium term.

The takeaway? That this is a timely IPO for a company that looks well-positioned to take advantage of two currently hot sectors. However, it has stumbled somewhat out of the blocks, and we would like to see further capital injection before the completion of the first three trials of its two pipeline candidates so as to ensure we avoid potential dilution of any early allocation.

Related Posts:

  1. Phase III Success Makes this Company a Potential Blockbuster Biotech
  2. Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

  3. Ebola Silver Bullet a Social Not Financial Win for Merck

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Ebola Silver Bullet a Social Not Financial Win for Merck

By
Jennifer Aldershot
-
Merck & Co., Inc.

Since the Ebola outbreak in March 2014, big Pharma has rushed to develop a vaccination for the virus. There have been a number of high-profile failures in the space so far, but as we head into the second half of 2016, it looks like we have finally got some progress. In November last year, we learnt that Merck & Co., Inc. (NYSE:MRK) had acquired the rights to an experimental Ebola vaccine called rVSV-ZEBOV, which was at that time being independently developed by NewLink Genetics Corp (NASDAQ:NLNK). The deal saw Merck pay NewLink $30 million upfront, and an additional $20 million during the first quarter of this year when clinical trials got underway. There are also certain royalty payments involved with the deal. Shortly after, on January 5, we learnt that the trial, which had recently been derailed as a result of adverse side-effects (joint pains in about 15% of all patients treated), had been resumed at a lower dose. The lower dose came in at 300,000 vaccine particles compared to a previous treatment of 10,000,000 to 50,000,000 vaccine particles, and as a result of the steep discount, there were concerns from that it would not be able stimulate and antibodial response. However, fast forward to August, and we have just heard that the Ebola vaccine showed 100% efficacy. In groups vaccinated immediately, there were no cases of Ebola in patients from 10 days after vaccination. The significance of this is huge, and backed up by a statement made by Børge Brende, the foreign minister of Norway, which helped fund the trial, and called the vaccine a:

“Silver bullet against Ebola, helping to bring the current outbreak to zero and to control future outbreaks of this kind”

To address the science quickly, scientists created a vaccine by taking out a gene from the vesicular stomatitis virus – a virus similar in structure to, and a member of the same family of, the virus that causes rabies. Having removed the gene, they replaced it with a gene of the Ebola virus that cannot cause Ebola on its own. The question was then whether this single gene could be enough to elicit an immune response. As current results allude to, it was.

On the news, stocks of both companies are up, but in this instance, it will likely be NewLink that sees more benefit from the proven efficacy than Merck. As mentioned, Merck must pay NewLink royalties on sales of the treatment on approval in different countries in Africa. Not only this, but the company will also distribute milestone payments as certain royalty levels are reached. The problem for Merck is that the vaccine is currently targeted at healthcare professionals who are working on the front-line to contain the Ebola crisis. As such, these administrations are funded and – in turn distributed – at low prices by charities and the aforementioned health organization. Currently Merck generates around 10% of its $40 billion revenue from a number of vaccinations, including shingles and HPV, but these are prevalent in first world’s developed nations, unlike Ebola, which will likely remain in the Third World foreseeable future. However, this said, the introduction of this vaccine could be a real game changer as far as containing the Ebola virus is concerned, and while perhaps not a game changing financial win for Merck, it certainly is a game changing social win for the company. From an added value perspective, there is therefore a certain level of attributable financial value – the result of which is the stock price increase we have seen over the last couple of days.

From a short-side perspective, the success of the Merck vaccine could put pressure on both GlaxoSmithKline plc (ADR) (NYSE:GSK) and Johnson & Johnson (NYSE:JNJ), both of which are developing their own treatments in combination with a number of small organizations and international health authorities. Johnson & Johnson committed up to $200 million to accelerating significant expand Ebola vaccine production late last year, and if Merck can demonstrate efficacy in this trial and in turn, a wider scale global trial scheduled for next year, this could be a wasted commitment.

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A $44B trade deficit sounds scary, but it’s really a fiction

By
TradeCircle
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Put the words “trade” and “deficit” together and you’ll get lots of people who call themselves fiscal conservatives in a tizzy. The word deficit sounds pretty scary. If we’re talking about the Federal budget or someone’s personal bank account, fear about persistent deficits may be warranted, but regarding trade it does not matter. Why not?

The Commerce Department released numbers on Wednesday showing that US imports totaled $232B with exports $188.6B. The difference is the so-called deficit. But what does the difference really mean? It means that the US exported 232 billion US dollars in exchange for imports, but only absorbed 188.6 billion US dollars in exchange for goods. All it means is that 44 billion currency units were shipped out of the country on net. So what?

If would be one thing if those dollars had to be redeemed for something, if the dollars were claims on some commodity that had to be paid, but they aren’t. There is no gold standard anymore, so they just sit there, in wherever country they were sent to in exchange for imports. Dollars are created by fiat, so no actual resources are expended in bringing these dollars into existence. The result is essentially $44B of “free stuff”.

An apt analogy would be a “trade deficit” between New York and Texas. Whoever ends up with more dollars and less stuff between the two would have the surplus. Whoever ends up with more stuff and less dollars would have the deficit. But it doesn’t matter who has what, because at the end of the day neither New York nor Texas would owe anything to the other, as all accounts are settled in either dollars or stuff.

Deficits only matter when accounts are not settled, for example when something is owed in the future as in a debt exchange. A deficit in the Federal budget is an issue because the deficits are financed by debt, which is owed later, and in the end that debt is paid by the public that is taxed directly or has its currency inflated to redeem the debt.

The real danger of a trade deficit is only indirect, in that when an economy gets used to exporting non-redeemable paper on net in exchange for stuff, it can get complacent and will have a hard time adjusting if the other side stops accepting the paper. In monetary parlance, if the value of the dollar plummets and can no longer finance the same amount of imports. The other danger, which is related, is what happens when all the net dollars exported come back to the US? High inflation would be the inevitable result.

So while there is nothing bad about a $44B trade deficit, the real trouble will only come when foreign countries stop absorbing these dollars the US prints in exchange for the things they produce.

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Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

By
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frost

Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

Towards the end of last year, we got word that Dr Phillip Frost, chairman and CEO of Opko Health, Inc. (NYSE:OPK), was looking to restructure then private company SciVac (now SciVac Therapeutics Inc. (SVACF) into a public entity. Little more was heard of the matter until March 2015, when gold and precious metals exploration company Levon Resources Ltd announced that it had entered into an agreement pursuant to which Levon would acquire 100% of the issued and outstanding ordinary shares of SciVac. OPKO had a 45% stake in SciVac, and so the deal would see current SciVac owners take 68.4% of the outstanding shares of the new company after its close, and Opko take a little over 30%. At first glance the arrangement can seem a little bit convoluted, but a closer look reveals it is very similar in structure to a number of other public shell spins Frost has orchestrated in the past.

On July 10, SciVac announced the completion of the transaction, and its granting of approval by the Toronto Stock Exchange. Frost has a dedicated following of both individual and institutional investors that monitor his activity, so any stock in which he has a hand has the potential to revalue quickly on positive news. Further, he has an outstanding track record in the biotech space, and for both these reasons, his hands-on involvement with the SciVac deal warrants attention.

SciVac’s flagship product is a Hepatitis B vaccine called Sci-B-Vac. Hepatitis B transfers from carrier to carrier through sexual contact, blood contamination and from mother to child. The virus gets into and replicates in hepatocytes, which are the primary functioning cell in the human liver. This invasion of hepatocyte cells leads to an immune response, during which the immune system attacks infected cells, causing damage not only to the infected cells, but also to wider liver function.

Currently, more than 170 countries have infant vaccination programs, and over 1 billion vaccines have been administered since 1982. The current standard of care necessitates three intravenous administrations over a period of six months. However, despite this vaccination effort, an astounding 2 billion people alive today have been infected with the virus at some point in their lives, an estimated 400 million people are currently carriers, 4 million individuals a year suffer from acute hepatitis B and 1.2 million people die every year from infection.

Infection rate is highest in central and southern Africa, Canada, the Middle East China and especially Southeast Asia where we see a higher than 8% prevalence. So if the current vaccination program is so widespread, why are there so many cases? First, there are a number of high-risk patients who don’t respond to the current vaccines, including sufferers of diabetes, cancer, HIV and renal disease. 50% of chronic liver disease sufferers of which there are 300 million globally, do not respond to current available vaccines. In addition, the current vaccinations are ineffective in the more than 2 million children born to infected mothers each year. Finally, with the current standard of care taking six months, frequent travelers are unprovided for.

So what’s different about Sci-B-Vac? It is a third-generation vaccine, and it differs from the second-generation vaccine currently used in the vast majority of cases in that it contains three hepatitis B surface antigens. Surface antigens are the viral antigen mimics, which display to the human immune system and initiate the immune response. In the second-generation, the vaccine only displays one antigen called the “S” antigen. Sci-B-Vac mimics two further antigens – “preS1” and “preS2”. These extra displays improve vaccine response.

scivac

Image illustrating the difference between 2nd and 3rd generation HBV vaccines.

The third-generation vaccine has demonstrated efficacy in more than 20 company sponsored or investigator initiated trials across 5000+ individuals. The treatment is also already approved in 10 countries, and has been administered to more than 500,000 patients in these regions. Further, in two independent comparative studies, Sci-B-Vac demonstrated it produced seroprotection (i.e. protection from the virus the vaccination is designed to treat) more rapidly in both adults newborns than in healthy individuals treated with Engerix B – the current SOC vaccination.

This is all well and good, but why has Dr. Frost gotten involved? Perhaps because of the mitigated risks involved. The vaccine has already demonstrated safety and efficacy in 500,000 patients and is only approved in 10 countries. This gives us a clear path to phase 3 trials and US approval. As far as timeframes are concerned, SciVac expects to gain marketing approval for the vaccine in Latin America this year, while also meeting with the FDA and the BMA before the middle of 2016. The first quarter 2017, the company expects to have phase 3 enrolment complete in the US, and efficacy data for HIV and renal disease sufferers during first quarter 2018.

To put the market potential for these two indications into perspective, anywhere between 34 and 81% of 10 million chronic renal failure sufferers do not respond to Engerix B, and approximately 30% of 3 million HIV sufferers globally also do not respond. SciVac expects to gain approval for both of these indications in the US and Europe before the middle of 2018.

Hepatitis B is not the only liver disease Frost is involved in either. He is also involved in a hepatitis C vaccine company called Cocrystal Pharma, Inc. (COCP). Cocrystal is up 256% since August last year, down from gains of around 300% logged in April. Frost currently owns about 20% of Cocrystal individually through his investment trust, and his healthcare company Opko also has an 8% position – structuring its ownership in a very similar way to how Frost has set up in SciVac. Cocrystal itself went public through an acquisition structured in an almost identical fashion to SciVac, through an acquisition by BioZone Pharmaceuticals, Inc, then trading under the ticker “BZNE” and since renamed Cocrystal.

What’s even more interesting, is that there is speculation that we could see a further deal between Cocrystal and SciVac somewhere down the line. From a pipeline perspective, it seems to make sense, with both companies being involved in the hepatitis vaccination space. Additionally, from an ownership perspective, it looks to make even more sense – with Frost holding a high percentage stake in both.

Conclusion

Over the last couple of years Dr. Phillip Frost has racked up his holdings in the hepatitis vaccine space through two reverse merger public offerings, and one of them is up in the triple digit percentage range since his involvement. He has now cemented his involvement in the second, and with a risk-mitigated path to what looks like a high percentage chance of regulatory approval, we could see similar growth in SciVac. Of course, in development stage biotech, nothing is certain. However, if there is a man to keep an eye on in the space, it’s Frost.

 

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Disclaimer:

 Market Exclusive Is a financial portal geared to engaging discussion on current financial topics. Market Exclusive is not an investment advisor. Please read our full disclaimer at http://marketexclusive.com/about-us/disclaimer/

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Sanofi Edges Ahead in Diabetes Race, Announces Yet Another Regeneron Potential Blockbuster

By
Jennifer Aldershot
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Sanofi

On July 29, 2015, Sanofi (NYSE:SNY) announced that it had met the primary endpoint in its phase 3 study of LixiLan, a combination treatment targeting diabetes that combines lixisenatide with the company’s current top-selling insulin product Lantus. Just a day later, the company announced that it was entering into an immuno-oncology collaboration with Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) – hot off the heels of the FDA announcement that it was approving the Sanofi/Regeneron PCSK9 inhibitor, Praluent, targeting high cholesterol – an approval that sees the treatment become the first PCSK9 inhibitor to gain approval in the US. Further, on the same day, Sanofi reported its Q2 2015 financials. In other words, it has been a pretty big week for Sanofi, and one that warrants address. So, with this said, let’s look at each of these developments individually, and try to ascertain where they fit into the bigger picture for the company.

So, first, LixiLan. As we said, the treatment is a combination of the company’s current  insulin product Lantus and a glucagon-like peptide 1 receptor agonist (GLP-1 RA) called lixisenatide. GLP-1 is a hormone released after humans eat meals, which suppresses glucagon secretion and stimulates insulin production. As an agonist, GLP-1 RA increases the production of GLP-1 and, as the latest trial results have shown, can work in tandem with a traditional insulin treatment to improve efficacy. The company had to phase 3 trials running, one that trailed the combination therapy in 1170 patients and a second that is ongoing, and studies the treatment in a further 736 patients. The primary endpoint of a statistically superior reduction in average blood glucose over the previous three months, when compared with the two components of the combination therapy used solo, came in as met in the initial 1170 patient trial. The second trial will complete during Q3, 2015. So what are we looking at from a timeframe perspective as far as getting approval and benefiting from any resulting upside market revaluation in Sanofi? Well, the company expects regulatory submission during Q4 this year in the United States and Q1 next year in the EU. Tack about six months on to each of those prospective timeframes, and we will be looking at approval somewhere midyear 2016 in the US and end of year 2016 in Europe. Worth noting are a couple of competing treatments, one of which is Novo Nordisk’s (NYSE:NVO) already European approved GLP-1 in combination with its current insulin treatment Tresiba (making a second attempt at approval after a 2013 rejection by the FDA) and Eli Lilly and Company’s (NYSE:LLY) Trulicity. In short, the next 12 months, this is likely to be a real hot space in biotech.

So, now to the company’s fresh partnership with Regeneron. The announcement highlighted a new collaboration between the two companies that will see them partner up on protein inhibitor REGN2810, currently in phase 1 trials. Sanofi will pay $640 million upfront, with a total of $1 billion invested in combination from the two companies ($750 million of which will come from Sanofi) for discovery through proof of concept studies on alternative monotherapy antibody candidates. Exactly what these candidates will be at the moment is pretty uncertain, as neither have specified in their announcement, but we will likely be looking at antibodies that work in collaboration with the current (and aforementioned) PD-1 inhibitor REGN2810. Conservative forecasts put the immune-oncology space at $10 billion annually over the next five years, and the latest play by Sanofi and Regeneron looks to position the two companies to take advantage of this growth.

Jumping ahead to the company’s current financial position, Sanofi reported €9.4 billion in sales during the second quarter of 2015, a 4.9% increase when accounting for constant exchange rates. The well profiled diabetes area of its current operations was expected to reduce, and did just that, coming in at a 3.8% decline on the quarter, but without this expected decline, total group sales came in at 7.3% higher quarter over quarter.

So, what’s the takeaway here? Well, it looks as though Sanofi is going all in immuno-oncology. As mentioned, the space is set to explode over the next five years, and if the Regeneron partnership bears fruit, both companies will be well-positioned to direct a proportion of the $10 billion sector valuation towards their own balance sheets. From a diabetes perspective, things are a little less clear, but the latest announcement keeps Sanofi in the running of a highly competitive race between itself, Eli and Novo.

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Progenics Pharma Soars, Here’s Why

By
ME Staff
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Progenics Pharma

An hour before market open in the US on Tuesday, Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) announced that one of its candidates had received US Food and Drug Administration (“FDA”) breakthrough therapy designation. The company’s market capitalization gained a little over 22% during the first part of the US session, before settling to close around $9.42 – giving back some of the gains but still 4% up on the previous day’s close. We have had a number of key announcements from the Progenics over the last few weeks, and the latest is just one in a series of potential market movers for the company. However, with this said, and now the breakthrough designation is in place, is there likely any further short to medium-term upside potential in the company’s stock, or is it worth waiting a little longer before gaining exposure to a revaluation? To answer, let’s have a look at the treatment in question, and a couple of the previous announcements with regards to how they relate to Progenics’s near term prospects.

So, first, let’s get to the science. The treatment in question is called Azedra. Azedra is a late stage drug candidate in development for the treatment of malignant pheochromocytoma and paraganglioma – which are essentially very rare brain tumors that develop from cells in the sympathetic nervous system. Basically, the human autonomic nervous system is split into two parts – the parasympathetic nervous system and the sympathetic system. The sympathetic nervous system is responsible for what we refer to in the nonscientific world as the fight or flight response, and as you might have guessed, includes the adrenal glands. A malignant pheochromocytoma is a tumor that forms in the sympathetic nervous system but is not attached to adrenal glands. Conversely, a paraganglioma is a tumor that attaches itself to adrenal glands. So, with this out of the way, what is the difference between this and current standard of care treatment? Well, it all comes down to targeting. Azedra is a small molecule (just another term for the type of molecule that makes up most drug treatments) with a radioisotope attached to it. When introduced to the body, it can first be used as an imaging agent as the combination of the small molecule and radioisotope targets both pheochromocytoma and paraganglioma highly specifically, and then once identified, can be channeled to deliver specific and individualized radio treatment to the tumors. Current standard of care is pretty hit and miss, and includes an adrenergic blockade (which has obvious negative side-effects) surgery, which is risky in the sympathetic nervous system, and chemotherapy, which has generally been shown to fail to produce a cure or generate significant remission.

So why the upside momentum from the breakthrough designation? Well, the treatment is currently under evaluation in a pivotal Phase 2b trial, and already has orphan drug and fast-track designation is from the FDA, since it is designed to treat a very rare indication. Breakthrough designation means that Progenics can hold regular meetings with the FDA throughout the drug development in order to gain real-time insight into how best to do things such as trial design, in order to achieve approval. There is also a cross-disciplinary review panel, which again, from an advisory perspective, can increase the likelihood of approval (of course, so long as efficacy is shown). Fast-track designation is very similar, in that it offers more frequent FDA interaction and the potential for rolling review, meaning the FDA will review each stage of the drug’s development rather than wait until it is all complete a review it as a whole.

So, put simply, what does all this mean? Well, the current phase 2 trial is a pivotal trial, meaning that – if it is successful – Progenics may be able to get approval for Azedra without having to conduct the usual phase 3. The trial started in late 2010, but was suspended whilst the company sought additional funding. Reenrollment began again in January this year, and at that point, the company treated 41 patients with 30% of them achieving the primary endpoint. In order to be considered for approval, 25% of the total of 58 evaluable patients must achieve the similar endpoints.

So what sort of timeframes are we looking at? Well, the company expects to complete the main part of the trial before the end of this year, or at least expects to complete enrolment before this year closes out, and so we could be looking at second half 2016 before we get trial end data. However, as things develop, interim data has the potential to move the stock on positive news. So, to answer the initial question, will we see further upside momentum between now and trial completion? In all likelihood, yes. Providing, the drug can maintain its current performance as Progenics seeks to treat the remaining portion of its required subject panel.

Looking for other breakthrough designation approval plays? Check out Dyax Corp. (NASDAQ:DYAX), Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) and Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).

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What Allergan’s “Big Week” Really Means for its Future

By
Jennifer Aldershot
-
Allergan

This week has been a big week for Allergan (NYSE:AGN). First, we heard that the company was selling its generic drug company to Israel based Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). The deal, worth a reported $40.5 billion, is the largest ever acquisition by an Israeli company, and comes at a time when many are betting against the biotech space on the pretense we are approaching the end of a five year bubble. Almost as soon as we got the Teva news, however, we got a follow up announcement that Allergan is set to acquire Illinois based Naurex Inc. for a flat $560 million. The two deals are the latest in a string of high profile acquisitions in the biotech space, and Allergan is up more than 6% on the week’s open. With this said, is there further upside potential in the company’s stock, or are the gains we have seen the entire short-term market response, and must we wait for the fruits of the acquisitions before we see any further considerable action. In order to answer, lets take a look at the terms of both deals, and try to ascertain the medium term impact of each on Allergan’s market capitalization.

First, lets look at the Teva deal. As we have mentioned, the deal will see Teva take on the entirety of Allergan’s generic pharmaceuticals business for $40.5 billion. Teva is already the largest generic pharmaceutical company in the world, and the latest acquisition cements its positioning in the space. One of the primary drivers behind the acquisition, it seems, is an increased amount of pressure being put on Teva Chief Executive Erez Vigodman by shareholders to expand the company’s revenue sources, from a diversification perspective. Approximately 48% of the company’s profits currently come from multiple sclerosis drug called Copaxone, and with a number of other multiple sclerosis trials hitting headlines recently in the non-generic world, the necessity for diversification has been pressing issue. Teva ‘s stock is up nearly 20% on the announcement, in part due to this diversification, but also as a result of the cost savings likely to come about as a direct benefit from the acquisition. Not only will Teva be able to reduce operational costs through economies of scale, but also the increased generic portfolio will give it a higher leveraged rate when it comes to negotiating with healthcare organizations and – in particular – US insurance companies. This increase leveraged should improve the company’s bottom line very quickly upon acquisition completion.

So now moving on to the second deal, the $560 million acquisition of Naurex Inc. by Allergan. The acquisition strengthens Allergan’s development pipeline, bringing two potential blockbuster treatments under its umbrella. The first is an intravenous depression treatment that has already proved efficacy in phase 2 trials and is heading into phase 3 before the end of this year, and an oral treatment for the same indication that has demonstrated promising results in early stage testing. Both are demonstrated tolerability, and bring a novel approach to depression treatment by targeting the receptors in the brain responsible for memory, that also contribute to glutamate levels (which, research shows, are out of sync in depression patients). Is a quick side note, it’s worth mentioning that the deal is not set to close before the end of 2015, but its value could rise from an Allergan perspective as there are a number of milestone payments due based on the research sales success of the aforementioned pipeline candidates.

So how should we approach these two deals, and where do we expect Allergan to head going forward? In short, we should look at them as very much part of the same development plan. Allergan has stated that it wants to reduce its debt (somewhere around $44 billion at the moment) to 3.5 times adjusted earnings by the end of this year. The company is also stated that it wanted to abandon the generic industry in order to focus on more targeted developed stage treatments. The Teva deal allows the company to reduce its debt holdings, while also freeing up capital to expand into the development side of things; indeed, Chief Executive Brent Saunders has stated that the company will use around $36 billion in net proceeds from the sale to fund further large acquisitions.

So in other words, Allergan has cashed in on its generic business at what seems to be an excellent price, and aims to use the vast majority of the proceeds to buy up developing stage pipelines. This is a switch in strategy for the company, but one that could prove very profitable in the long-term. With a $36 billion blank cheque, there are a number of attractive pipelines the company could go after, with rumors suggesting that Biogen Inc (NASDAQ:BIIB), Amgen Inc. (NASDAQ:AMGN) and AbbVie Inc. (NYSE:ABBV) as potential targets. Each of these companies has at least one potential blockbuster in its pipeline, and as such, it may be worth picking up and exposure to Allergan before it becomes the biotech incumbents that a $45 billion payday gives it the potential to be.

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Could This Treatment Replace Morphine in the US?

By
Roger Hannington
-
Cara Therapeutics

When markets opened in the US on Monday morning, Cara Therapeutics Inc (NASDAQ:CARA) traded for a little over $15. Premarket on Thursday, and throughout Thursday’s session, we saw high-volume and a spike to intraday highs just shy of $22 flat. We closed the day around $19, and it looks as though we’re going to get further gains today. All said, after a 30% up spike, we settled on around 25% gains in a little over 24 hours. The gains were rooted in a press release put out by Cara therapeutics premarket on Thursday, offering a taste of its topline results from one of its currently pipeline candidates – CR845. Markets translated the results as overwhelmingly positive, and expect Cara to now take its candidate into a phase III pivotal trial. However, as always, phase II success far from guarantees FDA approval, and further to that, FDA approval far from guarantees marketing success. So, with this said, is the 30% gain warranted? In addition, should we expect further gains based on this latest result, or have short-term speculative biotech traders missed the boat? To answer, let’s take a look at the treatment itself, how it performed in the latest trial, and what we could be looking at from a market potential perspective if the treatment is successful in its planned phase III.

So, first, let’s address the science. As part of the latest trials, Cara tested CR845 inpatients suffering from uremic pruritus – a chronic itch condition associated with sufferers of end-stage renal disease. The condition manifests itself as a skin condition, and does not associate itself with any particular gender, age, ethnicity or root cause of renal failure – presenting Cara with a relatively wide subject base in its trial. The treatment is what we might call an alternative take on current opioid analgesics such as morphine and oxycodone. These aforementioned have a mechanism of action that allows them to activate fresh opioid receptors in the central nervous system, essentially tricking the brain into overlooking pain signals from a particular area of the body. CR845, on the other hand, is a periphery treatment – in that it binds to opioid receptors at a specific target, but does not enter the central nervous system. For this reason, it does not affect the brain in the same way that traditional opioid analgesics do, which translates to a similar efficacy with a huge reduction in adverse effects. In the US, opioid analgesic abuse has reached epidemic levels, and Cara therapeutics believes periphery opioid analgesics such as CR845 can overcome this epidemic. Sounds interesting, right? Essentially, you can think of it as nonaddictive morphine.

So how did it perform in trials? Well, as we said in the introduction, we only have a taste of the topline results so far. However, this is enough to suggest a phase 3 pivotal could well be just round the corner. In the double-blind, randomized, placebo-controlled trial we saw a 54% greater reduction in worst itch sores for patients treated with CR845 than those receiving placebo – in other words, primary endpoint met. From a secondary endpoint perspective, the company allocated what’s called a Skindex score to patients receiving the treatment, which is essentially a baseline measure of improvement in dermatological conditions. In the trial, those treated with the drug experienced a 71% greater reduction in average total Skindex score over a two-week treatment period than those receiving placebo (for reference, a reduction is positive when it comes to Skindex). Finally, CR845 came out safe, well tolerated and did not demonstrate any serious adverse events. The only real side-effects were transient numbness (essentially numbness at point of injection) and a little bit of dizziness. Most importantly, there were no central nervous system associated side-effects, which had been the scourge of central acting opioid analgesics in the past.

So what is the market potential? This is a first in class treatment, meaning that we have very little to compare it to when it comes to price point. However, from a volume perspective, if Cara Therapeutics can achieve approval for CR845 it would be able to price the drug relatively cheaply and still generate significant revenues from its delivery. There are approximately 400,000 people in the US that suffer from renal disease, with about 50% of these experiencing uremic pruritus. On a global scale, we are looking at 2.2 million renal disease sufferers with, once again, about a 50% incidence rate of uremic pruritus.

So what’s the takeaway here? Well, Cara expects to initiate a phase III trial early next year, and if results mimic those with seen in the recent phase II, this treatment has the potential to be a real blockbuster for the company. The gains look valid, therefore, but from a big picture perspective, they look to be just a drop in the ocean of what could potentially be a game changing treatment. As mentioned, opioid analgesic addiction is a real problem in the US and globally, and if Cara can demonstrate efficacy and marketability for CR845 we could see the treatment start to replace morphine in a wide range of indications. In other words, longer-term, this could be a real winner. Cara is not quite in the league of its pharma mega cap counterparts such as Pfizer Inc. (NYSE:PFE) and GlaxoSmithKline plc (ADR) (NYSE:GSK), but a winner like this has the potential to elevate it a step closer.

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