The third quarter is always a busy one in biotech, and this year’s has been no exception. We have seen a raft of approvals and trial data hit markets during September, and – as we head into the final few days of the quarter, there are a number of further catalysts that could kick up some volatility over the next week or so. So, without further ado, here are a couple of biotech’s with upcoming catalysts to keep an eye on this week.
Anacor Pharmaceuticals, Inc. (NASDAQ:ANAC)
First up we’ve got Anacor Pharmaceuticals, Inc. (NASDAQ:ANAC). Anacor has had a great 2015, and is currently trading more than 330% higher than year open levels. However, over the last month or so, the company’s upside momentum has stagnated somewhat, and it now trades for an approximate 6% discount on annual highs. This discount could quickly disappear, however, if the company reports promising topline from its pivotal phase 3 study of its lead dermatitis treatment – AN2728. The company reported back in March this year that it would present the data before the end of Q3, 2015, and we expect to see it hit markets sometime before the end of this week. The treatment in question is what is called a phosphodiesterase type 4 inhibitor, or PDE4 inhibitor. Anacor is targeting atopic dermatitis, which is a skin disease that comes about as a result of overproduction of inflammatory cytokines in a patient. AN2728 has a pretty complicated mechanism of action, and there is a nice video describing how it works here, but for now, all we really need to focus on is the depths of science required to understand the trial’s endpoints. Lucky for us non-scientists, these relate to physical symptoms rather than scientific mechanism of action. Atopic dermatitis represents itself physically through a chronic rash, with an associated inflammation and itch. AN2728 inhibits the production of enzymes in the body that produce inflammation (very simplified), and so the company is targeting treatment success as judged by a primary endpoint of a graded improvement from baseline (essentially, has the rash cleared enough as a result of treatment?) When the results hit markets, look for a minimum of a two grade improvement from the baseline, as this will indicate the meeting of the endpoint for the phase 3, and suggests the company could get a new drug application (NDA) in the hands of the FDA before the end of the year. Looking at things from a technical perspective, we would expect positive topline results to break through near-term resistance of annual highs at $152 a share and validate a medium term target of $175.
XenoPort, Inc. (NASDAQ:XNPT)
We mentioned Xenoport back at the end of August as a potential candidate for a discount buy in the biotech space, with the thesis behind our argument being topline phase 2 results for one of its lead candidates released before the end of September. At the beginning of last week, we got a preliminary look at these results, and the full topline report is scheduled for before the end of this week. The treatment in question is XP23829, targeting psoriasis, and initial reports suggest safety, tolerability, and efficacy, with the meeting of its primary endpoint demonstrating for the first time that this type of prodrug can treat immune system related conditions such as psoriasis. All we know at the moment is that the phase 2 demonstrated statistically significant efficacy, but the degree to which this significance holds will be revealed in the comprehensive results release. Additionally, we would like to see some indication of a timeline for the initiation of the phase 3 trial alongside the results. In the preliminary data, Ronald W. Barrett, Ph.D., CEO of XenoPort suggested they could be looking at phase 3 initiation during 2016 – however, we’d like to see this narrow down a little bit. XenoPort has had a rough year, and especially a rough month, having lost 40% of its market capitalization from September highs. It looks as though markets have not yet priced in the successful meeting of XP23829’s primary endpoint, in turn suggesting that biotech investors may be waiting for the comprehensive results before taking a position. The company is currently trading at a little over $4 a share, but if we can get a narrowed down phase 3 initiation date on the back of some real statistical significance, a quick return to monthly highs of $7 looks like a realistic upside, near-term target.