The month of April is full of data and regulatory events. This is part II of our Biotech binary Event Watch. You can read part I here. April 30th is shaping up to be a Super Tuesday of biotech binary events. If the FDA sticks to it's schedule, on that day, there are 2 PDUFA decisions, 3 sets of briefing documents being released, and a non-FDA event that has implications for 2 companies we are watching. We outline below the binary events slated for April 30th as well as others where the exact dates are unknown. Covered herein are Raptor, Allergan, Titan, Aveo, Delcath, Pfizer, Sarepta, Vivus, Xenoport, and Exact Sciences.
Raptor is expecting an approval decision for PROCYSBI, their treatment for nephropathic cystinosis. The original PDUFA date was January 30th FDA extended the date by 90 days due to new informatin being submitted within 90 days of the PDUFA date. The company has not disclosed what information was submitted triggering the 90 day extension. The only thing the company has disclosed is that FDA has not requested additional studies.
RPTP stock ran up to the $6.33 range ahead of their Q1 results and subsequently dipped below $5 in mid february before tunring around. Recently the stock has been supported by its 20 day Exponential moving average which stands around $5.54. We see the $6.30 level as overhead resistance followed by $7 and $7.90. We expect that any run-up between now and then would moderate in the week before the PDUFA date. May options premiums suggest a $2.30 move in the stock price in connection with the FDA decision.
Even if PROCYSBI is approved, the larger question looming for RPTP is whether or not the company will be able to acheive pricing that makes the drug profitable. At the BIOCEO 2013 conference, the company stated that insurers they have spoken to indicate that they will treat the therapy like any other orphan indication. PROCYSBI has quality of life advantages over Cystagon which patients must wake up in the middle of the night to take, but Cystagon costs just $10,000 per year and PROCYSBI will likely be priced several times as high. On April 3rd, RPTP signed a deal to make Accredo Health Group the exclusive distributor of PROCYSBI, a move in preparatin for commercialization. Look to the announcemnet of pricing for further clarity on the commercial potential of PROCYSBI.
Titan has their PDUFA date on April 30th. Last month, the briefing documents release and subsequent advisory committee meeting led to wild swings in TTNP stock price. Being an over-the-counter stock, TTNP was not halted during the advisory committee meeting, leading to a large trading range in the stock that day. The advisory committee was very supportive of probuphine. FDA clearly had issues with Titan's proposed REMS and 6 of the advisory committee members abstained from voting on the REMS issue. The FDA presenters at the Ad Comm. indicated that revising the REMS was a work in progress and that meeting the April 30th PDUFA date may be a problem given the extent of the changes requried.
It is highly likely that Titan's PDUFA date will be extended by 90 days to give FDA time to fully review a revised REMS. Our view is that a 90 day delay would be strongly positive for TTNP stock since it indicates that FDA is leaning towards approval. A return to the highs before the advisory committee of $2.40 is not out of the question on either approval or the announcement of a 90 day delay. Should the FDA issue a CRL requiring further studies of, for example, the impact of reuse of implant sites, TTNP stock will fall to $1 or below. Our view is that FDA is likely to approve probuphine, but we note that in some 30% of cases, the agency does go against positive ad comm. recommendations.
Allergan has a May 2nd advisory committee meeting with the General and Plastic Surgery Devices panel of the Medical Devices Advisory Committee for Juvéderm Voluma XC, a dermal filler for use in facial plastic surgery. As mentioned in part I of our April biotech binary event review, AGN falls outside Red Acre's normal coverage universe. It is noteworthy that AGN has a PDUFA date on April 15th for LEVADEX. If LEVADEX is approved, the investor enthusiasm from that event may lead to positive momentum in AGN stock ahead of this briefing documents release.
The Oncologic Drugs Advisory Committee (ODAC) will be holding a meeting to discuss Tivozanib for treatment of advanced renal cell carcinoma (RCC). Tivozanib is an oral Tyrosine Kinase Inhibitor (TKI) which targets all 3 vascular endothelial growth factor receptors. In clinical trials, the drug demonstrated a 2.8 month progression free survival benefit over sorafenib in first-line RCC patients. During their 2Q2012 earnings release, AVEO revealed that the PFS benefit of Tivozanib did not result in an overall survival (OS) benefit. Furthermore, the earnings release indicated that:
The FDA has expressed concern regarding the OS trend in the TIVO-1 trial and has said that it will review these findings at the time of the NDA filing as well as during the review of the NDA.
AVEO's stock dropped 26% when this news came out.
In February, the final OS results from the TIVO-1 study were reported. The sorafenib arm had median OS of 29.3 months while the Tivozanib arm had median OS of 28.8 months. In other words, Tivozanib arm patients lived, on average, half a month less than sorafenib arm patients. While the sorafenib arm is numerically superior to the Tivozanib arm, the result is NOT statistically significant (p = 0.105). There was an imbalance in the percentage of pateints receiving follow-on therapies after disease progression between the two study arms. In the sorafanib arm, 74% of patients went on to receive another treatment after disease progression while only 36% of the Tivozanib arm patients received follow-on therapies. Without detailed information regarding each patient, it is impossible to know if the imbalance in follow-on therapies adequately explains why the PFS benefit failed to translate into an OS benefit. The FDA briefing documents will delve into these issues in detail.
It is noteworthy that Tivozanib appears to have a better safety profile than sorafenib. Data revealed at ESMO 2012 indicate that grade 3 or greater adverse effects occured in 36.3% of Tivozanib patients vs 51% of sorafenib patients. Dose reductions and dose interruptions were also significantly lower for tivozanib vs sorafenib.
One further point to note, from 2005 to 2011 6 new therapies were approved for treatment of RCC. As pointed out in the FDA briefing documents for Inlyta, (see page 6), none of the VEGF-R inhibitors demonstrated an OS benefit. Two points to keep in mind here. First, since there are several choices of therapy for RCC, including 3 VEGF-R inhibitors and a VEGF antibody, there is a chance that FDA may be less inclined to approve based on PFS without an OS benefit. Second, Almost all of the previously approved therapies were initially approved for second line treatment and subsequently approved for first-line therapy. The Tivozanib NDA is seeking approval as first-line therapy which is why the TIVO-1 trial was designed as a superiority trial. This is a potentially more risky strategy. The study design allowed for the sorafenib arm pateints to cross-over onto Tivozanib after disease progression so there is a substantial data set for Tivozanib in the second line setting after failure with sorafenib.
Post hoc explainations of the lack of OS benefit attributed to trial design, while reasonable, do not sit well with us in general. The imbalance in second line care outside of US and western Europe should have been anticipated and designed for in the trial. Nevertheless, on balance, our view is that the milder adverse effect profile combined with superior PFS benefit will outweigh the lack of OS benefit. We note that, had the OS inferiority been statistically significant, our view of the situation would likely have leaned the other way.
AVEO stock has been in a strong downtrend ever since the OS underperformance was reported in Q2 of last year. We see the release of briefing documents for AVEO as a potential inflection point. If the FDA's stance on the overall safety profile and PFS benefit vs the lack of OS benefit is in line with our view, AVEO stock could surge to the overhead resistance level of the 200 day EMA at $8.72 if not higher to the $10 resistance level. A positive advisory committee vote could send shares climbing back towards the $13 level. A negative vote would result in a drop close to cash. Given the stock offering in January 2012 which raised $53.6 million, and the cash on hand as of December 31, 2012 of $160.6 million, and assuming a cash burn of $4.5 million per month, AVEO should have about $193 million cash on hand at the end of April. this amounts to $3.92 per share based on approximately 50 million shares outstanding.
Delcath's Melblez will be reviewed by the ODAC in the afternoon session on May 2nd. AVEO's ODAC meeting is the same day in the morning session. Melblez is DCTH's drug/device combination consisting of melphlan and DCTH's CHEMOSAT system which isolates blood flow to the liver from the rest of the body. Very high concentrations of chemotherapy agents are thus delivered to the liver without getting into the wider bloodstream (in theory). The CHEMOSAT system relies on blood filters which are meant to capture and separate out the cheomtherapy agent (and byproducts presumably), to minimize side effects.
On the positive side, Melblez is already approved in the EU where it was approved as a medical device and received the CE mark. In clinical trials, Melblez demonstrated a statistically significant progression free survival benefit of 5 months compared to best available care. The trial was conducted under a special protocol assessment (SPA) meaning that FDA has agreed to the PFS endppoint.
On the negative side, Melblez failed to show an overall survival (OS) benefit. Furthermore, 3 out of 40 Melblez arm patients died due to procedure related complications (one from liver failure and 2 from sepsis due to neutropenia). That's a 7.5% mortality rate for the procedure. The deaths due to the procedure combined with control arm patients crossing over to Melblez after disease progression may explain why an OS benefit was not observed. Another potential negative is that DCTH switched to a gen2 filter after the original trials were done but before the NDA was submitted. FDA has allowed the company to use the newer filter in the expanded access program and will be reviewing data from this new filter as part of the NDA. On April 8th, the company revealed that FDA will be extending the PDUFA date from June 15th to September 15th to allow time to review new information submitted on March 18th. The press release indicates that:
The information related to clarification regarding the bridging studies that were performed between the filter generations that were used throughout the development program.
We are reminded about the cautionary tale of Mannkind Corporation (NASDAQ:MNKD). In 2009 MNKD submitted their new drug application for Afrezza. In early 2010 MNKD recieved a CRL asking for assays of the trial data in ways other than what was presented. Within 3 months, the company re-submitted the NDA, but as part of the re-submission, MNKD sought to get approval for their newer gen2 inhaler device. MNKD submitted bridging studies and simulations to demonstrate that the new device was bioequivalent to the inhaler used in the clinical trials. FDA issued the company a second CRL requesting clinical trials where the gen2 inhaler was compared against the inhaler used in the earlier cinical studies. DCTH's substitution of blood filters sounds eerily simillar to what MNKD tried to do. Luckily, DCTH already has clinical experience with the new filters both from patients in europe as well as the expanded access program in the US.
DCTH has been using "at-the-market" (ATM) financing facilities to raise capital while the NDA has been under review. We are not a big fan of ATM facilities as we have indicated in previous Red Acre Insights. Every time the stock runs up, the company is working against investors by selling into rallies. In DCTH's case, management seems to have an uncanny knack for taking the enthusiasm out of ralllies by either announcing further financings, delays, or restructurings. DCTH issued 19.7 million shares of stock in the first quarter of 2013 representing a 20% dilution to existing shareholders in Q1. The company now has 96 million shares outstanding.
While the company's recent restructuring announcement indicates that the existing $42 million cash on hand:
is expected to provide Delcath with sufficient resources for at least the next 12 months as the Company pursues three key objectives: U.S. FDA approval for MelblezTM Kit (Melblez (melphalan) for Injection for use with the Delcath Hepatic Delivery System), European commercialization of CHEMOSAT® Hepatic Delivery System for melphalan hydrochloride, and ongoing clinical development focused on label expansion.
The 2012 10-K indicates that:
Assuming Delcath receives FDA approval in 2013, the Company anticipates additional resources will be required to support full U.S. commercialization.
In other words, to fully commercialize Melblez, DCTH will raise additional funds. Undoubtedly the company will use the $50 million ATM facility on any run-up, but a larger secondary offering may also be necessary to acheive proper commercial ramp-up. Look ot the company's post-approval guidance for indications about how much capital would be required to fund a proper US launch.
With DCTH stock in the $1.50 range, we would not be surprised to see a move to $2.50 or higher on a positive Ad. Comm. vote; however, investors would do well to keep the cash position and likely future financing needs in mind if trading this event.
Pfizer's Q1 2013 earnings call will take place at 10 AM on April 30th. While Pfizer is outside Red Acre's coverage universe, this particular conference call is widely anticipated by investors in two micro-cap biotech companies: DURECT Corporation (NASDAQ:DRRX) and Pain Theraputics (NASDAQ:PTIE). PTIE is partnered with PFE on Remoxy which is an abuse deterrent formulation of oxycodone that uses DRRX's ORADUR abuse deterrence technologies. During Pfizer's 3Q2012 conference call, the company made statements which raised uncertainty about the future regulatory path for Remoxy. Specifically here is the statemetnt that led to investor concern and cratered both DRRX and PTIE's stock:
We think that the results of those studies will provide us a much greater clarity on whether or not we’ll be able to adequately address the questions raised in the complete response letter that we received from the FDA. So we’re targeting a late March meeting with the FDA to discuss those outputs and agree on a net go or no-go decision.
This statement implies that Pfizer might decide to scrap the entire program. Both PTIE and DRRX dropped by over 30% on this news. By now the meeting with FDA should have taken place and investors in DRRX and PTIE are anticipating that further news on the Remoxy development plan should be announced during the Q1 Pfizer conference call. We will publish a trading strategy for the DRRX/PTIE Remoxy trade in a few days so stay tuned!
There is much investor enthusiasm surrounding SRPT's eteplirsen, a promising therapy for Duchenne Muscular Dystrophy (DMD). The company should have had an end of phase 2 meeting with FDA by now and an announcement about whether or not they will file for accelerated approval for eteplirsen is expected sometime either by the end of April or in early May. Option premiums for the at-the-money May options straddle suggests a $15 to $16 move in the stock price based on the decision. Overall investor sentiment is that eteplirsen is a game changing therapy for DMD and regardless of wheter or not the company is able to file for accelerated approval, the therapy is likely to be eventually approved. One point of caution is in order: with just 12 patients in the phase 2 clinical trials, the sample size is very small. In ultra-orpahn indications, small sample sizes are not a bar to approval, but it is worth noting that competitors Glaxo Smith Kline (GSK) and Prosensa were able to mount a 54 patient phase 2 trial and phase 3 trial with 180 patients. Those bullish on the prospects for an accelerated filing are essentially betting that the drug's relatively clean safety profile and good efficacy in the current trials will be sufficient to nudge FDA to accept an accelerated approval filing. Such enthusiasm should be tempered by the reality that, with small sample sizes, the confidence intervals are large, and, with larger trials, adverse effects that were not seen in smaller trials can become apparent. Should SRPT file for accelerated approval, we see the stock surging to the $50 range. A dip to the $25 - $28 range is possible if they do not file for accelerated approval, but any dip would be bought up rather quickly as investors focused on the long term prospects for SRPT and eteplirsen will see it as a good entry point.
VVUS is expecting to hear from the FDA regarding their request for REMS modification sometime this month. As we mentioned in our weekly review for the week ending March 28th, it is likely that Pharmakon Advisors, who agreed to lend VVUS up to $110 million were convinced by the company's representations that the REMS modification would be forthcoming and would, in turn,lead to an inflection in Qsymia sales. Two things to keep in mind here: 1) there is no formal timeline that FDA is bound to regarding a REMS modification request; and 2) even if VVUS gets the REMS modification, this would not be reflected in sales until Q3. The stock has been hovering just under it's 50-day EMA lately and this acts as overhead resistance. A positive announcement could send shares up to the $13.40 level on retail investor enthusiasm, but buy side investors are likely to remain in a "show me" mode until a stronger sales ramp materializes.
XNPT completed a phase 3 trial of arbaclofen placarbil (AP) in multiple sclerosis patients with spasticity. Accoridng to the company's Q3 2012 earnings press release:
[we] expect preliminary top-line results early in the second quarter of 2013.
While the exact timing is unclear, investors should expect top-line results possibly by the end of April. We have not worked much on XNPT and therefore have no view on either the data or which way the stock may move, but it is worth nothing that, in addition ot the AP data release, on May 1st, XNPT begin marketing of Horizant (previously marketed by GSK). The longer term story for XNPT has to do with the '829 compound which is in phase 1 development. '829 is methly fumarate, which is a metabolite of dimethyl fumarate - better known as BG-12, Biogen-Idec's recently approved MS therapy. A successful phase 3 trial for XNPT may lead to increased investor enthusiasm given the other pipeline assets as well as the potential for incremental revenues from Horizant.
Exact Sciences should be reporting results from their 10,000+ pateint trial of their cologuard non-invasive colon cnacer and pre-cancer screening test. EXAS is a molecular diagnostics company, not a theraputics company. As such, their test does not go through the standard phase 1 through phase 3 testing that is required of new drugs. Instead, the trials involve establishing sensitivity and specificity of the diagnostic through collection of a large number of samples with and without the disease being detected. Should the data be positive, EXAS will likely file for FDA approval in Q2. In previous studies, the cologuard test exceeded its target goals of 85% sensitivity and 90% specificity.
EXAS stock hit a recent low of $9.52 on April 3. Since then shares have advaned mor ethan $1 and investors anticipate the data announcement sometime soon. As of December 31, 2012, EXAS had $108.1 million cash on hand. the compnay spent $44.2 million in 2012 and has guided that current cash would last at least 12 months. We beleive that the company has sufficient cash to fund operations well into 2014.
According to company estimates, the US market opportunity for cologuard is $2 billion and the global opportunity is $3 billion. While company estimates should always be taken with a grain of salt, even if the opportunity turns out to be 1/3rd of their estimates, EXAS is undervalued if the test works. Should the trial prove unsuccessful, the $686 million market cap is too rich. Options may be the low-risk way to participate in potential upside without taking on excessive downside risk in this binary event.