Jazz Pharmaceuticals (JAZZ) - Jazz it UP!!!

About Jazz Pharmaceuticals Inc.
JAZZ is a Palo Alto-based (California) specialty pharmaceutical company engaged in identifying, developing and commercializing innovative products to meet unmet medical needs in neurology and psychiatry. The firm's objective is to build a expansive portfolio of products through a combination of internal development and acquisition/in-licensing activities and to utilize its specialty sales resources to promote products in target markets. Jazz Pharmaceuticals applies novel formulations and drug delivery technologies to pre-approved drug compounds, and compounds with the same mechanism of action or similar chemical structure as marketed products, to enhance patient care by improving efficacy, minimizing adverse side effects or increasing patient compliance relative to existing therapies.


Trading Catalyst
FDA Advisory Panel Meeting - August 20, 2010
PDUFA Date - October 11, 2010

What is sodium oxybate?
Sodium oxybate is the sodium salt form of gamma-hydroxybutyrate, an endogenous neurotransmitter and metabolite of GABA. While the precise mechanism of action is unknown, the effects may be mediated in part through interaction with GABA(B) and GHB receptors. Sodium oxybate is the active ingredient in XYREM (sodium oxybate) oral solution, approved by the FDA and marketed by Jazz Pharmaceuticals in the U.S. for the treatment of excessive daytime sleepiness and cataplexy (the sudden loss of muscle tone) in adult patients with narcolepsy. The most commonly reported adverse drug reactions in narcolepsy patients are dizziness, nausea and headaches. Sodium oxybate has the potential to induce respiratory depression and neuropsychiatric events. Sodium oxybate has not been evaluated by regulators for the treatment of fibromyalgia and is not approved for this use.

What is fibromyalgia?
Fibromyalgia is a chronic condition characterized by widespread pain. Fibromyalgia is believed to be a central nervous system condition, resulting from neurological changes in how the brain perceives and responds to pain. In addition to pain, the main symptoms are fatigue, disturbed sleep and morning stiffness. The exact causes of fibromyalgia are unknown. It may be triggered by physical trauma, emotional stress, chronic pain or infection. Genetics, neurochemicals that affect pain modulation, neurohormones and sleep physiology abnormalities are thought to play a role. Research also has suggested a relationship between sleep and pain. Fibromyalgia patients experience a high prevalence of sleep problems, including a reduction in non-restorative or deep sleep.

Drug in Spotlight - JZP-6 (sodium oxybate)
The U.S. Food and Drug Administration's (FDA) Arthritis Advisory Committee and Drug Safety and Risk Management Advisory Committee will review JZP-6 (sodium oxybate) for the treatment of fibromyalgia at a joint meeting on August 20, 2010.

Clinical Data
On Dec. 15, 2009, JAZZ submitted an New Drug Application (NDA) for JZP-6 based on a comprehensive clinical development program for the drug, including results from two Phase III clinical trials.

In both trials, sodium oxybate significantly decreased pain and fatigue as well as improved daily function, patient global impression of change (in activity limitations, symptoms, emotions, and overall quality of life), and sleep quality. Sodium oxybate has not been evaluated by regulators for the treatment of fibromyalgia and is not approved for this use.

Recent Stock Trend

An upward momentum is apparent in advance of the catalyst date of Aug 20. JAZZ closed at $8.74 today on a volume of 658,701 (avg 557,000). It appears that $8.75 may be the current resistance as the stock price touched and retracted from this level on many occasions in the past 10 days. If this resistance is broken, we'll be in for a wild ride up before Aug. 20 arrives. Given that the price is at a 'transient peak' as of today, I do think that the entry point should be aimed lower at around $8.40-8.50.

VVUS Qnexa disapproved by FDA committee

FDA Panel Vote
Results from the highly anticipated advisory panel are finally out: 6 YES vs. 10 No for recommendation of the approval of Qnexa, VVUS' experimental obesity drug. After all, safety still trumps efficacy when it comes to introducing new drugs to patients. The 10-12% weight loss offered by Qnexa no longer weighs favorably in the face of potential cardiovascular risks. VVUS' share price bled an excruciating 56% in after market trading as frightened share holders dump their ownership of the company.

Trading Strategy
The way to capitalize on biotech catalysts is to get in early before a significant date (e.g. FDA panel, PDUFA, clinical results, major presentations...etc.) and exit just before the actual event. VVUS' story is a prime example of the unpredictability of the FDA's decision and the outcome of an NDA. If timed right, however, a majority of investors can still pocket a handsome return despite negative FDA/advisory committee remarks. In the case of VVUS, investors could still have gained a potential earning of as much as 42% in a 2-week window just prior to the panel meeting (July 1 - 14). Do REMEMBER though, it is always much much less risk-laden to exit BEFORE the date of interest as advised in a previous post to avoid getting burned on bad news.

So, now that the excitement about Qnexa is over, let's move on the next players in line. Stay tuned!

VVUS FDA panel meeting notes

Often times before a panel meeting (no later than 48 hours before the scheduled time), the FDA would prepare and release background material including comments on the examination of clinical trial data by a carefully chosen group of physicians. From this, a general sense of whether the drug being scrutinized would receive a solid recommendation from the medical experts for marketing approval can be extracted. Thus, working forward from the programmed meeting date of July 15, by the end of tomorrow the meeting notes should be available and the share price will undoubtedly reflect and amplify the experts' judgment. Keep alert throughout the day and check the FDA advisory calendar for any updates. Unfortunately, by the time the information becomes available to the 'general public' the stock price would have moved considerably already, so decide what you want to do FAST - whether you want to buy, sell, short the stock or trade options. VVUS' panel meeting with the FDA has been one of the most highly anticipated events in the past a year due to the unique indication (i.e. weight loss) that the drug intends to target. I am personally excited about this meeting, the outcome of which will set the tone for the upcoming assessment of another two potential weight loss medications by Arena Pharmaceuticals (ARNA) and Orexigen Therapeutics (OREX).

VVUS up 22.45% this week ahead of FDA panel

VVUS - FDA advisory panel in 10 days!!!

The clock is ticking. The FDA's advisory panel will gather on Thursday July 15 to offer independent expert opinions on Vivus' (VVUS) investigational obesity drug, Qnexa. As discussed in my previous post, subjects taking Qnexa achieved an average weight loss of 14.7% (37 lbs) in two major phase III trials lasting 56 weeks involving 3,750 patients. While concerns about the potential side effects of Qnexa may present a barrier, VVUS is confident that the low doses of the drug combination (Phentermine/topiramate) delivered by Qnexa will drastically minimize possible negative effects previously associated with these two individual drugs by themselves.

Competitors
Qnexa currently has two competitors in late stage development. The first is Lorcaserin from Arena Pharmaceuticals (ARNA) and the second is Contrave from Orexigen (OREX). Patients prescribed Lorcaserin and Contrave in phase III studies lost an average of 5.8% and 7% body weight, respectively.

Panel meeting for Lorcaserin - Sept 16, 2010
PDUFA date for Lorcaserin - Oct. 22, 2010

Panel meeting for Contrave - Dec. 7, 2010
PDUFA date for Contrave - Jan. 31, 2011


FDA's Cutoff
The FDA has two alternate efficacy benchmarks in its most recent draft guidance. A weight-management product can be regarded as effective if after one year of treatment:
1) The proportion of subjects who lose greater than or equal to 5% of baseline body weight in the active-product group is at least 35%, is approximately double the proportion in the placebo-treated group
2) The difference between groups is statistically significant.

Strategy
Data from Qnexa's studies certainly support the advancement of VVUS' diet pills based on the above guidelines. However, it is now up to the physicians to decide whether the benefits outweigh the potential risks of the drug. We will find out about this next week. Given past experiences with FDA's panels, it is quite likely that they will meet ~2 to 3 days ahead of schedule. Since share prices tend to fluctuate dramatically on the panelists' votes, it would be less risky to exit by July 13.