Neoprobe (NEOP): seeking FDA's nod with a novel tracer

Company:  Neoprobe (AMEX: NEOP)
Location:  Dublin, OH
Founding year:  1983

Investigational product:  Lymphoseek
Lymphoseek is a proprietary radioactive tracing agent being developed for use in connection with gamma detection devices in a surgical procedure referred to as Intraoperative Lymphatic Mapping (ILM). Neoprobe has an exclusive worldwide license agreement to Lymphoseek through the University of California at San Diego (UCSD). Lymphoseek is protected by U.S. Patent #6,409,990. All of the tracing agents that are currently used in ILM are used “off label” (i.e., not specifically cleared by regulatory authorities for that intended use), and Neoprobe believes there is a need for agents with a faster injection site clearance and less pass through from the sentinel node to distal nodes. UCSD has completed various Phase I clinical trials using Lymphoseek which were funded through research grants from the Susan B. Komen Breast Cancer Research Foundation or the American College of Surgeons. The clinical results from these trials, in which Lymphoseek demonstrated rapid clearance of the injection site and less “pass through” from the sentinel lymph node, have been presented at a variety of medical meetings over the last few years including meetings of the Society of Nuclear Medicine and the World Sentinel Lymph Node Congress. If approved, Lymphoseek will be the first tracing agent specifically labeled for lymph node detection. Lymphoseek is being investigated in other solid tumor cancers besides breast and melanoma.

Timeline to filing NDA:  3Q2011
According to Neoprobe, "[the company] has completed the initial Clinical Trial phases of Lymphoseek and [is] currently preparing the NDA for submission to the FDA".  In other words, they have the data on hand and are ready to release them (likely at the ASCO conference in June 2011).  Neoprobe has expressed strong confidence in achieving the end points of their phase III study in their February press release.
 
Recent development (as of 2011-04-27)

Neoprobe (NEOP) Files $100M Mixed Shelf; 12.5M Common for Selling Shareholders
Neoprobe Corp. (AMEX: NEOP) filed a registration with the U.S. Securities and Exchange Commission to sell.  


Shelf registration is a procedure that allows firms to file one registration statement covering several issues of the same security. SEC Rule 415, adopted in the 1980s, allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration "on the shelf," the corporation, by simply updating regularly filed annual, quarterly, and related reports to the SEC, can go to the market as conditions become favorable with a minimum of administrative preparation and expense.

Trading map
Today's shelf registration announcement by Neoprobe will likely cause an overreaction, as some traders scramble to exit before the share price drop.  This will cause a chain reaction to bring the share price down, temporarily halting the recent upward momentum.  However, the number of catalysts lined up for Neoprobe will likely attract investors back, and eventually induce a quick rebound; therefore this will be a great entry opportunity to open a position in either the stock or options.  Based on the timeline of the ASCO meeting (June 3-7), June or July $5 call options seem most appropriate.  I will be looking to buy some cheapened calls tomorrow morning.  

Spectrum Pharmaceuticals (SPPI): PDUFA in 3 days!!!

The run-up has been spectacular for Spectrum Pharmaceuticals (SPPI).  The biotech is scheduled to hear from the FDA on Friday (Apr. 29, 2011) in regards to its sNDA for Fusilev's novel indication (read more background).  Based on literature review, Fusilev's clinical  efficacy and safety, shortage of leucovorin (Fusilev's isomeric version), Fusilev's present off-label use, and Spectrum's previous interactions with the FDA, I estimate the odds of Fusilev's approval to be 75%.  Given this info, while one might be tempted to rush in last minute to accumulate some shares before FDA's fast approaching announcement, it is actually NOT a smart move.  Looking at the chart, SPPI closed at $9.45 today, sitting in close proximity to the 52-week high of $9.75.  The 'formulation approval', mistaken by a lot of traders as an early approval of Fusilev's use in colorectal cancer, resulted in the spike in share price last Thursday.  However, the average trading volume (~1 000 000) and stagnate stock price (~$9.45) during today and yesterday's sessions signal the unwillingness of most investors to make a drastic move before Friday.  This simply means that if you buy now, you won't be able to profit due to the lack of price movement.  If you decide to hold through Friday, then you are faced with very little upside (even on approval) because, as mentioned above, the run-up has been great (my Apr. $9 call has gained 93% from $0.7 to $1.35 in the past 2 weeks) and most traders are ready to SELL on the news.  My prediction is that there will be an ~10% surge on approval initially, followed by a quick sell-off.  In that case, you will likely lose money since you bought at the peak.

Trading map

Using the Hike-n-Slide strategy, I am looking to purchase May (or even June) put options with a strike as close to the post-approval peak as possible BEFORE the sell-off begins.  Looking at the option chain below, a lot of people are ALREADY doing this, as shown by the high volume and price (although they could also be hedging their shares or simply expecting a rejection).  The reason it's best to wait until the actually announcement is that on approval, stock price will jump (temporarily), and this will cause the put option price to drop.  To maximize profit, buy at the drop and wait for it to shoot up as traders begin to sell ('the slide').  

PREVIEW: Trading targets for the next few weeks

Spectrum Pharmaceuticals (SPPI)
PDUFA:  2011-04-29

NeoPharm Inc (NEOL)

60-day NDA:  2011-05-07

BioMimetic Therapeutics Inc. (BMTI)
FDA panel:  2011-05-12

Neoprobe Corp. (NEOP)
Clinical data release:  May
American Society of Clinical Oncology (ASCO) conference:  June

UPDATE: Spectrum Pharmaceuticals (SPPI) - bullish ahead of major FDA catalyst

Spectrum Pharmaceuticals (SPPI) will hear from the drug regulator regarding the prospect of approval of the biotch's experimental drug, Fusilev (read more about SPPI and Fusilev).  

SPPI is up more than 6% in the last week alone, as investors' interests grew ahead of Spectrum's scheduled PDUFA date, Apr. 29, 2011.  

Meanwhile, corresponding to the rising share price, May $9 call options have seen even larger gains (up ~43% since last week: $.70 --> $1).  

This is not the first time Spectrum has tried getting Fusilev approved for advance colorectal cancer.  Read more - http://michaeljuan.blogspot.com/2011/04/spectrum-pharmaceuticals-sppi-another.html

About Fusilev

What is FUSILEV (levoleucovorin) for injection?
FUSILEV (levoleucovorin) for injection is a folate analog. FUSILEV is the pharmacologically active isomer of leucovorin (also called folinic acid), which is made up of a mixture of two isomers, one active, and one inactive. FUSILEV can only be administered by your healthcare provider. 

How is FUSILEV different?
FUSILEV contains the active isomer of leucovorin and does not contain the inactive isomer of leucovorin. Only one-half of the dose of FUSILEV needs to be given as compared with folinic acid.

What do folates do?
Folates are a group of vitamins that allow cells to reproduce. Specifically, they fuel the synthesis of purinic and pyrimidinic bases, the building blocks of DNA. Cells need to duplicate their own DNA before they can divide.  Folate deficiency hinders DNA synthesis and cell division, most notably affecting rapidly proliferating tissues, such as normal bone marrow and cancer tissue.

The folate form most commonly found in nature, folic acid, has to be metabolized to the reduced active form, in order to exert its biologic activity. FUSILEV is a reduced, active folate.

Why is FUSILEV important to patients?
FUSILEV protects against the toxic effects of methotrexate, which is a type of chemotherapy that prevents folates from being metabolized to the reduced active form , therefore leading to cell death. Specifically, methotrexate is a folic acid antagonist which binds and inhibits one enzyme involved in an early step of the activation of folic acid to folinic acid. The administration of FUSILEV, therefore, bypasses the metabolic block effected by methotrexate.

What is FUSILEV approved for?
Rescue after high-dose methotrexate therapy in osteosarcoma—FUSILEV is used in patients with osteosarcoma who are treated with the folic acid antagonist methotrexate. This drug blocks the replication (copying) of DNA by preventing the active form of folate from being formed. Along with many types of cancer cells, some healthy cells like bone marrow and gastrointestinal mucosa cells also reproduce rapidly, which is why chemotherapy can have toxic effects. FUSILEV rescue therapy allows for a plan of administering a high dose of methotrexate in an attempt to kill more cancer cells while protecting the healthy cells with FUSILEV. This use of FUSILEV is described as rescue therapy.

To reduce the toxicity of methotrexate—FUSILEV is also used to diminish the toxicity of methotrexate in situations where the body is not able to rid itself of the drug normally. FUSILEV is also indicated for accidental overdosage of folic acid antagonists.

http://www.fusilev.com/about_fusilev.html

Spectrum Pharmaceuticals (SPPI): another try at the advanced colorectal cancer market

Spectrum Pharmaceuticals (SPPI) will hear from the US drug regulator on Apr. 29, 2011 regarding its supplemental new drug application, or sNDA, for Fusilev's use in advanced metastatic colorectal cancer.  Currently Fusilev is already approved for treatment of osteosarcoma (bone cancer) and methotrexate-related toxicity.  However, this will be Spectrum Pharma's second try at getting Fusilev, a novel folate analog, approved for advanced colorectal cancer.  Back in October 2009, FDA had issued a complete response letter to the California-based biotech citing that Fusilev (levoleucovorin) has not been demonstrated to be 'non-inferiror' to its closely associated form, leucovorin, or folinic acid, which is already being used in chemotherapy (press release).  Before the announcement, SPPI share price had gained a spectacular 463% between Jan, 2009 ($1.48) and Sept, 2009 ($8.33).  The complete response letter brought SPPI down to the $3 - 5 range and kept it there until Dec. of 2010, when the stock began to soar again based on anticipation of Fusilev's approval.  Since then, it had gained ~90%, surpassing the peak of 2009 before the issuance of the complete response letter.

Trading map 
With the key PDUFA date nearing (Apr. 29, 2011), I believe the recent pullback (-6.7% since Apr. 6), resulting from early investors taking profit, creates a great entry point for late comers who hope to gain from the options market, which is much more volatile than trading actual stock shares.  I will monitor SPPI closely in the next few days and look into buying May $9 or $10 call options on one of the down days.  At today's market close, May $9 and $10 call options were traded at $0.65 and $0.35, respectively.

UPDATE: FDA approves Xenoport's restless leg syndrome treatment, Horizant

~~~ Xenoport receives FDA approval for its drug, Horizant, against restless leg syndrome ~~~

http://www.reuters.com/article/2011/04/07/glaxo-horizant-idUSN0629415020110407

Now, this was a complete surprise!  In my opinion, Horizant should not have been approved despite its status as a resubmission (read here to see why).  This further reiterates FDA's unpredictable behavior from time to time.  If they had followed their own stringent requirement for safety, even a hint of carcinogenic risk (which was found associated with Horizant) would have deterred them from approving a drug!!!  What a surprise to see them clearing the drug this time around!

Yesterday I was able to off load 50% of my options as I felt the upward momentum was too strong and that it was appropriate to lower the risk by half ahead of today's decision (it turned out that my hunch was correct).

Now what?!

I am going to stick with my Hike-n-Slide strategy to trade an FDA approval.  On the news tonight, most people reacted and rushed in on Xenoport's stock (XNPT) - XNPT was already up 56.7% in after-hour trading ('the Hike').  I anticipate more buying early tomorrow morning before the stock crashes on weaning of investors' overreaction, or irrational hype (the 'slide').  I will look into purchasing May $10 or $11 put options, expecting share price to come down from its peak relatively quickly.  Apr options may be a little too risky as they will expire by the end of this week.  May options, on the other hand, will allow more than a month for the stock to slide from the post-approval peak.     

Short selling targets: Vivus (VVUS) and Orexigen (OREX)

I want to quickly point out two short selling/put option purchasing opportunities.  Although, significant intraday drop in share price had already taken place, I believe there's still room to the downside.  

VVUS jumped 16.3% following announcement of 2-year follow-up clinical trial data, showing patients experiencing reduced blood pressure from VVUS' experimental obesity drug.  Intraday drop already amounted to 10% and there's more room to drop.  Apr $7 put options surged 218% from the falling stock off of today's peak.  Read more about Vivus announcement.  

Orexigen, a direct competitor of Vivus in the diet pill arena, also soared 22% following announcement of follow-up clinical trial data, showing patients benefiting from sustained weight loss of >10% for more than two years.  Intraday drop already added to 6.6% and more share dumping is expected in the next few days.  Apr $3 put options surged as high as 300% from the falling stock off of today's peak.  Read more about OREX press release.