The world of biotech is both exhilarating and rewarding. However, picking the appropriate companies to invest in can be challenging and at times depressing. In this blog, you will find information gathered from industry reports, analyst forecasts, and market trends, helping you to emerge from mindless speculation and make intelligent investment decisions! - Michael Juan
Shares of Discovery Laboratories Inc. (DSCO) surged to their highest level in more than a year Wednesday after the company received long-awaited regulatory approval for its infant respiratory drug Surfaxin, but the stock retreated as investors learned of the costs involved in marketing the treatment.
The biotechnology company plans to launch Surfaxin as well as recently approved Afectair, a device for delivering aerosolized medicine to ventilated patients, at the tail end of 2012. The annual investment cost to market and sell the two products is between $12 million and $13 million, Discovery Labs said.
Shares of Discovery Labs opened Wednesday up more than 30%, reaching $5.39, their highest point since December 2010; however, the stock has since pared its gains and is now 21% higher at $4.55.
Chelsea Therapeutics International Ltd. (CHTP)’s drug to treat a condition that can cause dizziness in people with central nervous system disorders won the backing of a U.S. advisory panel.
The panel voted 7-4 today in Silver Spring, Maryland, the treatment called Northera, potentially the company’s first on the market, should be approved. The Food and Drug Administration is scheduled to decide whether to clear the drug for sale by March 28. The agency doesn’t have to follow the panel’s recommendation.
CHTP jumped almost 75% in AH trading to close at $4.21. I would expect CHTP to see a quick 'slide' tomorrow (target: $3 or below) and therefore will purchase cheap put options tomorrow morning, hoping to profit from a drop in share price after the initial peak. As always, good luck to all! Feel free to follow me on Twitter (@MichaelJuan01) for more trading updates.
As most people already knew by this point, Vivus' obesity therapy, Qnexa, garnered overwhelming support from the FDA panelists yesterday, receiving a one-sided positive vote outcome (20-2). On the great news, VVUS traded as high as $21.44 (52-week high) today, representing an amazing 103% gain from yesterday's close of $10.55. However, as expected with quick profit taking, share price steadily came down throughout the day to close at $18.73.
Meanwhile, another biotech company, Orexigen, also in the process of developing its own obesity drug, Contrave, jumped more than 20% before the opening bell today and reached a 52-week high of $3.98 (+24% from previous day's close) before reversing its course to close at $3.66.
As briefly alluded to in my blog post yesterday, I believe today's pop was a perfect short opportunity for the following reasons:
1. One-sided positive vote for its largest competitor means that Orexigen will be required to show even more convincing data to overcome the high bar set by Vivus - Not very likely based on Orexigen's past studies at least in terms of efficacy.
2. Contrave was commented on negatively by panel members during the review of Qnexa is yesterday's meeting - A sign that the drug is not favored over Vivus' Qnexa among obesity medical experts.
3. Last but not least, it will take at least three and a half years before FDA can make a decision on Contrave's fate. According to Orexigen's press release, the company will not commence an additional cardiovascular outcome trial until late 2Q2012.
"The Company plans to initiate the Contrave outcomes trial late in the second quarter of 2012" - Orexigen
This trail is expected to take 2 years. Plus the time it requires to prepare and file an NDA resubmission as well as for the FDA to review the drug, investors are looking at an unpredictable PDUFA result some time in 3Q2015 - Not unfamiliar to seasoned biotech traders, this timeline might as well be eternity and there is no justifiable reason to stick around for this lengthy period of time.
I expect OREX to drop to the low 3's if not lower in the next few weeks. Currently Mar $4 put options are trading at $.6, which means that there is still a potential gain of $.4 per contract. Good luck with the trade as always and feel free to follow me on Twitter (@MichaelJuan01) for more trading updates.
The Mountain View, CA-based biotech managed to spur enthusiasm among the FDA panelists today to recommend to the agency the approval of a new obesity drug, Qnexa. VVUS' shares jumped more than 100% in after hour trading to $21.15 (7:38 p.m. EST) on the great news from what was supposed to be a controversial panel expected to end with a tight vote. As it turned out, the result was an overwhelming yes from the panelists (20-2 for approval).
Trading Roadmap
I was hoping to trade with the 'slide' strategy if the panel result was a tight yes, since some investors would remain skeptical about the final PDUFA result in April and would therefore book their profit immediately, causing a quick decline in share price tomorrow. However, since the vote was one-sided, the chance of a 'slide' is slim. Some even speculate the possibility of a takeover by a large pharma, which may keep the share price up if not propel it even higher. This one is a tough call, but I'm inclined to think that VVUS share price will continue to hike ahead of PDUFA, as the hype of "the first obesity drug to be approved by the FDA in 13 year" becomes more widespread. On the other hand, the other 2 companies, Arena Pharmaceuticals and Orexigen, which also try to push their obesity drugs through the drug regulator, may suffer as a result. I would keep these 3 (VVUS, ARNA, OREX) on the watchlist for the next few days for any trade opportunities.
Finally, congrats to those long VVUS into the panel!!! It was a risky trade and it's worth celebrating!
Vivus's experimental obesity drug will get a second chance at getting the nod form FDA panelists tomorrow (2/22). For the company, the first try was a disaster. Not only did the panelists voted against (10 No vs. 6 Yes) recommending Qnexa for approval, the FDA went on to send the company back to the drawing board by issuing a CRL (complete response letter), requesting for long term studies to demonstrate sufficient data to support the drug's safety. Based on this request, Vivus extended its original 56-week CONQUER study to a 108-week follow up trial, which the company named SEQUEL.
In December of 2011, the company published the findings from this trial in the American Journal of Clinical Nutrition (AJCN). The summary of the results is as follows:
Patients treated with Qnexa had significant, sustained weight loss compared to those in the placebo group over two years.
Average weight loss at week 108 was -9.3% and -10.5%, respectively, for the mid- and top-dose as compared to -1.8% for the placebo group (least-squares mean ITT-LOCF).
Qnexa patients had improved cardiovascular and metabolic risk factors and a decrease in the need for associated medications in comparison with the placebo group.
Placebo patients had a three times greater likelihood to progress to type 2 diabetes compared to subjects receiving top-dose Qnexa and a two times greater likelihood than patients on mid-dose Qnexa.
Qnexa therapy was well tolerated, with no new adverse events observed in the second year of study.
The most common side effects were upper respiratory infection, constipation, tingling, sinus infection, dry mouth and runny nose.
There were no drug-related serious adverse events reported. The completion rate in SEQUEL was approximately 83% for both Qnexa doses and 86% for the placebo group. Discontinuations due to adverse events were 4.5% and 4.4% for the mid- and top-dose, respectively, and 3.1% for the placebo group.
Trading Roadmap
Similar to many traders, I think the outcome of tomorrow's panel will be a coin toss. Below are my reasons for voting for and against recommending Qnexa for approval:
FDATracker.com has predicted negative panel vote taking into account the past voting history of the members that will be serving on the panel tomorrow. As a result, VVUS dropped more than 11% below $10.7 as of 11:22 a.m. PT.
Personally, after reading VVUS' most recent publication of the SEQUEL study in AJCN, I was quite impressed with the data and thought Qnexa may have a reasonable chance of getting past the panelists this time around. However, one thing, in addition to safety concerns, that worried me was the increase in body weight in the top dose arm toward the end of the study (bottom curve - triangle).
Am J Clin Nutr 2012;95:297-308.
It is hard to explain why this had occurred, despite that fact that patients were kept on the same treatment regimen and dose throughout the 2-year period. In other words, it is difficult to predict whether the trend toward "loss of efficacy" would continue had the trial been extended longer. This may potentially be a deal breaker for Vivus in my mind. Finally, there's always the "exercise over drug" mentality that doctors have for treating obesity, a significant barrier that continues to lower the benefit/risk ratio.
So what will I do? Well, because of the risky nature in investing in either side (i.e., call vs. put), I may regrettably sit this one out. However, this is not to say that there isn't an opportunity to profit from the panel. If vote is positive, the "slide" strategy will come in handy (i.e., purchasing put for cheap in anticipation of a share price as hype weans). If vote is negative, purchasing cheap calls may be a great strategy as the PDUFA is not far away (2012/04/17) and a quick "hike" is likely.
As always, good luck and feel free to follow me on Twitter (@MichaelJuan01) for trading updates.
"Shares of Columbia Laboratories plunged more than 55% after FDA advisors voted against recommending the company's experimental drug for approval"
Columbia Laboratories Inc. and Watson Pharmaceuticals Inc. didn’t provide sufficient data that their progesterone gel reduces the risk of preterm birth, advisers to U.S. regulators said.
A Food and Drug Administration advisory panel voted 13-4 today in Silver Spring, Maryland, that the companies didn’t adequately prove the gel prevents mid-trimester births. The agency is scheduled to decide whether to approve the gel by Feb. 26 (PDUFA) and isn’t required to follow the panel’s recommendations.
"Columbia Laboratories (CBRX) regained more than 60% of yesterday's loss as traders eager to bet on surprise panel outcome"
Only 2 days left until the FDA panel votes on whether or not to recommend Columbia Laboratories' (CBRX) preterm birth therapy for the agency's approval. The biotech company's stock has seen wild swings ahead of the panel decision.
Yesterday, CBRX tumbled 54% after a briefing document, usually published 3 days before the panel meeting, raised concerns over the insufficient efficacy of the experimental drug. However, as mentioned in yesterday's blog post, CBRX was due for a bounce as traders favor the bet of a surprise positive outcome coming out of this Friday's meeting. As a result, CBRX regained more than 60% of what it had lost yesterday with more than 8 times the avg volume, finishing at $1.47 as of the end of today's trading.
It should be noted that the general consensus is still negative for CBRX and there may even be a chance to purchase cheap put options going into Friday if the stock keeps ripping higher. I will be watching this closely tomorrow. Alternatively, waiting for the potential 'slide' play on Monday is always a great strategy. Feel free to follow me on Twitter (@MichaelJuan01) for trading updates. Good luck!
"Columbia Laboratories Inc. (CBRX) fell the most in almost five years after U.S. regulators said the company’s progesterone gel to reduce the risk of preterm birth isn’t effective"
Columbia Labs dropped 54 percent to $1.10 at the close in New York, the biggest single-day decline since Feb. 5, 2007. Watson Pharmaceuticals Inc. (WPI), a partner on the drug, fell 6.8 percent to $57.98, the greatest single-day loss in almost three years.
“The information and data in this application do not support the efficacy of progesterone gel compared with placebo in reducing the risk of preterm births before 33 completed weeks,” Food and Drug Administration staff wrote in a Dec. 22 report released today. The product would compete with KV Pharmaceutical Co. (KV/A)’s gel Makena, approved in February 2010. KV rose 6.2 percent to $1.89.
The FDA staff based its determination on data from narrow groups in a global study, said Amy Raskopf, a spokeswoman for Livingston, New Jersey-based Columbia Labs.
“This is a global study,” she said in a telephone interview. “It was designed as a global study. FDA agreed.”
An FDA advisory panel is set to meet Jan. 20 on Columbia Lab’s gel and weigh the risks and benefits. The agency isn’t required to follow the panel recommendations.
Not Statistically Significant Of U.S. patients, 16.8 percent using the gel experienced preterm birth at 33 weeks of pregnancy, the endpoint the company and the agency agreed on, compared with 19.2 percent using placebo, not a statistically significant difference, FDA staff said.
“It does not appear that the applicant has identified a population of U.S. women who are likely to benefit from the use of progesterone gel to reduce their risk of preterm birth,” FDA staff wrote.
Columbia Labs said its gel was associated with a statistically significant reduction in preterm birth compared with placebo of 8.9 percent versus 15.2 percent in 465 pregnant women from 10 countries, according to a document from the company.
Preterm birth affects 10 percent to 12 percent of all pregnancies in the U.S., with an economic impact of $26 billion annually, according to the company.
The safety of Columbia Lab’s gel was similar to placebo, according to the FDA staff report. There were no maternal deaths in either the group using the gel or the placebo and the rates of fetal, neonatal and infant deaths were similar.
Trading Roadmap Since the actual panel vote will not take place until Friday (1/20), there could be a bounce ahead of that date as traders bet on the possibility of a surprise positive recommendation by the FDA panel. However, this is risky and should only be pursued with extreme caution. Given the current status of the stock, playing the 'slide' on a surprise positive panel outcome would be a better strategy. Feel free to follow me on Twitter (@MichaelJuan01) for trading updates. Good luck!
CBRX has two major upcoming catalysts, one is the FDA panel (1/20) and the other is PDUFA (2/26). Like most companies facing scrutiny by the FDA panel, CBRX has gained much attention in recent days, resulting in a nice 13.7% hike in today's trading with a more than 100% increase in volume.
More significantly, Jan 2.5 call options traded at $0.6 today, representing a doubling of yesterday's closing price (see the first time call options were mentioned as a strategy to trade CBRX; at the time they were $0.3).
With only 9 trading sessions remaining, dramatic volatility is expected with CBRX and more hike may follow as more traders pour in their money after today's action. At this point, trade with extreme caution! It is not uncommon for these stocks to swing up OR down 10+% in a day for no particular reason even before the panel makes a decision. If one has no position in the stock or stock options, I would in fact wait to play the slide on CBRX. I will be watching this one closely. Feel free to follow me on Twitter (@michaeljuan01) for more trading updates. Good luck!
Preterm Birth in Women with Premature Cervical Shortening
Columbia's lead clinical development program is PROCHIEVE® (progesterone gel) to reduce the risk of preterm birth in women with premature cervical shortening. Preterm birth is a serious public health problem, affecting 10 to 12% of all pregnancies in the United States. The ecomomic impact of preterm birth is significant, costing more than $26 billion annually, with the average preterm infant costing approximately $52,000. A short cervical length at mid-pregnancy is the single most powerful predictor of preterm birth.
Technology
Key Ingredient
Each of Columbia’s marketed products and product candidates utilizes its bioadhesive drug delivery system (BDS) technology that differentiates Columbia from its competitors and provides a platform for numerous future applications. The key ingredient in the BDS is polycarbophil, a non-immunogenic, hypo-allergenic, bioadhesive polymer. Polycarbophil bonds to the cells of the body’s mucosal surfaces upon administration. In Columbia's vaginally-administered products, it bonds to the vaginal epithelial cells. Once in place, the BDS releases the active drug in a controlled and sustained manner until it is discharged upon normal cell turnover. This occurs every three to five days for the vaginal epithelium.
Formulation
Gels —The Company’s bioadhesive vaginal gels are self-administered using a patient- friendly, pre-filled applicator.
Chemistry
Polycarbophil is lightly cross-linked with divinyl glycol. It is a weak polyacrylic acid (pKa = 4.2) containing multiple carboxyl radicals (COO-), which are the source of its negative charges. These acid radicals permit hydrogen bonding with the cell surface. Hydrogen bonds are weak, but in the case of polycarbophil they are numerous and therefore tenacious.
Polycarbophil mimics negatively charged mucin, the glycoprotein component of mucus responsible for its attachment to underlying epithelial surfaces.
Benefits Bioadhesive vaginal delivery of progesterone exhibits the following benefits:
Facilitates targeted delivery of active compounds to the uterus, right where they are needed
Avoids the local site pain, irritation and potential infection of daily compounded progesterone intramuscular injections
Maintains low systemic levels
Pre-filled applicators make these FDA-approved products easy to use and patient-friendly, without the mess of pharmacy-compounded suppositories.
Columbia’s technology is currently being used to develop bioadhesive, vaginally-administered anesthetic, testosterone, and carbamide peroxide products to treat a variety of women’s healthcare indications.
Summary of Clinical Data
In April 2007, Columbia reported that data from a Phase III clinical trial that evaluated PROCHIEVE for the prevention of preterm birth in women with a prior preterm birth earlier than 35 weeks show a delay in cervical shortening in patients treated with PROCHIEVE versus placebo. The data further suggest a correlation between cervical length, progesterone administration, and both a reduction in the likelihood of preterm birth and an improvement in infant outcomes. The data were published in the peer-reviewed journal Ultrasound in Obstetrics & Gynecology in October 2007.
In 2008, Columbia initiated the PREGNANT (PROCHIEVE Extending GestatioN A New Therapy) study, a randomized, double-blind, placebo-controlled Phase III clinical trial evaluating PROCHIEVE to reduce the risk of preterm birth in women with a short cervical length as measured by transvaginal ultrasound at mid-pregnancy. In October 2008, Columbia announced a collaboration with the Perinatology Research Branch (PRB) of the Division of Intramural Research of the Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD) of the National Institutes of Health (NIH), under which we amended the study protocol to reflect the addition of nine NIH sponsored sites and an increase in the number of patients from 300 to 450.
In December 2010, Columbia and Watson jointly reported positive top-line PREGNANT study results; the study was published in Ultrasound in Obstetrics & Gynecology in July 2011. The published results indicate that administration of PROCHIEVE from mid-pregnancy until term in women with a premature cervical shortening as confirmed by transvaginal ultrasound was associated with a statistically significant reduction in the rate of preterm birth at ≤32 6/7 weeks (p=0.020), the primary endpoint of the study, vs. placebo gel. Use of PROCHIEVE was associated with a 45% reduction in the incidence of preterm birth at this endpoint. Improvement in infant outcome was noted with PROCHIEVE. The incidence and profile of adverse events in patients receiving PROCHIEVE was comparable to placebo, which was as expected given the product's documented safety history.
Source: Columbia Laboratories
Trading map
For those unfamiliar with the hike-n-slide trading strategy, my primary strategy to trade biotech stocks, it takes advantage of the increased volatility and hyped up anticipation of a pre-scheduled event (i.e., FDA panel, clinical results release, PDUFA). Trades are made before and after the announcement of the event outcome without having to hold unjustifiable risks through the event. As such, the actual outcome of the event (i.e., positive or negative recommendation, approval or rejection) will not significantly affect the profitability of the trades - the beauty of the hike-n-slide trading strategy.
CBRX has climbed more than 15% in the past month ahead of the 1/20 FDA panel as traders broadly anticipate positive recommendations from the panelists. At $2.50, CBRX is still 72.4% lower than its 52-wk high of $4.31, which was seen after a hike in share price that initiated after the company announced positive phase III clinical trial data in Dec of 2010. As the FDA panel date approaches, CBRX is expected to hike back towards this level as trading activity picks up. A great way to trade CBRX is through call options. As of the last trading session of 2011, CBRX Jan 2.5 call was trading at $.30, meaning that the options would be in the money when CBRX trades at $2.8 ($2.5 + $.30). If the global economy remains steady, it is very likely that CBRX will be trading above $2.8 before 1/20. However, the only concern is that Jan call options expire on 1/21, a day after the panel meeting takes place on the Friday before the option expiration (OpEx) weekend. In other words, traders may not have a chance to know the results of panel votes before the options stop trading at the end of Friday's trading. This may encourage more buying of the Feb call options which of course carry a higher time premium. It is ultimately up to the individuals to decide which of the Jan or the Feb call options to go with for trading CBRX. So far, higher volume has been observed with the Jan call options compared to the Feb call options. I will make my call (no pun intended) fairly soon. Follow me on Twitter (@Michaeljuan01) for trading updates. Good luck!
In order to take advantage of biotech stock/options trading, it is paramount to know which companies are the centre of attention within the biotech community. These companies tend to be the ones facing scrutiny by the FDA panel and those to be dealt FDA drug approval decision (PDUFA). With skyrocketing volatility, the stocks of these companies are perfect for trading. Mark these important dates down on your calendar as a start. Detailed analysis of each company and trading roadmap will follow as the date of each event approaches. Good luck and have a fulfilling and prosperous 2012!
A few biotech stocks (with near term catalysts) that I will be watching:
Vivus Inc. (VVUS) - one of the most-watched biotech companies late last year with an obesity drug candidate, QNEXA, whose approval was DENIED by the FDA on 2010-10-29 based on birth defect and cardiovascular concerns. We are expecting to hear FDA's acceptance of QNEXA's NDA resubmission (likey by tomorrow 2011-10-31). A PDUFA action date will be assigned when this occurs and we may see a quick hike-n-slide play.
Pacira Pharmaceuticals (PCRX) - PCRX is expected to deliver a press release Monday morning to disclose the outcome of FDA's decision on EXPAREL, which had an PDUDA date of 2011-10-28 (last Friday). It is widely speculated, based on rumors, that FDA has approved the drug. We will see lots of trading actions tomorrow morning. Unfortunately, no PCRX options are available for trading, making it less attractive for a slide play.
BioSante Pharmaceuticals (BPAX) - though the original November PDUFA date for Company's Bio-T-Gel has been delayed to 2012-02-14, investors' appetites for this stock have not decreased. In fact, BPAX hiked up 17% last week as more investors turned their attentions to the results of Libigel's pivotal trial data, to be announced some time in December. Should the markets remain strong, another great week for BPAX should follow!
pSivida Corp. (PSDV) - PSDV has a PDUFA date next week (2011-11-12) for ILUVIEN. Stock popped 12% on Friday. Based on the high call/put option ratio, most investors are betting on ILUVIEN's approval. This is an interesting stock to follow.
If you haven't noticed, I have posted significantly fewer number of articles since August (2011). Why?! Well (besides my newly arrived baby boy), plainly put, thelandscape of biotech trading has changed drastically. Many companies that people thought were great 'Hike' targets based on major catalyst events (PDUFA, clinical trial results, NDA filing/acceptance) never saw the 'Hike' that was highly anticipated and once foreseeable. Correspondingly, the magnitude and predictability of 'Slide' have also been diminished. As a result, it take a lot more patience and discipline to execute trades following what was once 'predictable' patterns. Undoubtedly, it has been tough and head-scratching for many biotech enthusiasts for the past several months, but, moving forward, people should continue to remind themselves of the following principles which will, in my mind, sustain the viability and profitability of biotech stocks and options trading:
1) Biotech will ALWAYS thrive - big pharmas simply lack the focus, energy, and agility that small biotech companies possess to develop new therapies and innovative medical devices; licensing and acquisition by big pharma will still be the key theme in the coming years
2) Big news events in biotech will ALWAYS drive hype - major news networks, trading forums, and even social media (such as Twitter) continue to be valuable sources of information/misinformation that help stimulate the excitement about a particular event (e.g., drug approval), which in turn leads to volatile stock prices that traders can take advantage of
3) Biotech stocks/options will ALWAYS yield high percentage profit - I know this one is tricky and may not be as convincing in a tough market, but when the economy stabilizes, small cap biotech will be one of the first places where traders will pour their money back into. Particularly with stock options, high percentage profit in a short time can easily be achieved (I remember when 100+% gains in a matter minutes were the norm just before the summer of this year).
All in all, I will continue to seek opportunities in biotech and share them with you here. However, I will be using Twitter as my primary trading news tool on a day-to-day basis. There is a Twitter Feed column to the right of this blog where you can view my most recent tweets. Note that I will also stay an active trader even when I don't see any good trades in biotech - I do this by trading broad market indices and a few tech companies. Follow me on Twitter (@MichaelJuan01) for more trading updates. As usual, good luck to you all!
Product candidates: LibiGel, Bio-T-Gel Short term catalyst: 3 presentations at healthcare conferences (9/7, 9/12, 9/27); press release Mid-term catalyst: Bio-T-Gel PDUFA (11/14), LibiGel Phase III efficacy trial results update (4Q2011) Long term catalyst: LibiGel NDA filing (mid/end-2012) 52-week high: $4.02 52-week low: $1.30
TheStreet.com Interview with BioSante CEO
Cash Position
On Aug. 2, 2011, BPAX closed a $48 million public offering of common stock. According to BPAX CEO, Stephen Simes, the proceeds of the $48 million underwritten financing together with the cash the company had before the transaction results in almost $80 million in cash. This cash balance is sufficient to fund the LibiGel program and BioSante through the anticipated LibiGel new drug application (NDA) submission by the end of 2012, and in fact all the way through a potential FDA approval which could come in mid-2013. This long runway was one of the key reasons for executing the transaction at this time. Another reason for executing the transaction at that time was so that in the fourth quarter of this year when the company announce LibiGel efficacy data investors can concentrate on the quality of the data versus being concerned that BPAX would need to raise money.
More on LibiGel Trials
LibiGel (testosterone gel) is being developed for the treatment of female sexual dysfunction (FSD), hypoactive sexual desire (HSDD) in post-menopausal women. BPAX has completed enrollment in two pivotal efficacy trials under SPA agreements with results expected during the fourth quarter of 2011. In addition, the company has also completed enrollment in a Phase III safety trial, which is expected to produce data supporting LibiGel's NDA submission anticipated to be made in 2012..
Primary safety outcomes being evaluated are related to cardiovascular (CV) events such as CV death, myocardial infarction, and stroke with a lower than expected rate of 0.58% (22 CV events) observed to date and a 0.24% rate of breast cancer (nine cases). BPAX has patent protection for LibiGel through mid-2022 and estimates over 4 million testosterone prescriptions are written off-label for the treatment of female sexual dysfunction (FSD), representing a potential market opportunity of $2 billion.
Summary of the background and rationale for development of LibiGel for the treatment of FSD, HSDD in post-menopausal women (based on BPAX's recent SEC 10-K Annual Report filing)
“Although generally thought of as being limited to men, testosterone also is important to women and its deficiency has been found to cause low libido or sex drive. Studies have shown that testosterone therapy in women can boost sexual desire, sexual activity and pleasure, increase bone density, raise energy levels and improve mood.
According to a study published in the Journal of the American Medical Association (JAMA), 43% of American women between the ages of 18 to 59, or about 40 million women, experience some degree of impaired sexual function. Among the more than 1,400 women surveyed, 32% lacked interest in sex (low sexual desire). Furthermore, according to a study published in the New England Journal of Medicine (NEJM), 43% of American women between the ages of 57 to 85 experience low sexual desire.
According to IMS data, two million testosterone prescriptions were written off-label for women by U.S. physicians in 2009 and according to independent primary market research, at least 2 million additional prescriptions of compounded testosterone were written off-label for women. Female sexual dysfunction is defined as a lack of sexual desire, arousal or pleasure. The majority of women with FSD are postmenopausal, experiencing symptoms due to hormonal changes that occur with aging or following surgical menopause.”
Trading Roadmap
Given the list of catalysts in the short, mid-, and long term (including PDUFA, clinical trail results, NDA filing), there is great potential that BPAX will see a 'Hike' ahead of the company's anticipated submission in 2Q2012. Under normal circumstances, it would be safe and less risky to purchase call option contracts with an expiry date many months down the road. However, with the increased volatility and unpredictability seen in the markets around the world at the moment, I would remain cautious in making such 'long term' trades with catalysts that are as far as 3 months away. Currently, Dec 2.5 call options are traded at $.75. With BPAX trading in the $3.60 -3.80 range just prior to the latest round of stock offer, this is a reasonable entry to me. The 3 presentations by BPAX in September could potentially attract more investor attention and kick off the 'Hike'. I will continue to monitor BPAX price in the coming weeks. Good luck! You are always welcome to follow me on Twitter (@MichaelJuan01) for trading updates.
Friday's early approval announcement may have caught many by surprise (original PDUFA 8/30); hence the irregular price fluctuation at close. With the Aug options expiring today (technically tomorrow), there was not really any opportunity for a 'Slide' play. The Sept put options still carry a high time premium at this point, so I will look into these early next week (potentially another spike Monday morning) and decide what to do. Since the approval was only the accelerated type and not the full version, SGEN will have to conduct a phase IV/confirmatory trial post marketing. This was NOT what investors would have liked to hear, so a 'Slide' is quite likely. I will keep an eye out for this next week!
We all know that job numbers aren't increasing as fast as they should, economic growth is overwhelmingly sluggish, and the stock market has just suffered its worst week since the recession. Those of us, biotech investors, have seen once consistently profiting strategies being thrown out the window in these past two weeks. Take a look at the incredible change in some of the highly 'promising' biotech stocks during 7/25 - 8/5 (2-wk period):
$CLSN: down 25.42%
$ANX: down 28.07%
$SGEN: down 22.72%
$BPAX: down 33.8%
$DEPO: down 32.2%
Fueling the fire, S&P downgraded the US credit from the top AAA rating for the first in history on Friday (8/5). Middle East stock markets first reacted to this with a dramatic plunge in late Sunday morning (8/7), and it is said that the Asian markets will follow suit later in the day. How will the US stock market react tomorrow morning? Will another 500+ point drop occur? Will the Fed intervene? Is QE3 in place? Have we reached the bottom yet (Alan Greenspan doesn't think so)? Those are obvious questions that every investor thinks about as he/she rehearses the various scenarios of market reaction in this upcoming week.
What would I do?
While the latest financial news (i.e. S&P downgrade) could have huge impact on the market's already weakened confidence, I don't see this as the end of the world (yet) for a few reasons:
1) S&P is not the only ratings agency (Moody's and Fitch still maintain US credit at AAA)
2) US treasuries are still among the safest investment instruments in relative terms despite downgrade
3) Washington going to great lengths to discredit S&P in hopes to minimize downgrade impact
I foresee a broad sell-off as the market opens tomorrow, followed by stabilization, if not even a rally. I've read/heard that many are gearing up to put their cash to work and I certainly agree that many stocks with near term catalysts, such as ones mentioned above, are heavily discounted right now. Nevertheless, I will remain cautious before resuming full on buying mode (there are still many other factors, such as employment, political weakness, Euro debt, economic growth...etc. that add to instability). I will do so only when I see at least 2-3 consecutive days of gains plus reversal of broad market sentiment; otherwise cash is still a valuable position! As always, think wisely, evaluate cautiously, and act boldly - good luck!
July 14, 2011 - FDA advisory committee unanimously recommended accelerated approval of for TWO indications
ADCETRIS (brentuximab vedotin)
ADCETRIS is an antibody-drug conjugate (ADC) that targets CD30, a defining marker of Hodgkin lymphoma (HL). CD30 is also expressed on other cancers, including anaplastic large cell lymphoma (ALCL). ADCETRIS is comprised of an anti-CD30 monoclonal antibody linked to a potent cell-killing agent, monomethyl auristatin E (MMAE), using Seattle Genetics’ proprietary technology. This technology enhances specific uptake of ADCETRIS into CD30-expressing tumor cells, inside which the MMAE is released, achieving a targeted cell-killing effect.
ADCETRIS has received orphan drug designation in the United States and Europe for both HL and ALCL. SGEN had also obtained Fast Track designation from the FDA for brentuximab vedotin in HL.
Worldwide development
Seattle Genetics is jointly developing brentuximab vedotin with Millennium: The Takeda Oncology Company under an agreement where Seattle Genetics has full commercialization rights to brentuximab vedotin in the United States and Canada, while Millennium has exclusive rights to commercialize the product candidate in all other countries. In June 2011, the European Medicines Agency (EMA) accepted for review Millennium's Marketing Authorization Application (MAA) for brentuximab vedotin for the treatment of relapsed or refractory HL and relapsed or refractory systemic ALCL.
Just shy of a home run
On July 14, 2011, SGEN announced that the Oncologic Drugs Advisory Committee (ODAC) to the FDA voted 10-0 to recommend that the FDA grant accelerated approval of ADCETRIS for the treatment of patients with Hodgkin lymphoma who relapse after autologous stem cell transplant (ASCT). In addition, ODAC voted 10-0 to recommend that the FDA grant accelerated approval of ADCETRIS for the treatment of patients with relapsed or refractory systemic anaplastic large cell lymphoma (ALCL). The FDA is expected to act on the two Biologics License Applications (BLAs) for ADCETRIS by August 30, 2011 under the Prescription Drug User Fee Act (PDUFA).
This is clearly positive news for the company to have complete endorsement from the panel, but the tricky part now is the fact that the company may need to conduct an additional confirmatory trial to support full approval of ADCETRIS. The ADCETRIS BLAs were based primarily on data from a pivotal trial in relapsed or refractory Hodgkin lymphoma that was conducted under a Special Protocol Assessment with the FDA and from a phase II trial in relapsed or refractory systemic ALCL. These smaller, single-arm trials with surrogate endpoints such as response rate rather than patient survival rate are sufficient for an accelerated approval which considerably shortens the time required prior to receiving FDA approval; however, in order for ADCETRIS to be granted full approval, SGEN will still need to conduct a phase 4 confirmatory trial to confirm that the surrogate endpoint in fact translates into prolonged patient survival.
Trading map
The only drawback of an accelerated approval is the time and money required to conduct a phase 4 trial. Upon initial approval though, SGEN can immediately market ADCETRIS, which is predicted to experience rapid adoption by hematologists/oncologist as the first approved therapy in relapsed/refractory patients.
Prior to the panel meeting, SGEN had seen a nice 'Hike' from $15 to a 52-week high of $21.41, a 43% climb in a period of two and a half months. However, the concern around the additional trial SGEN needs to conduct as well as the broad market pessimism on US debt ceiling negotiation had dragged the stock down more than 18% since the advisory panel gathering. With the PDUFA date being a month away (8/30), I believe that this is a reasonable entry point for another 'Hike' before the drug regulator decides on the fate of SGEN's drug. The superior activity that ADCETRIS demonstrated in the clinical trials, the strong FDA interest in making this drug available to patients, and the potential runup SGEN had seen ($21.41) will spur enough hype to push SGEN back up to $19-20 ahead of the 8/30 PDUFA. Given this estimate, Sept OTM $17.5 call options seem well priced at $.95. I will look into adding to my existing position (IN at $.90) in the next few days pending complete resolution of the US debt issues (don't want to get caught by irrational sell-off) and SGEN's 2Q earnings report on 8/4 (may buy before; expect more news coverage to 'remind' investors about near term PDUFA). Follow me on Twitter (@Michaeljuan01) for trading updates. Good luck!
