UPDATE: Huge GAIN from Spectrum Pharma (SPPI) post-approval slide

Stock of Spectrum Pharmaceuticals falls as expected

Spectrum Pharmaceuticals (SPPI) drops for a second day today following FDA's approval of its drug, Fusilev.  Surprised?  Not really (read here to know why).  Investors pulled out of the stock, worrying about the slow sales growth of Spectrum's non-Hodgekin's lymphoma drug, Zevalin, suggested in the 1Q earnings released today.  Even though the company's earnings were 496%  higher compared to the same quarter last year ($41M vs $7M), the sales of Zevalin had remained unchanged meanwhile ($6M).  Since the excess profit seems to be solely due to the sales of Fusilev during a time of shortage, investors do not buy into the persistence of Spectrum's strong earnings.  Most people imagine that when leucovorin becomes available again, patients will undoubtedly choose the generic version over Spectrum's drug, which is roughly 10x more expensive.  

How I trade?

Expecting a quick slide of SPPI post-FDA's approval of Fusilev, I sent out a tweet (@michaeljuan01) on Sunday, May 1, the weekend before the market had an opportunity to react to SPPI's late Friday announcement.  The tweet also contained a link showing the price estimates of SPPI following Fusilev's approval based on analysis of the data collected from 3 of the most recent and popular biotech stocks following an FDA approval.  Given this information, I recommended buying either the May $10 and $9 or June $9 put options.  The next morning, I was able to have my May $9 and June $9 put orders filled @ $0.5 and $0.78, respectively (see my tweet), which I thought could be lower.  It wasn't long until SPPI fell as expected, losing 11% of its peak value in 2 days.  This morning I sold my options at the steepest share price drop and profited 140% (sold @ $1.20) and 61% (sold @ $1.25) for the May and June $9 puts, respectively.  This is how I trade - A strict system that allows me to follow a predictable pattern and enables me to allocate a small portion of my fund to a relatively low risk/high reward trade at a rapid pace.  

Follow me on Twitter (@michaeljuan01) for my next trade targets.

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').  

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.

AEterna Zentaris (AEZS) - 1Q2010 financial report

AEterna Zentaris (AEZS) releases finance results for the three-month period ended Mar. 31, 2010.

Revenues were $6.4 million for the three-month period ended March 31, 2010, compared to $6.1 million for the same period in 2009. The increase is mainly due to a comparative increase in sales of Cetrotide® to certain customers in the first quarter of 2010. This increase was partly offset by lower amortization of upfront license fee payments in 2010 related to our agreement with sanofi-aventis U.S. LLC (sanofi-aventis), which was entered into in March 2009, in connection with our now discontinued development program involving cetrorelix for the treatment of Benign Prostatic Hyperplasia (BPH), and subsequently terminated.

Research and development (R&D) costs, net of tax credits and grants, were $5.7 million for the three-month period ended March 31, 2010, compared to $11.4 million for the same period in 2009. The comparative decrease in net R&D costs is almost entirely attributable to the winding down and termination of development activities related to cetrorelix in BPH, despite the presence in the first quarter of 2010 of residual expenditures associated with certain remaining contractual obligations.

Selling, general and administrative (SG&A) expenses were $2.8 million for the three-month period ended March 31, 2010, compared to $3.6 million for the same period in 2009. This decrease is primarily related to lower comparative salary and benefit costs, lower legal expenses and other cost-saving measures.

Net loss was $5.9 million, or $0.09 per basic and diluted share, for the three-month period ended March 31, 2010, compared to $12.4 million, or $0.23 per basic and diluted share, for the same period in 2009. This decrease is mainly related to lower comparative net R&D costs, lower SG&A expenses and higher foreign exchange gains, partly offset by lower comparative license fee revenues and lower sales and royalty margins.

Cash and cash equivalents were $26.9 million as at March 31, 2010. This amount excludes an estimated $13.7 million of net proceeds received in connection with the registered direct offering completed on April 20, 2010.

1Q2010 Highlights

January 25, 2010: Updated results of a Phase 2 study related to the use of perifosine in the treatment of advanced metastatic colon cancer showing a statistically significant benefit in survival, including 5 FU-refractory patients.

January 29, 2010: Publication in the February 2010 issue of the Journal of Clinical Cancer Research of positive Phase 2 results for perifosine as a single agent for the treatment of advanced Waldenstrom’s macroglobulinemia.

February 3, 2010: Special Protocol Assessment (SPA) granted by the United States Food and Drug Administration (FDA) for the Phase 3 trial of perifosine in combination with capecitabine (Xeloda®) in refractory advanced colorectal cancer. The trial is to be conducted by Keryx Biopharmaceuticals, Inc. (KERX), Aeterna Zentaris’ partner and licensee for perifosine in North America.

March 1, 2010: Disclosure that the Committee for Orphan Medicinal Products of the European Medicines Agency (EMA) had issued a positive opinion for orphan medicinal product designation for perifosine for the treatment of multiple myeloma.

Shares of the company slid 2.87% to $2.03 in early morning trading.

AEternal Zentaris (AEZS) stocks climbed 14.21% following IND approval

Shares of Canadian biotech, AEterna Zentaris (AEZS), traded up 14.21% today upon FDA's approval of the firm's IND application for its bladder cancer fighting drug, AEZS-108. Approximately 21 million shares exchanged hands before the closing bell. After hour trading tacked on an additional 0.96% to $2.11 per share. AEZS is backed by strong bullish momentum, amassing 68.55% gain in the past 5 days alone.

Upcoming Events:
May 13, 2010: AEZS is scheduled to announce 1Q2010 financial and operating results tomorrow before market opening and Annual Shareholder Meeting later in the day.

May 18, 2010: President and CEO, Juergen Engel, Ph.D., will present a corporate overview at the upcoming Rodman & Renshaw Annual Global Investment Conference in the Albemarie Suite of the Grosvenor House Hotel in London, U.K

June 4-8, 2010: Final results of a randomized phase II study of perifosine in combination with capecitabine (P-CAP) versus placebo plus capecitabine (CAP) in patients (pts) with second- or third-line metastatic colorectal cancer (mCRC) will be presented at the ASCO (American Society of Clinical Oncology).

Delcath's shares up 31% upon release of postive clinical data!!!

URGENT UPDATES

- Pivotal study compared PHP to best alternative care

- Results surpass primary endpoint expectations
- DCTH to initiate rolling NDA submission in the next 30 days
- Shares hiked 31% in after-hours trade


Delcath Systems Inc. (DCTH) announced today that their pivotal phase III clinical study results have met the main study objective of demonstrating the efficacy of slowing cancer progression in the liver of patients with melanoma metastasizing to the organ.

In this study, Delcath's PHP (Percutaneous Hepatic Perfusion) system used with chemotherapy drug melphalan was tested against best alternative care. Based on the positive trial findings, DCTH expects to initiate their rolling NDA (new drug application submission) to the FDA within the next 30 days.

After detailed analysis to the study results, it was reported that PHP patients had a statistically significant longer median hepatic progression-free survival of 214 days compared with 70 days in the best alternative care arm. The company added, on a conference call, that while they were expecting the best alternative care arm to show progression-free survival of around 4 months instead of around 2 months, the PHP arm still produced a remarkable improvement in patients, showing progression-free survival of 7 months. The trial results certainly came as a pleasant surprise as patients, experiencing rapid disease progression, who crossed over from the best alternative care arm to the PHP treatment arm performed even better than those with 'milder' conditions.

"This certainly puts them on a good start," Craig-Hallum Capital analyst Brooks West commented on Delcath's odds of obtaining a regulatory approval, especially when the trial was run according to a special protocol assessment, which provides a company with a written agreement that the design and analysis of the trial are adequate to support a marketing application submission with the U.S. health regulators.

On June 5, the company will further announce news regarding overall patient survival as part of the trial's secondary end points at the annual meeting of the American Society of Clinical Oncology.

The PHP system is priced at $20,000/system at the moment and sees estimated revenue of $745 million in the US market alone.

Shares of the company were up 30.78 percent to $14.19 in after-hours trade. DCTH closed at $10.85 Wednesday on Nasdaq.

Delcath Systems (DCTH) - next generation of localized cancer treatment

Stock Alert

Share prices have been on the rise for Delcath Systems (DCTH), soaring 80% in a month (Mar - Apr 2010). DCTH is near the end of their phase 3 data (malphalan using PHP) analysis and is planning to have their plant inspected by the FDA by end of month. In addition, the company will attend 3 conferences in the last 2 weeks of April. These conferences include:

• The 9th World Congress of the International Hepato-Pancreato-Biliary Association, Buenos Aires, Argentina, April 18-22
• The 2nd European Conference on Interventional Oncology, Florence, Italy, April 21-24
• The AmSECT 48th International Conference, Reno, NV, April 28-May 1.
  

The solid confidence, expressed by Delcath's management, in meeting the end points in the pivotal trial warrants the potential of the company's cancer fighting technology!

Medical technology company Delcath Systems Inc. (DCTH: News ), whose PHP (Percutaneous Hepatic Perfusion) system is currently under late-stage testing on patients with metastatic melanoma and inoperable liver tumors, is expected to release the trial data in the coming days. The stock was trading around $5 when it was profiled on RTTNews site last October.

Delcath's patented Percutaneous Hepatic Perfusion technology allows physicians to deliver significantly higher doses of anti-cancer drugs to the liver without exposing the patient's entire body to those same potent levels of drug, thereby limiting the toxic side-effects due to chemotherapy treatments.

Besides being non-surgical, Percutaneous Hepatic Perfusion, or PHP, is a repeatable procedure. With 2.6 million liver cancer patients worldwide, there is a large unmet market opportunity for Delcath's PHP.

In the late-stage study, Delcath is testing its PHP System for the regional delivery of anti-cancer drug Melphalan for the treatment of patients with metastatic melanoma and inoperable liver tumors. The 92-patient, randomized, multi-center, phase III study commenced patient enrollment in February 2006, and the company began data analysis of the trial in February of this year.

The study's primary objective is to demonstrate a statistically significant improvement in the hepatic progression free survival of patients with metastatic melanoma to the liver treated with the Delcath PHP System versus patients in the control arm.

Last month, Delcath confirmed that it intends to release data from the metastatic melanoma trial in April. The company remains highly confident that the study results will meet the primary endpoint.

Provenge - A potential catastrophe brewing for late comers

Drug of wonder???

Provenge, a therapeutic vaccine under development by Dendreon Corp. (DNDN), is on the verge of winning FDA's approval for the treatment of advanced stage metastatic prostate cancer with the PDUFA date scheduled on May 1, 2010. Previously suggested as a short term hit in this blog, DNDN has many qualities of a biotech jackpot (revolutionary product, large market, ~600% return from a year ago). Nevertheless, convincing the FDA has not been smooth sailing for the Seattle-based biotech (see Provenge development history). This makes the light at the end of the tunnel that much more attractive for the company's shareholders, for whom things just get better and better. The most recent pivotal trial updates, released by DNDN a little over a month ago, are summarized below:

Trial summary
- Increased 3-year survival by 38% compared to placebo (31.7 vs. 23.0%)
- Extended median survivak by 4.1 months compared to placebo (25.8 vs. 21.7 months)
- Reduced risk of death [HR=0.775], p-value = 0.032
- Summary: pre-specified primary endpoint of significantly improving overall survival compared to placebo was met in the pivotal trail of Provenge

In addition to the promising efficacy, Provenge, unlike conventional chemo drugs, displays side effects, mainly resembling flu-like illness, that are much more tolerable for cancer patients, thereby presenting a pleasing alternative to the standard of care in castrate-resistant prostate cancer, Docetaxel (Taxotere®).

Trial design
Trial name: IMPACT (IMmunotherapy for Prostate AdenoCarcinoma Treatment)
Patient number: 512 (2 : 1 treatment-to-placebo arm)
Patient population: men with asymptomatic or minimally symptomatic, metastatic, castrate-resistant prostate cancer
Trial type: multi-centre, randomized, double-blind, placebo-controlled
Primary endpoint: overall survival

What's the concern?!

Dendreon Corp's shares leaped from $6.58 (Apr 6, 2009) to $39.40 (Apr 6, 2010) in as little as one year. The whopping ~600% increase may be enticing for investors, but if you just became aware of this company and hope to jump on the bandwagon, you might be in for big trouble. Why? Let's take a look at the risk to reward ratio. To do this, first determine how high DNDN's share price could reach if Provenge was approved (reward) and, conversely, how low it could drop if the drug was rejected (risk)? Based on JP Morgan's price target of $48, there is still room for another 21.8% increase (from today's $39.40), which is a stunning return by itself. Pretty tempting right? Hold on! Let's take a look at risk? Well, normally when FDA rejects a drug, shares of emerging biotech firms with no product on the market, such as Dendreon, are immediately dumped like there's no tomorrow, resulting in 40-80% slash in share price. Read this article on how FDA's rejection or delay drives down share prices. Assuming a 60% reduction in DNDN's stocks follows FDA's denial (something not unfamiliar to the biotech firm), the risk to reward ratio would then be 60% : 21.8% or roughly 3 : 1 (i.e. three times more risk than reward), a ratio that would only be embarked on by irrational casino gamblers. What's the verdict? Well, if you don't own any DNDN shares right now, then you might as well be a spectator and marvel at the ending of this dramatic roller coaster ride, hands off!

Potential short term hits

Keep an eye out for the tickers listed below for a quick snap:

Delcath Systems (DCTH): NDA filing - April, 2010

Amylin Pharmaceuticals (AMLN), Eli Lilly & Co. (LLY), Alkermes Inc. (ALKS): PDUFA date - Mar. 12, 2010



MannKind Corporation (MNkD): PDUFA pending

Dendreon Corporation (DNDN): PDUFA date - May 1, 2010

InterMune Inc. (ITMN): NDA review - Mar. 9, 2010

Keryx Biopharmaceuticals - baby steps towards giant success

Keryx Biopharmaceuticals (KERX), a NY-headquartered company, possesses a duo of mid/late-phase investigational new drug programs aiming to actualize the commercialization of a cancer-treating and a phosphate-binding drug. Backed by positive phase II efficacy data, FDA’s declaration of the Special Protocol Assessment (SPA), and solid funding, Keryx has the potential to soar in niche markets such as multiple myeloma and hyperphosphatemia. More importantly, the company actively extends its force into acquisition and in-licensing of advanced technologies to supplement its drug development efforts, thereby speeding up progress while trimming down cost before their products reach the pharmacy shelf.

Why multiple myeloma?

The evolution of the pharmaceutical industry over the past decade has resulted in increasing interest in multiple myeloma, a targeted niche market for smaller biotech start-ups whose primary goal is often to attain rapid approvals for orphan drug status through smaller, less-expensive trials. Once this is accomplished, the revenues that accompanied the sales of the approved products will enable companies to pursue more profitable cancer indications. Simply put, concentrating on niche markets such as multiple myeloma assists smaller companies to take baby, yet less-risky, steps towards gaining an entry ticket to the more rewarding and competitive pharmaceutical arena.

That said, multiple myeloma is, not at all, a trivial cancer indication. In fact, it is conceivably one of the most profitable niche tumor indications for novel treatments due to the large amount of drug in demand. The nature of myeloma, being a disseminated cancer, precludes the effectiveness of surgery and radiotherapy, and thus patients require drugs that travel in the blood throughout the body in order to survive. When taken consistently to maintain tumour remission, myeloma drugs allow patients to live for many years, and, for this reason, these drugs supply a wide population of patients that need them to stay alive.

What is multiple myeloma?

Multiple myeloma is a type of blood cancer characterized by the uncontrolled proliferation of B cells, a type of white blood cells responsible for the production of antibodies, constituting an important part of the immune system. The major symptoms of multiple myeloma include bone pain, increased risk of infection, renal failure, and anemia.

Current drugs on the market, although effective at high-dose, suffer from harsh toxicity that poses a limitation. Adding to this, patients ultimately face relapse and experience disease progression when forced to be taken off drugs to avoid fierce side effects. Consequently, drug therapies that offer a low toxicity profile can drastically improve the outcome of the patients by making long term remission possible with continuous dosing.

Why Keryx?

Keryx Biopharmaceuticals is currently testing the efficacy of their novel, potentially first-in-class, oral anti-cancer agent, KRX-0401 (perifosine), in a phase III trial, under the FDA’s Special Protocol Assessment (SPA), against multiple myeloma. With reduced toxicity, KRX-0401 blocks a key cell growth signalling event, the phosphoinositide 3-kinase (PI3K)/Akt pathway, preventing excess cell growth and cell transformation. The agent has demonstrated both safety and clinical efficacy in several tumor types, both as a single agent and in combination with novel therapies. The minimal toxicity and the convenient oral administration route make KRX-0401 suitable as a maintenance therapy post initial remission, warranting large-volume usage by a large patient group.

Outside of multiple myeloma, Keryx is also tapping into the swelling market of end-stage renal disease by developing an oral phosphate-reducing medication, Zerenex (ferric citrate). The drug, indicated for hyperphosphatemia (elevated circulating phosphate levels) in patients with end-stage renal disease, is currently expected to enter phase III trials, pending FDA’s SPA agreement. With dominating drugs, such as Genzyme’s Renagel and Renvela, expiring in 2014, Zerenex could be ripe just in time for the thirsty market.

As a growing company, Keryx also devotes their efforts in actively seeking strategic relationships for its product candidates and hunting down fitting compounds and companies for in-licensing or acquisition, ensuring the company’s competitiveness against other firms.

Summary

All investments in small biotech businesses come with potentially lucrative returns at the expense of immense risks. Keryx has surprised analysts by showing better-than-expected earnings per share (EPS) of ~200% averaged across the past 4 quarters. Currently, the company retains $33.68 million in cash/equivalents plus long-term investment securities, and approximately 56 million shares of common stock outstanding (70 million shares fully diluted) with no debt/convertibles. With a partnership in Japan with JT & Torii Pharmaceuticals, Keryx is expecting over $100 million in potential milestone payments and sales royalties upon the commercialization of Zerenex. Specifically, following the completion of the ongoing phase II study in Japan, the start of the phase III trial will bring in a development milestone payment during 2010.

Based on the promising results obtained thus far with both end-trial investigational new drugs, the debt-free balance sheet, and recommendation by several other analysts covering the company, it is time for strong acquisition of Keryx with anticipation of positive data from the drug trials in 2H11 for KRX-0401 (Perifosine) and 2H10/1H12 for Zerenex.