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•BTK 2693.28
June 12, 2014 | Issue No. 781
Since Last Issue:
•NBI 2,588.09
BTK: 3.5%; NBI: 2.9%; Model Portfolio: 4.5%; Trader’s Portfolio: 6.6%
Three-week break ahead!
Next issue out July 3rd, 2014
UPDATES: ALKS ANTH IMGN INCY ISIS NKTR
NVAX PCYC
This Issue: A BRIEF IMMUNE-ONCOLOGY UPDATE
Biotech Sector Analysis
HCV Taketh And Giveth Back – Technical analysts
say charts tell the story and ever since the IBB
surpassed the 50-day moving average two weeks
ago (for the first time since the March 21 GILD
Solvadi letter on HCV drug pricing), the sector has
continued a pre-Summer rally. MTSL is based on
fundamental analysis. However, after a two-month
consolidation period – momentum players appear to
be back in the space for now. Moreover, fund
managers may want to get ahead of a summer rally
and make up for lost value after the February/March
demolition of most stocks in time for the end of the
second quarter.
Expecting a post-ASCO selloff – but just the
opposite occurred as investors began this June in a
back-to-bios mode. ASCO was a Big Pharma and
biotech conference after all – INCY and PCYC stars’
shined bright, while BMY’s immune-oncology
disappointed. The sector’s leaders are leading once
again – CELG’s Markman hearing was positive and
the overhang removed, AMGN’s pipeline is emerging
and BIIB gained timely Elocate approval.
GILD,
which rebounded earlier and more than most, took a
hit on the surprising MRK purchase of IDIX (see
below), but overall the sector seems to have
regained some strength in a risk-back-on
environment.
after its failed attempt at AZN and now MRK appears
to be following suit. Pharma knows quite well that
their value drivers are being derived from innovative
biotech discovery programs, while their core drugs
lose patent protection. Hence, while biotech stocks
were sold indiscriminately – it appears to have been
a technical and not fundamental selloff. Biotech
stocks remain in the golden age. Another example of
positive clinical news, RCPT’s oral MS drug
RPC1063 delivered impressive Phase II results that,
if repeated in larger studies, could make it a drug of
choice in the $20 billion MS drug market (on the
other hand, OREX’s Contrave approval date was
pushed back three months).
Moreover, action has trickled down to the smaller
and mid-cap names – driven by M&A, specific stock
fundamentals, oversold conditions and short
covering. First PFE proclaimed it was going shopping
©Piedmont Venture Group (2014). Address: P.O. Box 40460, Berkeley, CA 94706. Telephone: (510) 843-1857. Fax: (510) 843-0901. Website: http://www.bioinvest.com. Email: [email protected].
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
MRK Acquires IDIX At An Enormous Premium In
Big HCV Surprise – One of the emerging Big
Pharma players once again revived the hepatitis C
race. MRK’s purchase of IDIX for $3.6 billion or
$24.50 per share – a 235% premium over IDIX
closing price – is a sign that GILD may not have
cornered the market and/or that the IDIX patent
estate is a lot more valuable than investors gave
CEO Ron Renaud credit for. Merck has stated they
can cut the time to cure rate or cure different
genotypes of HCV than Solvaldi. In addition, IP was
probably key to the large premium as both Merck and
IDIX were suing GILD before the acquisition and
their combined IP could pose problems for GILD.
Regardless, it is an excellent example of the value of
small
biotech
companies
that
have
disruptive/differentiated assets backed by solid
patents (e.g., the NVAX RSV F Protein vaccine).
Short sellers got taken out – 20 million shares of IDIX
were short at the time of the announcement. Several
other smaller M&A transactions have occurred of
late, in addition to rampant rumors of an NPSP
acquisition by Shire.
ACHN’s Turn, Touché – On the heels of the
MRK/IDIX deal, ACHN announced that the FDA had
removed the clinical hold on sovaprevir, its novel
NS3/4A protease inhibitor, allowing the company to
conduct trials in patients with HCV. Simultaneously,
the company initiated dosing in patients with ACH3422, a uridine-analog nucleotide polymerase
inhibitor, in patients with genotype 1. Proof-ofconcept results from this trial are due during the fall
of 2014. With the three key targets of HCV drugs
now in trials – a nucleotide, an NS5A and a protease
inhibitor – takeover speculation rapidly took over
ACHN shares. Like IDIX, ACHN shares were pretty
much ignored once GILD’s Solvaldi emerged as the
leader. Things have certainly been interesting this
year in the multi-billion dollar HCV market – which is
likely to have multiple drugs and multiple players
over the next several years.
After ASCO, A Number of June Scientific &
Regulatory Meetings – This week, MTSL
Recommendation NKTR/AZN’s naloxegol received
a positive panel vote from an FDA Advisory
committee, against CV studies for OIC drugs-paving
the way for movantik and likely leading to approval
by the September PDUFA data. Upcoming scientific
meetings are taking place following ASCO, keeping
many biotech stocks in the spotlight as summer
approaches. They include the following therapeutic
classes – arthritis – EULAR (Paris, 6/11-14, Eular),
hematology/oncology – EHA (Milan, 6/12-15,
Ehaweb event), diabetes – ADA (San Francisco,
6/13-17,
Diabetescongress),
and
psychopharmacology – ASCP (Hollywood, FL, 6/1619, ASCP meetings). MTSL names involved include
ALKS, ANTH, BMRN, CELG, INCY, IMGN, ISIS and
PCYC.
TEVA Buys Labrys for Migraine Treatment – Teva
jumped into the M&A fray with its recent purchase of
Labrys Biologics. The company paid $200 million in
cash up-front for the privately held drug developer
with an additional $625 million in potential milestone
payments. The move has the potential to expand
Teva’s lineup of migraine treatments as Labrys has a
drug candidate, LBR-101, for the prevention of
chronic migraines in midstage clinical testing. While
not a huge deal, it does illustrate that large pharma
companies continue to partner or buy the pipeline
assets they need to assure future growth.
France Gets Smart on GILD’s Solvaldi – France’s
health technology assessment agency, Commission
de la Transparence, has issued a positive
recommendation for Gilead’s Sovaldi.
The
Committee voted unanimously for Sovaldi to be
assigned SMR rating of “Important” and ASMR
rating of “II”; both ratings together should put GILD
into an excellent negotiating position and provide the
necessary leverage required to secure premium
pricing in France. As a reminder, historically an
ASMR’s rating of “II” is assigned only to agents >
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
considered to have made an
“important”
improvement to the standard-of-care and such
agents have been able to command strong pricing
power (e.g., Soliris). The bottom line in our view, is
this positive recommendation from the French
indicates that Sovaldi will receive less push back in
Europe then it has in the U.S., albeit, at a lower price.
ASCO 2014 – Immune Oncology Rises to the
Top – As many expected, immune oncology (I-O)
was all the rage at the recently concluded American
Society of Clinical Oncology (ASCO) meeting. While
it is widely acknowledged that before ASCO, Bristol
was the leader in the space followed by Merck, and
Roche. At the conference, however, AstraZeneca
showcased its I-O pipeline as the competitive
landscape changes rapidly while the exciting sector
evolves. BMS’s lead drug exhibited further toxicity in
both NSCLC and renal trials, with some very real
adverse events in lung cancer. Yervoy has been the
primary culprit, however, BMS also reported some
notable adverse events with its PD-1 blocker,
nivolumab. Just before ASCO on May 6, MRK was
granted priority review for its top drug PD-1 prospect,
MK-3475, with an FDA approval deadline of October
28. It is expected to get the first mover position in a
new wave of immune-oncology therapies that is
expected to be a game changer in the oncology
market. The initial indication is melanoma. Despite
its speed bumps, BMS is still a leader but it is
becoming clear that they may not have the best-inclass I-O drug candidates, leaving them vulnerable to
the next wave of competitive I-O compounds. The
emergence of AZN’s strong I-O pipeline is, in our
view, the primary driver for the recent Pfizer bid.
Pfizer has little presence in the I-O sector and AZN’s
emerging pipeline would have transformed Pfizer into
an I-O player overnight.
Immune Oncology Market Poised for Significant
Growth – The I-O sector is primed to become a
super blockbuster market. Most current Wall Street
estimates for the I-O treatment space (~$10-15
billion) are only based on few cancer types
(melanoma, NSCLC, and renal) and that is changing.
The signal at ASCO is that I-O will impact the vast
majority, if not virtually all cancer types in some
shape or form with all the new tools emerging. A
great example is the bladder cancer data reported by
Roche which showed a 50% response rate (including
one complete response) in PD-L1+ patients with RG7446 in pre-treated metastatic bladder cancer; a
setting which typically has very limited treatment
options. Adding combination treatments to both
radiation and chemo is another example of why the IO market opportunity is poised to grow significantly
larger over the next few years.
Big Pharma Dominates I-O By Combining
Biotech Assets – While Big Pharma dominates the
I-O treatment landscape, most of the assets and the
technological know-how came from the biotech
industry which pioneered the development of
monoclonal antibodies. BMS acquired much of its IO technology from the Medarex acquisition, Roche
came into I-O through its Genentech investment, and
AZN’s I-O platform is riddled with MedImmune
technology. We believe that INCY and FPRX are
the two MTSL Recommendations that will have the
biggest impact in the I-O treatment landscape. INCY
through their unique and proprietary oral IDO-1 drug
candidate and FPRX through their second
generation antibody discovery platform that has
already been validated by a major BMS
collaboration.
What is Immune Oncology? Immune oncology (IO) is the newest and most exciting sector for new
cancer drug development. Cancers grow and spread
because tumor cells have developed ways to evade
elimination by the immune system. For example,
cancer cells make proteins which apply the “brakes”
to immune cells and prevent the immune cells from
killing the tumor cells. One of the most exciting
recent discoveries in cancer therapy has >
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
been the identification of ways to release these
“brakes” and allow the immune cells to once again
kill the tumor cells. This new approach has the
potential of not only reducing tumor growth like
traditional therapies, but potentially eliminating the
cancer entirely in some patients. The approval of
BMY’s Yervoy (ipilimumab which targets CTLA-4)
to treat melanoma was a major breakthrough for
cancer immune therapy – the drug had failed in
multiple direct solid tumor trials before BMY
harnessed its potential and garnered approval.
Recently ipilimumab showed that some melanoma
patients had lived as along as 10 years while on
therapy. The PD-1/PD-L1 checkpoint pathway has
recently emerged as the hottest target (and most
competitive) for cancer immunotherapy in biotech
with a slew of drug candidates in development (PD
stands for “programmed cell death”). While the
Immune-Oncology Drugs in Development
aforementioned pathways have been grabbing all
the headlines, IDO inhibitors are the next hot target
in line behind the PD-1s. In our view, INCY’s
INCB024360, an orally available small molecule
that inhibits IDO (the others are injectable
monoclonal antibodies), is rapidly emerging as the
next major compound in I-O. In addition to being
oral, ‘360 also may be a best in class drug which
would make it a key part of combination therapy.
Combo therapy is particularly important in I-O as
this class of drugs appears to work better in
combination and many experts expect three or
more drugs could be used at once. This will also
make safety very important for this class of drugs,
because unknown and unpredictable toxicities can
be a major problem when combining drugs. The
NIH’s Dr. Louis Staudt referenced this exact point
at the recent AACR meeting in April. There is
much going on, but there is also much to learn.
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
AZN Unveils Broad I-O Portfolio at ASCO –
AstraZeneca was one of the true surprises at ASCO
as they have been busy building an I-O pipeline.
The company will augment their current pipeline of
drug candidates – CTLA4, PD1, PD-L1, with >9 new
I-O molecules that will enter the clinic within next
twelve months.
■ 1x new NME to take the T-cell breaks off
■ OX40 + 2xNMEs to put T-cell gas on
■ 1x NME in Tumor microenvironment
■ 4+x NMEs in Antigen presentation
Combination of tremelimumab (CTLA4) + PDL1 –
The first dose ranging data was presented at AZN’s
analyst meeting (this was too early to be shown in
the full ASCO meeting and will be updated at
ESMO). Low toxicity burden means dose ranging is
already much higher than BMS’ ipi+nivo combo and
dose escalation continues. The ability to use a
higher dose should bode well for ‘treme’s combo
efficacy potential. Better safety also bodes well for
‘treme in combo studies as toxicity will be a limiting
factor for many drugs when used in 2’s or 3’s, which
is the expectation with most I-O treatments.
MEDI4736 (PDL-1) - AZN will start an adjuvant lung
study in 2015 with its PDL-1 under the theory that
using I-O drugs earlier in the disease when the
immune system is more intact will have a better
affect. AZN made a specific point at their analyst
meeting that bears watching going forward. They
believe that PD-1 and PDL-1 may not be as
interchangeable as is currently being assumed, and
may actually have different effects on different
cancers. This also explains why they have both PD’s
currently in development.
MTSL Recommendations INCY & FPRX Have I-O
Potential – I-O is clearly of high interest to investors
and the standing room only crowd that eagerly
greeted the presenter for INCY’s INCB24360 (IDO)
poster is further illustration. In fact, the presenter
was barely able to put it up for display due to
crowding
in
the
presentation
area.
For
immunotherapy-naïve patients in the 25mg BID (n=8)
and 50mg BID (n=4) cohorts, the objective response
rate was 42% and the disease control rate was an
impressive 75%.
In immunotherapy-experienced
patients (n=5) there were two patients with stable
disease. Data from a 300mg subgroup had some
intriguing follow-up data despite being stopped due
to toxicity. Although all patients in the 300 mg twicedaily cohort were discontinued before responses
could be fully evaluated, six of the seven patients
were alive after one year, including three who have
not received subsequent checkpoint inhibitor
immunotherapy. In our view, this shows that the ‘360
may have a sustained treatment effect even after
therapy has stopped. We remain impressed with the
data for ‘360, albeit, from a small data sample. For
those who doubt IDO after the ASCO abstracts were
made available, major votes of validation have
occurred this year as INCY has already formed three
IDO combination joint ventures with the leaders –
MRK, BMY and AZN.
An IDO1 competitor, NewLink Genetics (NLNK) has
its own compound in the clinic. Based on the data to
date and stage of development, in our view, INCY is
still the unquestioned leader in the IDO1 inhibitor
space. We anticipate multiple clinical updates over
the next 12-24 months as the ‘360 combination
studies mature. The fact that INCY has established
three clinical research agreements to study ‘360 in
combination with three of the four big players in I-O is
further testament to the program’s strength. The
collaborations are with anti-PD-1, MK-3475 (MRK),
anti-PD-L1, MEDI 4736 (AZN), and with anti-PD-1,
nivolumab (BMS). Given the prevalence of
antibodies within the I-O drug development space, in
our view, FPRX is extremely well positioned to be a >
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
major player in the future development of the sector.
New targets for cancer immunotherapy are needed
to address those patients that do respond to or
cannot tolerate agents currently in development.
FPRX and their cutting edge second-generation
antibody technology puts them in the proverbial
“catbird seat” when it comes to identifying new
targets and antibody drugs in this exciting and
growing space.
Investment Conclusion – INCY, FPRX Well
Positioned To Participate In The Next
Blockbuster Oncology Market – As the I-O space
evolves, MRK is currently in the lead, but by no
means is it a zero sum game. BMS’ early lead
appears less secure, with full data now being pushed
to 2015. While being first to market is usually best,
fast follow uppers can surprise as they use the
information garnered by the leader to their
advantage. This can be particularly important in
clinical development and specific patient selection.
AZN’s ‘treme is a very good example of a
competitive late-comer as it is a second generation
Yervoy and appears to have much less toxicity. The
better toxicity profile should allow for increased dose
vis-à-vis Yervoy leading to better efficacy.
Additionally the better toxicity profile would make it a
better combo drug than Yervoy as toxicity is
paramount when combining multiple cancer drugs.
While biomarkers are early in development for the IO space, they could be important. For example,
BMS’ biomarker may not be as accurate as MRK’s or
ROG’s, which could lead to some confusion with
their data.
unique skill set allows it to both identify new targets
and make the antibodies that address the new
targets. The excellent BMS deal for preclinical I-O
drug candidates is a major validation of FPRX’
unique antibody discovery/development platform.
CLINICAL TRIALS WATCH – Relevant New
Studies or Changes Posted on ClinicalTrials.gov
for our MTSL Portfolio and/or Related Companies
since last Issue:
ALKS – A Study of ALKS 5461 for the Treatment of
Major Depressive Disorder (MDD) - the FORWARD4 Study
BMY – A Single-Arm, Open-Label, Multicenter
Clinical Trial With Nivolumab (BMS-936558) for
Subjects With Histologically Confirmed Stage III
(Unresectable) or Stage IV Melanoma Progressing
Post Prior Treatment Containing an Anti-CTLA4
Monoclonal Antibody (CheckMate 172)
CELG/PCYC – Lenalidomide, Ibrutinib, and
Rituximab in Treating Patients With Relapsed or
Refractory Chronic Lymphocytic Leukemia or Small
Lymphocytic Lymphoma
CELG - Continuous Lenalidomide Therapy Versus
Observation Following Induction Without
Lenalidomide, Pomalidomide or Thalidomide in
Myeloma
In our view, INCY and FPRX are both well positioned
to create value for their shareholders in the I-O
sector. INCB24360 is a unique and potentially very
active and safe drug candidate. The fact that the
compound is already being developed with three of
the biggest players in I-O (where are you Roche?) is
a testament to both its uniqueness and potential.
FPRX may have one of the most comprehensive tool
kits to broadly address the I-O space. The company’s
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
Company Updates
CELG - Safety and Efficacy Study of Abraxane in
Combination With Carboplatin to Treat Advanced
NSCL Cancer in the Elderly (ABOUND 70+)
CELG - Efficacy and Toxicity Study of Pomalidomide
and Dexamethasone
in Patients Who Have
Relapsed After Exposure to Lenalidomide and
Bortezomib
City of Hope Medical Center - Genetically Modified
T-cell Immunotherapy in Treating Patients With
Relapsed or Refractory Acute Myeloid Leukemia
INFI - A Phase 1b/2 Study of IPI-145 in Combination
With Fludarabine, Cyclophosphamide, and Rituximab
(iFCR) in Previously Untreated, Younger Patients
With Chronic Lymphocytic Leukemia
INCY - Trial of Ruxolitinib and Erlotinib in Patients
With EGFR -mutant Lung Adenocarcinoma With
Acquired Resistance to Erlotinib
INCY –INCB047986 in Rheumatoid Arthritis
ISIS - Safety, Tolerability, Pharmacokinetics, and
Pharmacodynamics of ISIS -APO(a)Rx in Patients
With High Lipoprotein(a)
PCYC/PFE – Ibrutinib and Palbociclib Isethionate in
Treating Patients With Previously Treated Mantle
Cell Lymphoma
University of Pennsylvania CART - meso in
Mesothelin Expressing Cancers
ALKS, ANTH, IMGN, INCY, ISIS, NKTR,
NVAX, PCYC
ALKS – Initiates Two Registration Trials for ALKS
5461; Phase III AL Data Presentation At ASCP
Meeting – This week, ALKS initiated two registration
studies – FORWARD-3 and FORWARD-4 for ALKS
5461, a once-daily, oral investigational medicine with
a novel mechanism of action for the adjunctive
treatment of major depressive disorder (MDD).
These studies will evaluate the efficacy and safety of
ALKS 5461 in patients suffering from MDD who have
had an inadequate response to commonly prescribed
drugs, including selective serotonin reuptake
inhibitors (SSRIs) or serotonin-norepinephrine
reuptake inhibitors (SNRIs). ‘5461 is a key driver of
long-term ALKS growth, as a wholly owned,
proprietary compound in yet another blockbuster
anti-psychotic drug market.
One of the biggest meetings of the year for ALKS,
data from the positive Phase III study of aripiprazole
lauroxil (AL) in patients with schizophrenia will be
presented for the first time. The data was chosen as
a best poster, which will appear in the online 2014
ASCP Poster Session:
Wednesday, June 18, 2014, 12:00 – 2:00 p.m. ET
Poster 75: Safety and Efficacy of Aripiprazole
Lauroxil: Results From a Phase 3, Multicenter,
Randomized,
Double-Blind,
Placebo-Controlled
Study in Subjects With Acute Exacerbation of
Schizophrenia. Alkermes will also present data
related to the company’s state-of-the-art clinical trial
methodologies in schizophrenia as well as data
pertaining to the company’s development of ALKS
3831, a new investigational medication designed to
address important unmet medical needs of patients
with schizophrenia:
>
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
Tuesday, June 17, 2014, 3:30 – 4:30 p.m. ET
The oral presentation, “Analysis and Missing Data
Handling in Psychiatry Trials With Inevitable, High,
Differential and Informative Discontinuations,” will be
presented during a symposium entitled, “Statistical
Methods, Personality Disorders, Substance Abuse,
and Comorbidity Presentations.”
Wednesday, June 18, 2014, 12:00 – 2:00 p.m. ET
Poster 73: Prevalence, Healthcare Utilization and
Cost of Patients Dual Diagnosed With Schizophrenia
and an Alcohol Use Disorder.
Depression - Data relating to ALKS 5461, the
company’s development candidate for the treatment
of major depressive disorder (MDD), will be
presented. This presentation has also been
nominated as a best poster, and will appear in the
online 2014 ASCP Poster Session.
Tuesday, June 17, 2014, 11:15 a.m. – 1:00 p.m. ET
Poster 44: ALKS 5461, a Novel Opioid Modulator as
Adjunctive Treatment for Depression
Alkermes will also present data related to the
company’s state-of-the-art clinical trial methodologies
in depression. Key presentations include:
Wednesday, June 18, 2014, 12:00 – 2:00 p.m. ET
Poster 26: Feasibility, Integrity and Efficiency of the
Sequential Parallel Comparison Clinical Trial Design.
Poster 27: Blinded Dual Ratings Confirm Primary
Site-Based Ratings in an MDD Trial.
The transformation of ALKS is well underway. ALKS
is a BUY under 55 with a TARGET PRICE of 75.
ANTH – Interim SLE Look Due; Company
Preparing MM Trial – In an update call with senior
management, ANTH is expected to have a busy
H2:14 with blisibimod (b-mod). Over the next month
or so, the company is expected to take an interim
look at the CHABLIS1 trial (CHABLIS1 Trial) in
patients with lupus (SLE). The clinical/surrogate
endpoint is a trend in the level of proteinuria and,
while it will not be confirmatory of the final results, it
is an important catalyst and will give ANTH and
investors the first look at b-mod’s post-PEARL
clinical trials. The interim look may or may not
influence a potential partner decision to form a
collaboration – but the company is hopeful one may
finally be struck by the end of the year regardless.
Such a partner will help fund and coordinate the
second SLE trial, which is ready to go and is
expected to begin by H2:14. In addition, a look at
first IgA nephropathy trial is due by end of Q3/early
Q4. There is a lot of sound science behind BAFF
inhibitors including b-mod and we are cautiously
optimistic of the outcome. ANTH is, by far, the
cheapest stock in our portfolio after multiple clinical
failures. Hence, investor expectation is minimal at
best although there’s always high risk when unblinding studies. B-mod’s mechanism of action has
also been identified as a potential treatment for
multiple myeloma – and there is a chance that a
collaboration for combination MM therapy may also
be signed by the end of the year. The company
ended Q1:14 with $23 million in cash, enough for the
end of the year; hence, some form of capital raise is
needed (e.g., partnership, capital markets) after
hopefully good news. ANTH is a BUY under 6 with
a TARGET PRICE of 20.
INCY - A Slew of Positive Data at ASCO – INCY
had a very productive ASCO as they presented
positive data for ‘360 in combo with Yervoy
(discussed above), and positive data for Jakafi in
both PV and pancreatic cancer. The primary
endpoint for the PV trial was a spleen reduction of
35%+ and hematocrit control at week 32. While only
21% of Jakafi-treated patients met the primary
endpoint (vs. 1% in control), 77% met at least one of
the primary endpoints. Also important was
symptomatic control with 64% of patients reported a
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Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
greater than 50% improvement in symptoms such as
itching, muscle ache, and night sweats. We expect
INCY to file an NDA with the FDA for PV approval
shortly. The RECAP data in pancreatic data and the
biomarker, C-reactive protein (CRP), were finally
revealed at ASCO. The data was strong and
showed that in the predefined subgroup of patients
(n=60) with median CRP at study entry (13 mg/L),
the hazard ratio for overall survival was 0.47 (95%
CI: 0.26-0.85; P value =0.01. This is very strong data
from such a small sample size and adds to our
confidence that Jakafi will be effective in treating
solid tumors. In totality, INCY had an excellent
ASCO with positive data for both ‘360 and Jakafi in
multiple cancer types. INCY is a BUY under 68
with a TARGET PRICE of 85.
ISIS – AZN Initiates ISIS-AR Trials; ADA Data This
Weekend – ISIS and partner AstraZeneca have
started a Phase I trial of ISIS-AR in patients with
cancer. ISIS-AR is an antisense drug designed to
treat patients with prostate cancer by inhibiting the
production of the androgen receptor (AR).
AstraZeneca is planning to develop ISIS-AR broadly
to treat patients under a variety of settings during the
course of prostate cancer treatment, including both
as a single agent and in combination therapy. The
drug candidate may also work in other advanced
solid tumors, such as breast, bladder and ovarian
cancers, where the androgen receptor pathway is
potentially a contributing factor. ISIS-AR is the
second drug candidate (ISIS-STAT3 is in Phase I/II)
with AZ to enter clinical development that
incorporates generation 2.5 chemistry to increase the
potency of antisense drugs. ISIS continues to deliver
positive news flow from the 32 different drugs in
development. Next up is Phase II “late breaker” data
for ISIS-GCGR which will be presented at ADA
starting this weekend. ISIS is a BUY under 55 with
a TARGET PRICE of 70.
MDCO – Oritavancin Phase III Data Published in
the NEJM – The publication in the New England
Journal of Medicine of results from the SOLO I
Phase III clinical trial of oritavancin, MDCO’s novel
antibiotic for Acute Bacterial Skin and Skin Structure
Infections (ABSSSI), reported that a single 1200mg
intravenous dose of ORBACTIV (the oritavancin
proposed brand name) was non-inferior to twice-daily
intravenous dosing of vancomycin given for 7 to 10
days in patients with ABSSSI caused or suspected to
be caused by Gram-positive bacteria including
methicillin-resistant Staphylococcus aureus (MRSA).
The PDUFA date is August 6th.
In our view,
approval is highly likely and Orbactiv’s single dose
administration will allow it to take share in the fastgrowing, gram-positive infections market. On May
23rd, the FDA approved Durata's Dalvance, another
new entrant into the market. Pricing will be key,
although the Dalvance regimen involves two
infusions (vs. one for oritavancin). Oritavancin is a
key component to the MDCO transformation that
includes a major focus on hospital-based infections.
MDCO is a BUY under 40 with a TARGET PRICE
of 60.
NKTR – Panel Votes Against CV Studies For OIC
Drugs Paving The Way For Movantik Approval –
The FDA Anesthetic and Analgesic Drug Products
Advisory Committee (AADPAC) voted against
requiring cardiovascular outcomes trials for the
peripherally-acting mu-opioid receptor antagonist
(PAMORA) class of drugs. In our view, this was the
best possible result for MOVANTIK – NKTR/AZN’s
naloxegol oxalate – awaiting FDA approval for
opioid-induced constipation (OIC) for patients with
chronic non-cancer pain. The Committee suggested
continued post-approval data collection for
cardiovascular safety, which partner AstraZeneca
presented a comprehensive plan at the panel. The
PDUFA date for MOVANTIK is September 16, 2014,
and after today’s meeting we are highly confident
that the drug will be approved on time.
www.bioinvest.com | 9
Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
On June 4, the New England Journal of Medicine
published data online from two pivotal Phase III
studies of MOVANTIK – KODIAC-4 and KODIAC-5.
Both studies met their primary endpoint, showing an
improvement in treatment effect versus placebo.
Results from these studies show that more OIC noncancer pain patients treated with MOVANTIK at a 25
mg dose had a consistent response of increased
spontaneous bowel movements through 12 weeks of
treatment compared to placebo. The approval of
MOVANTIK (naloxegol) will be the first regulatory
validation of the company’s pegylation platform and
an oral version to boot. It will also trigger meaningful
milestone payments from AZN. In our view, the
approval will favorably impact the remainder of
NKTR’s pipeline, lowering the discount rate and
raising the net present value (NPV) of the multiple
programs under development. NKTR is a BUY
under 13 with TARGET PRICE of 20.
Follow-On Offering Creates Buying Opportunity;
Proceeds Will Accelerate “Respiratory Vaccine”
Timeline – Last week, NVAX announced a $100
million secondary offering of common stock. The
underwriters are JPMorgan and Citibank, two global
investment banks that currently do not cover the
stock from a research standpoint. After speaking with
management, the use of proceeds is to fund a
standalone elderly trial that will accelerate the path to
approval for the disruptive/novel combination flu/RSV
vaccine.
On May 12th, the company announced longer-term
follow up data from last year’s elderly RSV study that
provided vaccination protection over 4-6 months
(RSVStudy). As a result, the company now has a
potential “seasonal” vaccine strategy for the elderly.
Prior to this, there was no standalone elderly path to
approval.
The new path provides the earliest
license/commercialization
potential
for
the
“respiratory vaccine” – the combination of the
flu/RSV program into a single vaccine that, in our
view, will be highly differentiated and lead the
company into the combined >$5 billion market for flu
and RSV vaccines. As a reminder, the NVAX F
Protein RSV vaccine just completed its fourth clinical
trial since last year, and the company is about to
meet with the FDA to begin the first RSV trial in
pregnant women. With the biotech sector beginning
to rebound from the sharp pullback, NVAX included,
a dilutive offering seemed a bit surprising – as the
company has ~$130 million in cash and government
funding (and no debt). However, in light of the new
data from May 12th – there is a strong likelihood of
accelerated development of the crown jewels. The
company will, after the deal, be able to fund all major
markets – maternal immunization, pediatrics and
now the elderly. In addition, incorporating major
distribution, market making and investment research
from two of the larger, well-respected investment
banks, in our view, will also add to long-term appeal
of the stock.
With the shares down based upon the financing, we
believe an attractive opportunity exists to initiate or
add to positions in NVAX. There is mounting
evidence of the “respiratory vaccine” as a major
biotech commercial success, driven by sound
science, a growing clinical database and a focused
management team. NVAX is a BUY under 6 with a
TARGET PRICE of 13.
PCYC – Imbruvica Shines at ASCO; sNDA
Accepted For Priority Review - Updates at EHA –
A day doesn’t go by without PCYC or Imbruvicarelated news and the totality of the data continues to
be highly encouraging. At ASCO, partner JNJ and
PCYC drug sponsored several symposia on CLL and
the Phase III RESONATE data was presented and
simultaneously published in the NEJM with major
fanfare. The common term used among researchers
at the conference and analysts afterwards is “SOC” –
meaning Imbruvica is on its way to becoming the
new “standard of care” for the treatment of CLL – the
www.bioinvest.com | 10
Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
most common form of B-cell blood cancer. In our
view. ASCO data – including the duration of
response (DOR) results now exceeding
an
astonishing 3 years – further solidifies the drug in
hem-oncs eyes. As Dr. Susan O’Brien from MD
Anderson put it – “Imbruvica is the easiest drug I’ve
even prescribed.” Prescription data recently spiked
and that was before the conference. The post-ASCO
pop is likely over the next few weeks, too. In addition,
the FDA just accepted the company’s sNDA
application for a full CLL/SLL label, giving it a Priority
Review and setting a PDUFA date for October 7.
The train doesn’t stop there – the EHA – Jannsen’s
home oncology base – is set for this weekend. And
while some believe ABT-199 still has the chance to
de-throne Imbruvica someday – most ASCO
watchers note that its TLS profile has hardly been
fixed and that its use in the community will be very
difficult – especially compared with Imbruvica. When
the autoimmune compound – one with even greater
commercial opportunity and financial leverage to the
company – starts poking its head out later this year,
investors will begin to appreciate the next leg up in
the PCYC value proposition. PCYC is a BUY under
160 with TARGET PRICE of 200.
www.bioinvest.com | 11
Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
“The Back Page”
Price (52-week)
# of
Mkt.
Value
Symbol
Company
Orig.Rec.
Lo
Hi
Current
Target
Shrs.
(m)
($mil.)
Recommendation
ALKS
Alkermes
10.13
26.47
54.25
46.65
75
140.3
6,176.0
BUY under $55
ANTH
Anthera
3.04
2.54
4.88
3.28
20
19.3
57.9
BUY under $6
BMRN
BioMarin
12.68
53.53
84.25
61.78
60
140.8
8,087.6
BUY under $45
CELG
Celgene
49.93
110.53
174.66
160.22
145
408.8
60,849.9
BUY under $125
CNDO
Coronado
6.63
1.25
10.20
1.73
N/A
35.2
61.2
HOLD
FPRX
Five Prime
16.29
8.02
23.33
13.90
32
21.40
275.8
BUY under $22
IMGN
ImmunoGen
4.86
10.69
20.25
13.20
20
86.1
983.3
BUY under $12
INCY
Incyte
5.88
18.23
70.86
53.20
85
170.6
8,692.1
BUY under $68
ISIS
Isis
7.63
20.52
62.66
32.24
70
115.1
2,938.5
BUY under $55
MDCO
Medicines Co.
31.98
23.53
41.28
28.04
60
61.8
1,619.8
BUY under $42
NKTR
Nektar
4.66
8.87
15.34
12.54
20
116.9
1,289.4
BUY under $13
NVAX
Novavax
2.44
1.87
6.95
4.55
13
208.5
871.5
BUY under $6
OGXI
OncoGenex
36.82
3.31
14.25
3.55
N/A
15.4
58.8
HOLD
PCRX
Pacira
15.78
26.72
86.73
82.00
75
33.7
2,534.6
BUY under $55
PCYC
Pharmacyclics
17.00
77.80
154.89
94.84
200
74.8
7,480.0
BUY under $160
SGMO
Sangamo
4.77
6.86
24.69
16.01
30
60.4
796.1
BUY under $20
The Trader’s Portfolio
The Model Portfolio
Company
Shares
Owned
Total Cost
Today’s
Value
LONG positions
Today’s
Value
LONG positions
27,189
93,300
Anthera
1,625
39,057
5,330
Coronado
3,700
24,776
6,401
Five Prime
2,900
40,420
40,310
Incyte
3,139
51,176
166,995
Isis
3,300
53,501
106,392
Medicines Co.
1,250
40,375
35,050
16,824
Nektar
6,000
36,411
75,240
81,510
Novavax
35,965
128,288
Anthera
2,875
68,731
9,430
Coronado
6,000
40,178
10,380
Five Prime
3,700
60,876
51,430
ImmunoGen
2,000
9,938
26,400
Incyte
3,662
42,500
194,818
Isis
4,750
58,333
153,140
600
19,380
6,500
63,277
Novavax
Total Cost
2,000
2,750
Nektar
Shares
Owned
Alkermes
Alkermes
Medicines Co.
Company
25,000
58,025
113,750
OncoGenex
2,000
62,495
7,100
Pacira
1,000
15,938
82,000
30,000
67,670
136,500
OncoGenex
3,000
63,892
10,650
Pacira
1,500
23,907
123,000
Pharmacyclics
1,000
42,804
94,840
Pharmacyclics
1,450
52,892
137,518
Sangamo
5,000
23,250
80,050
Sangamo
5,000
23,250
80,050
29-May-14
Equities
Cash
Portfolio
Value
$1,159,938
$61
$1,159,999
Position
Total
Margin
Portfolio
Value
$906,758
-$291,125
$615,633
www.bioinvest.com | 12
Medical Technology Stock Letter | A BRIEF IMMUNE-ONCOLOGY UPDATE
Benchmarks
NASDAQ
S&P500
Model
Trader’s
Last 2 weeks
1.2%
0.5%
4.5%
6.6%
2014 year-to-date
2.9%
4.4%
-2.4%
-2.2%
Calendar year 2013
38.3%
29.6%
103.4%
214.7%
Calendar year 2012
13.4%
15.9%
25.7%
68.7%
Calendar year 2011
-1.8%
0.0%
-3.2%
-16.0%
Calendar year 2010
16.9%
12.8%
19.6%
4.3%
Model Portfolio
Contact Info
The Model Portfolio is designed to reflect
specific recommendations. We began the
Model Portfolio on 12/23/83 with $100,000. On
4/13/84, we became fully invested. All profits
are reinvested. Stocks recommended since
then may be equally attractive, but may not be
in the Model Portfolio. Transactions and
positions are valued at closing prices. No
dividends are created, and a 1% commission
is charged. We don’t use margin. Interest
income is credited only on large cash
balances.
Medical Technology Stock Letter
John McCamant, Editor
Jay Silverman, Editor
Jim McCamant, Editor at Large
Mahalet Solomon, Associate
Joan Wallner, Associate
Trader’s Portfolio
The Trader’s Portfolio joined the Model
Portfolio on 1/6/05 with $500,000 and is
designed to take advantage of short-term
opportunities throughout the biotech sector. Te
Trader’s Portfolio will hold both long and short
positions in stocks, trade in options, and use
margin. These strategies increase risk.
Although there is no limit on the time any
purchase can be held, the time frame for most
investments will be weeks to months.
P.O. Box 40460
Berkeley, CA 94704
www.bioinvest.com
Tel.510.843.1857
[email protected]
New Money Buys (when under our limit)
1st Tier: ALKS, INCY, ISIS, PCYC
2nd Tier: IMGN, MDCO, NKTR, NVAX, PCRX,
SGMO
rd
3 Tier: ANTH, FPRX
www.bioinvest.com | 13