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Friday
Apr062012

The Weekly Dose - April 6, 2012

AuthorDDE Editor

The Weekly Dose - April 6, 2012

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Weekly Commentary - Financings seem to be the topic of the last few weeks.  BioWorld published a great article, "Spring has Sprung: Venture funding in BioTech is up. From that article: "Based on BioWorld's data, the first three months of 2012 saw U.S. biotech venture rounds bringing in a rousing $391 million – a 34 percent increase compared to the same period last year. 

In the cell therapy space we have just survived several raises. Aastrom, Athersys and NeoStem (just to name a few) all raised capital. Aastrom deal was creative with a long term debt note. The good news is they should be financed through PIII results now. Typically we do see stocks rise post financings as fundamentally the enterprise value is even more attractive.  Does dilution matter ? It’s a great question but the answer in the world of biotech is not so simple. These companies are working to completely change the unmet medical need around usually novel indications. In the case of Aastom its CLI, Athersys is Ulcerative Colitis (&others) and NeoStem is cardiovascular disease (preservation of heart function). So in this regard if these companies demonstrate "proof of principal" in their P2 (NBS, ATHX) or P3 (ASTM), the dilution from these raises becomes "irrelevant.

M&A remains very robust across the biotechnology sector. This week Spectrum and Allos announced a deal. We know that pipelines in big pharma are getting dry and we do expect to see more of the micro-cap companies being acquired.

In BioDefense the sector has been hit hard. SIGA lost the case versus Pharmathene and yesterday Cleveland BioDefense (CBLI) ran into trouble with BARDA. Fundamentally the technology at SIGA around their small pox anti-viral is strong. Once a procurement occurs we should see SIGA rebound. Management at SIGA is first class with Eric Rose MD as CEO.

Keryx also saw hopes dashed this week when Perifosine failed to show a benefit in a P3 trial for Colon Cancer. As such Keryx saw its valuation drop sharply now with a market cap of only $118 but with $31 million in cash (March 31, 2012). Zenrex (ferric citrate) is in a long-term Phase 3 study for end stage renal disease (ESRD) patients with hyperphosphatemia. Results are expected in the fourth quarter of 2012. This stock could (should) fly on good data. There is an opportunity here, and we will go back and look at the P2 data. Was it great ? Can it reliably predict P3 in Kidney disease. We know as biotech investors that predicting oncology trials (P3) from (P2) data has pit-falls. Our sense is the renal disease should be more predictable and we will come back to this topic.

On the other side we saw that Ventrus (VTUS) picked up new coverage and launched with a $30 target. Ventrus clinical programs are relatively low risk so this should be a story about basic clinical execution and we would expect to see a rise in the stock.  Lastly we are watching the progress in the Hepatitis C stocks like Achillion (ACHN) and Identix (IDIX). We saw that a bearish note came out for IDIX from Brean Murray and the consensus on the street around ACHN is pretty positive. Given the consolidation we've seen in this space with both Pharmasset and Inhibitex we believe Achillion is a name worthy of interest.

An important comment on Abbott (& Enanta) in the HCV space came out this week too. A. P2 trial demonstrated ABT-450 (protease inhibitor) plus a polymerase inhibitor (ABT-333) along with ribavirin, suppressed the HCV (genotype 1) after 12 weeks of treatment in more than 90% of treatment-naive patients and 47% of patients who didn't respond to prior treatment.

In the PILOT trial, all 11 evaluable treatment-naive patients receiving once-daily 150 mg ABT-450 plus ritonavir, ribavirin and ABT-072 for 12 weeks achieved and maintained HCV RNA levels less than 25 IU/mL from weeks 4-12, the primary endpoint. Additionally, 91% of patients achieved a sustained virologic response (SVR) 24 weeks after the end of treatment.

In the CO-PILOT trial, 93% (n=14) and 95% (n=19) of treatment-naive patients receiving once-daily 150 or 250 mg ABT-450, respectively, plus ritonavir, ribavirin and ABT-333 for 12 weeks achieved an SVR 12 weeks after the end of treatment. In 17 non-responders receiving low-dose ABT-450 plus ritonavir, ribavirin and ABT-333 for 12 weeks, 47% achieved an SVR 12 weeks after the end of treatment. However, six non-responders experienced viral breakthrough while on treatment and three non-responders relapsed after treatment ended.

Abbott, which markets Norvir ritonavir, has exclusive rights to ABT-450 from Enanta. ABT-450 is an oral protease inhibitor. Abbott's ABT-072 and ABT-333 are non-nucleoside polymerase inhibitors in Phase II testing for HCV.

The HCV market is trying to understand how combination therapy may change the need to use Interferon. This is implications for leaders Schering Plough and Roche (major makers of interferon) and well as Gilead (who just acquired Pharmasett).  The HCV space is still rapidly evolving.

Highlights This Week

Conference Call 4/4/12: Cleveland Biolabs ($CBLI): Update on BARDA development funding process

Cleveland BioLabs ($CBLI) announced that the company received a response from the Biomedical Advanced Research and Development Authority of the Department of Health and Human Services (BARDA) indicating that BARDA has declined to invite the company to submit a full proposal at this time for continued development funding of CBLB502 as a radiation countermeasure.

Rodman and Renshaw update on $KERX

Perifosine Strikes Out – Zerenex at Bat – A Potential Home Run Opportunity
 
Summary: X-PECT Trial Fails to Meet Primary Endpoint – Removing All Perifosine Revenues from Model - Keryx announced that the Phase 3 X-PECT trial for the treatment of metastatic colorectal cancer failed to meet its primary endpoint of overall survival (OS). During the conference call, management elaborated that the median OS observed in the control arm of capecitabine + placebo was significantly higher than any other historical control treatment investigated in other randomized trials for the similar patient population.

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Based on BioWorld's data, the first three months of 2012 saw U.S. biotech venture rounds bringing in a rousing $391 million – a 34 percent increase compared to the same period last year.

The biggest jump showed up in the early rounds. Series A and seed deals brought in 63 percent more moola the first quarter, with a total of $98 million rolling into 11 companies. Investors put more of their cash into clinical-stage firms (25 percent vs. 7 percent for 2011) and much less of their cash into specialty pharma deals (26 percent vs. 83 percent for same period last year).

Median deal size didn't change much between 2011 ($4 million) and 2012 ($6 million).

That trend of supporting early stage innovators makes me very happy.

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