Biotech Stocks Live (and Die) on the Calendar
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By George S. Mack, The Life Sciences Report
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Since the beginning of the biotech revolution, analysts have kept spreadsheets, tables and calendars to catch the next whiff of data coming out of companies whose futures hang in the balance. I recently interviewed Vice President Michael Hay of Sagient Research Systems for The Life Sciences Report. Hay watches for data and listens to conference calls the same way analysts from investment banks and asset management firms do, but his specialty niche is catalysts. He has concluded that the two most powerful share-price drivers of small companies are pivotal phase 3 data and U.S. Food and Drug Administration (FDA) advisory panel votes. The Prescription Drug User Fee Act (PDUFA) date, which is when the FDA delivers its yes or no decision on a drug, is not necessarily the big market mover because most times FDA takes the advice of the advisory committee, which means the news is already baked in. Indeed, the PDUFA date can sometimes trigger a sell-on-the-news effect to knock a stock down from its peak even on good news.
During our conversation, Hay started with recent approvals of two new obesity drugs. Arena Pharmaceuticals Inc. (NASDAQ: ARNA) received the FDA's blessing of Belviq (lorcaserin hydrochloride) on June 27, and Vivus Inc. (NASDAQ: VVUS) saw its product Qsymia (phentermine + topiramate) get approved on July 17. Hay is still bullish on Vivus because it owns 100% of Qsymia, and it also has an erectile dysfunction drug Stendra (avanafil), which was approved by the FDA in April. Hay is less bullish on Arena, in part, because Belviq is partnered with Eisai which gets two-thirds of revenues. But if these two companies signal anything for the future, it has to be about Orexigen Therapeutics' Inc. (NASDAQ: OREX) obesity drug Contrave (naltrexone + bupropion) which has an important catalyst on the horizon to rule out cardiovascular risk. Those results are expected in the second half of 2013. "After these two approvals for Arena and Vivus, I feel much more positive (on Orexigen) than I did before," he says. "If you look at the way these overwhelmingly positive votes for these two approvals come out, you kind of see it as a green light for Orexigen. Contrave may actually have a better profile than Arena's Belviq or Vivus' Qsymia once it does hit the market."
Hay is also following NPS Pharmaceuticals Inc. with its Gattex (teduglutide) for short bowel syndrome (SBS) patients who are unable to absorb nutrients properly. The PDUFA date is expected to be September 28. "It hasn't had an advisory committee yet," says Hay, "But the FDA stated that it does want one. I guess there's a possibility that if that falls close to the PDUFA date, it could be extended."
On the large cap side Hay has been following the progress of Gilead Sciences' Inc. (NASDAQ: GILD) Quad Integrase (elvitegravir + cobicistat + emtricitabine + tenofovir) for HIV. The "Quad pill" is a once per day dose which is expected to improve patient compliance and give new life to Gilead's aging but lifesaving product line. It's PDUFA date of August 27. "We expect this drug to be approved," says Hay. "It has shown non-inferiority efficacy data versus the components and the standard of care that's on the market now."
Hepatitis C (HCV) has been of huge interest to the markets this year. Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) is expecting some very important phase 2 efficacy data for its HCV candidate ACH-1625. These data are expected at any time. Hay is overall neutral on Achillion because Gilead is the 800-pound gorilla in the HCV space right now. "It's going to be tough really to beat out the drugs that already have quite a substantial lead, such as Gilead's drug, GS-7977," he says.
Sunesis Pharmaceuticals Inc. is developing vosaroxin for acute myeloid leukemia (AML), and it has an upcoming data monitoring board (DMB) decision for a large phase 2 trial. "Those can be very large movers because it happens before a trial is completed," says Hay. "An event positive or negative, either way, is somewhat unexpected. My assumption is that the DMB will probably look at it and say to continue the trial, which is expected to be completed at the end of 2012 with data coming in 2013."
1) George S. Mack of The Life Sciences Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None
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