The second quarter begins with a plethora biotech binary events. In fact, in order to keep each Red Acre Insight to a reasonable length, we are splitting up the April Biotech Binary Event Watch into two parts. In this first part you will find coverage of Allergan, Theravance, Endo Health Solutions, Sucampo and Gilead. Part two will cover the remainder of the events in the month.
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Allergan (NYSE:AGN) PDUFA for LEVADEX April 15
Allergan has a PDUFA date of April 15th for Levadex. Levadex is an orally inhaled drug for acute treatment of migraines. This NDA was originally submitted by MAP Pharmaceuticals. MAP was acquired by AGN in March of this year. LEVADEX originally received a complete response letter from the FDA in March 2012 citing CMC issues and some inhaler usability data that the agency was not able to review because it was submitted late in the first review cycle.
Allergan has a $32 billion market cap, at Red Acre we generally do not focus upon the mid-cap and large-cap biotech space. We note that AGN shares have been on a tear since the beginning of 2013, recently reaching almost $115 per share. Shares have dipped down slightly in the past week and are presently hovering around the support level of the 20 day exponential moving average.
LEVADEX approval may have a potentially negative read-through for NuPathe (NASDAQ:PATH). Recall that PATH received FDA approval for their ZECUITY transdermal patch for treatment of migraines. ZECUITY's major marketing claim is that, because the medication is delivered transdermally, it works even in patients with migraine related nausea. LEVADEX's inhaled medication provides similar fast onset and low incidence of nausea (Nausea side effects in LEVADEX trials were 5% and 2% for drug and placebo arms respectively). Given AGN's resources, approval of LEVADEX could potentially lead to increased competition for PATH among migraine sufferers who experience nausea. Note that the nausea side effects as reported by MAPP and PATH are not directly comparable because they were not measured or reported in the same fashion. If LEVADEX is approved, the approved label may provide additional data allowing for a more direct comparison.
Theravance (NASDAQ:THRX) Advisory Committee for BREO April 17
Theravance and partner Glaxo Smith Kline (NYSE:GSK) have an advisory committee meeting on April 17th for BREO, their inhaled LABA/corticosteroid combination therapy for COPD. GSK has led clinical development of BREO and will be presenting the sponsor portion of the AD COMM. BREO is meant to be a successor product to GSK's ADVAIR (2012 sales of $8 B) and a competitor to Symbicort (2012 sales of $3.2B). If approved, THRX is entitled to receive royalties of 15% on global sales up to $3 billion and 5% on sales above $3 billion.
THRX and GSK have another NDA under review this year for ANORO, a LABA/LAMA combination therapy meant to compete with Spiriva for treatment of asthma. Should either of these drugs be approved, THRX will have to pay milestones to GSK (up to $220 million if both drugs are approved). THRX did a debt financing in January of this year to raise cash to pay for these milestones.
THRX stock has recently been supported by it's 200 D EMA though, on April 8th, the stock closed slightly below the 200 D EMA. We believe that the recent dip may be attributable to traders exiting the stock in the week ahead of the advisory committee meeting. Overhead resistance is at $26 while downside support for the stock should be found at $22 followed by $20 and $18 based on the 2-year chart.
The BREO trials had some data issues including 7 deaths due to pneumonia; however, several of those deaths occurred at one clinical site (in Asia) and 6 of the 7 deaths were at the highest dose tested in trials, (a dose for which the company is not seeking approval for the COPD indication) suggesting that the issue may not prevent a favorable Ad Comm. vote. Expect the briefing documents to mention the deaths and the Ad. Comm. questions may include a specific discussion topic about the deaths and how they impact the safety of the drug. When briefing documents contain such negative information, the stock tends to react negatively the day they are released. Look for the stock to dip to the $20 level or possibly to $18 depending upon the tone of the FDA's stance on these safety issues.
We will re-visit these issues once the briefing documents are released on April 15th. We note that, should BREO receive an unfavorable review from the AD ACOMM, or receive a CRL, THRX has a second PDUFA on December 18th for ANORO making any dip in share price a potential buying opportunity ahead of the second regulatory event.
Endo Health Solutions (ENDP) Advisory Committee for AVEED April 18
ENDP has an advisory committee meeting for their injected testosterone replacement therapy, AVEED. This product was developed by Indevus Pharmaceuticals. ENDP acquired Indevus in 2009. AVEED is approved globally in 86 countries, but, the US approval is not a sure thing due to rare but serious side effects seen with AVEED as well as other injectable testosterone replacement therapies. The advisory committee meeting announcement indicates that:
The safety discussion will focus on post marketing reports of oil microembolism in the lungs and potential anaphylactic reactions. In addition to AVEED, other approved testosterone injectable products will be referenced, especially in regard to oil microembolism and potential anaphylactic reactions reported for those products.
In other words, there are side effect concerns that the FDA will ask the advisory committee to focus upon. AVEED was rejected by FDA in 2009 due to side effect concerns, so the advisory committee focus on safety considerations for not just this product, but the entire class of injected testosterone replacement products is worth noting.
ENDP stock has been in an uptrend since the beginning of this year, although this has more to do with management changes than with AVEED. We note that the recent move from the $30.75 level to the $34.25 level appears to be a slight run-up ahead of the advisory committee meeting. If this is the case, expect traders to lock in some of these gains before briefing documents come out on April 16th.
We note that ENDP had $3 billion in revenue last year and yet only has a $3.8 billion market cap. The reason for this is that the company took on excessive debt in 2010 and 2011 to help finance a spree of acquisitions. ENDP has $3.17 billion in long-term debt. While the company's revenues appear to be sufficient to service the debt, this explains why, on a price to sales basis, the stock may appear to be undervalued but in fact is not. While the AVEED advisory committee is the short-term catalyst, investors have longer-term hopes pinned on the turn-around for ENDP that is anticipated from the new CEO. Given the excessive debt levels and concerns over side effects, we are on the sidelines for this binary event.
Sucampo Pharmaceuticals (NASDAQ:SCMP) PDUFA for Amitza sNDA April 26
Sucampo pharmaceuticals has an April 26th PDUFA date for it's supplemental NDA for Amitza for the opioid induced constipation (OIC) indication. Amitza was approved in 2006 for chronic idiopathic constipation (CIC) and in 2008 for constipation predominant irritable bowel syndrome (IBS-C). The OIC sNDA was granted priority review last year, but, in November, SCMP revelaed that the PDUFA date had been shifted back due to new information submitted late in the review cycle that constituted a major amendment to the NDA.
We believe Amitza is likely to be approved for the OIC indication. Amitza is a chloride channel activator and does not act on the Mu-opioid receptors in the gut; therefore, recent concerns over CV safety of Mu-opiod receptor agonists such as Relistor should not affect Amitza. It is interesting to note that the SCMP announcement of delay in sNDA PDUFA date occurred just 9 days after Salix Pharmaceuticals (NASDAQ:SLXP) revealed that FDA was requiring a CV outcomes study for Relistor prior to approving for OIC in chronic non-cancer pain. We have confirmed with SCMP management that the PDUFA delay for Amitiza in OIC is unrelated to the FDA CV concerns for Mu-opioid receptor agonist drugs.
In the past, SCMP has had a somewhat rocky relationship with commercialization partner Takeda due to disappointing sales ramp-up. SCMP took Takeda to arbitration over breach of contract due to, in SCMP's opinion, less than best-effort sales rollout. Last July, the International Chamber of Commerce's International Court of Arbitration handed down a decision that SCMP had failed to demonstrate a material breach of contract. According to the company, while this dispute was not resolved in Sucampo's favor, the silver lining from the incident is that in the process of pursuing the arbitration much new information was brought to light regarding what could be done to improve the ramp-up of promotion and sales of Amitiza. Whether or not this has led to a change in efforts by Takeda remains to be seen; however, it is noteworthy that, in January 2013, after Linzess entered the market, Amitza posted its highest sales to date. The OIC indication will give SCMP's Amitiza a new talking point and an edge over Linzess since Linzess is not, at the present time, approved for OIC.
Currently there are no approved oral medications for OIC. We believe that approval for the OIC indication will be positive for SCMP stock price because this indication adds 2 to 2.5 million patients to Amitiza's addressable market and these patients will not be on-label for competitors. Furthermore, first sale of Amitza in OIC triggers a $10 million milestone payment from Takeda to Sucampo, equivalent to 24 cents per share. SCMP stock has increase 40% since recent lows in mid-march. Downside support lies at $5 and overhead resistance at $7 followed by $8.44. Due to the strong recent run-up in share price, we expect some selling pressure in SCMP in the week prior to the expected PDUFA date of 4/26.
Gilead Sciences (NASDAQ:GILD) PDUFA for Elvitegravir and Cobicistat April 26
GILD has 2 back to back PDUFA dates for Elvitegravir and Cobicstat, two HIV therapies that are under review as monotherapies. Both of these drugs are part of QUAD, the GILD 4-drug single pill combination therapy that was approved in August 2012. Since these drugs are already approved as combination products, we see little risk to these PDUFA decisions. GILD is another stock that falls outside Red Acre's typical coverage universe with nearly $74 billion in market cap. We note that the stock has been on a tear since January 2012 and the 20 day EMA has been a reliable support level. As such, a surprise rejection of either of these therapies would re-test the 20 day EMA, but we have no view on how GILD stock behaves on approval. Note that, technically speaking, the PDUFA dates for Elvitgravir and Cobicistat are April 27th and 28th respectively. Since these dates are on the weekend, investors should expect to hear the news by Friday April 26th if not earlier.
