� 1999, Biotechclinician
BIOTECHCLINICIAN Weekly
I want to begin by thanking everyone for all of the emails during my short (OK, not so short) hiatus. A bit of an explanation (though no excuses!). My partner has gone back to residency and is working the hours that entails. I have been traveling a lot the past few months and while reading about our industry have not put pen to paper (well fingers to keyboard). I am also working on a new website that I will be happy to tell you all about when it is ready. Again, I want to thank you all for the kind emails; it means a lot to hear from each of you. Since we have quite a bit to catch up on, we will get right to it.
The markets are headed for what seems to have become a routine September/October correction. The market corrected 4-5% for the week, depending on the index you follow. As always, there were a number of people and events blamed. The upcoming Fed meeting, Microsoft's Steve Ballmer, a weak dollar and earnings anxiety were all to blame at some point. Whatever the cause was, it hit most of our stocks as well as the rest of the market.
Cell Pathways managed to buck the trend, finishing up ½ at 9 1/16. CLPA did not have any news over the week but it has continued to languish over some concerns. It seems the biggest is the perceived threat from the COX-2 inhibitors (Celebrex from G.D. Searle/Monsanto (NYSE: MTC) and Vioxx from Merck (NYSE: MRK)). In late August, Celebrex's NDA received a priority review designation from the FDA for the new indication, the regression and prevention of colorectal adenomatous polyps in patients with familial adenomatous polyposis. This news seemed to cause significant consternation in the markets (and glee in the shorts). It looks from here that the concerns are overblown. We are looking at two separate mechanisms of action. If both of these products work to prevent or treat cancer, all the better. It does not take much of an intuitive leap to see the possibility that two separate mechanisms of action would work synergistically to cause apoptosis of cancer cells.
Another concern seems to be the FDA. Obviously, the near term future of Cell Pathways rests on the upcoming decision by the FDA. This is an unknown to everyone (including the FDA) at this point. We can look at the facts and make an educated guess. Aptosyn is a drug that is used to treat a condition (adenomatous polyposis coli) that has a high mortality rate if left untreated. As of now, the only treatment is surgical intervention which. Aptosyn, in the clinical trial data presented so far, seems to work. The toxicity from Aptosyn seems to be minimal ("First Do No Harm"). CLPA seems to have discovered a novel pathway that induces apoptosis across a number of diverse tumor types (though this does not have direct bearing on the decision, I suspect the FDA will not completely ignore this information). We must also consider what could go wrong with the FDA approval. The FDA could totally reject the NDA. Though this seems unlikely, it certainly has happened to other companies. What is more likely is the FDA voices concerns about the paucity of study participants. It seems that CLPA has been proactive on this point. They met with the FDA and discussed the numbers prior to NDA filing as well as promising more data after filing of the NDA.
A final concern seems to be monetary. The company has a dwindling supply of cash. Though CLPA has been frugal with their expenses, clinical trials are expensive. It seems like management has been in discussion with major pharmaceutical companies over some sort of partnering agreement. If the drug "works," money should not be a problem in the near future.
What does all of this mean? If the company has found a new class of drugs for fighting cancer, this is a tremendous buying opportunity. The day to day gyrations of this stock are not material to the health and future of this company, what counts is the efficacy of the SAANDs. Remember, this company is either worth nothing or billions, in my estimation, there is nothing in between.
Other news about CLPA included the issuance of U.S. patent number 5,948,779 covering its second investigational drug, CP461 and related compounds. As we know, preclinical studies of CP461 demonstrated a potent anticancer effect in a broad range of human cancer cells including prostate, breast, colon, lung, ovarian, pancreatic, leukemia, lymphoma and multiple myeloma cell lines. CP461 has not produced significant side effects at any dose in Phase I clinical trials. CP461 is reported to be a much more powerful apoptotic inducer than Aptosyn. CLPA also announced the filing of the NDA on August 26, 1999. The NDA had been expected based on the results of the Phase III study for APC.
Sepracor has been up and down, finishing the week down almost 2 at 71 9/16. Sepracor seems to be a victim of the "momentum" players in the market, it moves up fast but comes down hard. If you can separate short term from the long term, this seems to be a promising situation. Simply viewing the company as a generic drug maker with relatively certain approvals coming down the line, one can argue undervaluation.
Sepracor had some important news in September. Hoechst Marion Roussel, the pharmaceutical company of Hoechst AG, and Sepracor amended an existing business arrangement related to fexofenadine (Allegra). The arrangement settled all patent issues between the companies involving the antihistamine developed and marketed by Hoechst Marion Roussel. The two companies seemed to have reached this settlement to avoid protracted litigation. Sepracor will receive royalties on ex-US sales of Allegra retroactive to March 1999. Under a new US agreement, which will commence in 2001, Sepracor will receive lower royalty rate of 2% on Allegra. The ex-US royalties will be 7%.
BioChem Pharma is another of our stocks that seems undervalued. BCHE is one of a handful of profitable biotech companies out there. They have made money from their cornerstone AIDS drug, 3TC. 3TC has continued to grow rapidly with the advent of combination therapy. Couple this with the Hepatitis B treatment that continues to gain approval around the world and you see a company with significant growth ahead of it. The company also has a number of promising drugs in the pipeline including new HIV drugs and different vaccines. As with Sepracor, the long term view of this company looks promising. BioChem Pharma finished the week down almost 3 at 23 3/16.
ImClone has had quite a run though it has recently given back some of its gains, finishing the week down over 3 to 32. The markets are certainly recognizing the value offered by ImClone. If the results from Phase II hold into Phase III, this company could be huge in the coming years. Their most promising drug, C-225, could be used in a number of cancer types down the road. And though we hope that everyone will take their Aptosyn daily and not have cancer, until that happens, C-225 will have a vast market (unfortunately).
Isis is another company that is either going to be massive or a footnote in the history of biotech. If the trials show good results and FDA approval is given for the Crohn's drug, ISIS 2302, antisense technology will be validated. Since Isis is the leader in this technology, they should be rewarded with an appropriate market cap. Isis finished down a fraction to 12.
Again, I want to thank you all for the emails. I will make a valiant attempt to keep the site up to date. I will archive the old BiotechClinician Weekly as was suggested in some of the emails. I also have a new search engine that works much better than the previous model (which didn't work at all). If anyone has suggestions about the site, I would love to hear about them. Have a wonderful week.
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� 1999, Biotechclinician