Patrick K. asks: "Can you help me interpret the new Vertex Pharmaceuticals' (VRTX) hepatitis C drug data? Will this drug replace Incivek and what does it mean for Gilead Sciences (GILD), Idenix Pharmaceuticals (IDIX) and some of the other companies trying to develop hepatitis C drugs?"
I find it fun to reduce biotech news to musical terms, so when I first saw the new Vertex Hep C data on Monday, my first thought was LL Cool J's seminal rap "Momma Said Knock You Out."
"Don't call it a comeback!"
Vertex is still very much in the Hep C game. The company's experimental drug ALS-2200 (at the highest dose tested) yielded a 4.54 log10 reduction in viral load after seven days of dosing in genoytype 1 hepatitis C patients. ALS-2200 wasn't studied directly against similar Hep C "nucs" in this pilot trial but, naturally, that isn't stopping investors from making their own comparisons. The potency of ALS-2200 stacks up quite well compared to Gilead Sciences' much beloved GS-7977 (4.5 log10 reduction after seven days) and Bristol-Myers Squibb's (BMY) BMS-094 (4.25 log10 reduction after seven days).Oh, wait, did I just mention BMS-094? Silly me. The caveat to all this is that the ALS-2200 results, as promising as they are, only come from eight patients dosed for a week. The blowup of Bristol's nuc in phase II on Wednesday night will place greater scrutiny on the longer-term safety of Vertex's new drug. It's a wee bit early to declare ALS-2200 the next Hep C wonder drug. Gilead has already started phase III studies of '7977 so Vertex is probably 18 months to two years behind. It is worth noting, however, that Vertex enters the coveted Hep C "nuc" club with ALS-2200 by spending far, far less than the $11 billion Gilead spent to buy Pharmasset in order to gain control of '7977. Investors don't seem to care about Gilead overpaying to get into Hep C today but they may care in the future if the treatment pie gets sliced into smaller and less valuable pieces due to a glut of all-oral regimens that all work equally well. As for Incivek, ALS-2200 isn't a replacement drug. It may be complementary if combination studies planned are successful. The problem, however, is that Incivek is not an attractive drug moving forward due to side effects and dosing (two or three times a day). I'd rather see Vertex test ALS-2200 in combination with a more convenient and less toxic protease inhibitor like Johnson & Johnson's (JNJ) TMC435 (co-owned with Medivir.) Vertex also needs to find an NS5a inhibitor that it can combine with ALS-2200. Perhaps Idenix's IDX719 might be a good choice? Matt B. writes: "What are your thoughts on Talon Therapeutics (TLON)? Any more potential for another rally before PDUFA?" I spoke with Talon CEO Steven Deitcher last week. He remains "encouraged and hopeful" that FDA will approve Marqibo on or before Aug. 12 -- the company's PDUFA date. (What else is he going to say, really?) Recall, an FDA advisory panel voted 7-4 to recommend Marqibo's approval as a new treatment for patients with Philadelphia (chromosome) negative acute lymphoblastic leukemia (Ph-ALL) who are no longer responding to current therapies. The panel vote was positive but the margin of victory wasn't tremendous -- some of the experts on the panel seemed unimpressed with Marqibo's 15% response rate but voted "yes" anyway because these PH-ALL patients have no other medical options. That's a reasonable argument for granting approval, so I'll predict FDA does give the green light to Marqibo, although on my 0-10 confidence scale, Marqibo scores a 7. Talon's future starts to look more questionable after Marqibo is approved. Deitcher says there are about 4,000 Ph-ALL patients worldwide, half of those in the U.S. Pricing hasn't been disclosed but I'm guessing $50,000 per course of therapy, which equates to a $100 million market opportunity in the U.S. Talon might deliver $30 million to 40 million in U.S. Marqibo sales on this initial indication, assuming the company can market the drug successfully -- a job it's never done before. The scariest part of the Talon story is its balance sheet. Talon's fully diluted share count is not the 21 million listed on Yahoo Finance. In reality, the company has 140 million shares outstanding when all convertible preferred shares owned by Warburg Pincus and Deerfield Capital are factored in, says Talon CFO Craig Carlson. So, at a share price of $1.10, Talon's true market cap is $154 million, not the $23 million listed in Yahoo Finance. Talon is not a cheap stock. And the share count is headed higher because Talon needs to raise a lot more cash to market Marqibo and pay for the confirmatory phase III study mandated by FDA. That trial is going to cost $42 million, says Deitcher. In our conversation, Deitcher mentioned plans to seek an ex-U.S. partner for Marqibo that could help the company raise additional non-dilutive cash. He also hinted that large pharmaceutical companies might want to acquire Talon outright. Talon as takeover bait? Really? Marqibo is nothing more than a reformulation of vincristine, an old chemotherapy drug -- hard to see it as a highly sought-after product but heck, stranger things have happened. Bill R. has a problem with my column on Amarin (AMRN) and the insider sales executed the day after Vascepa's approval. He writes: "I am a follower of your Twitter account and you give good information, but I believe the title of this article does a terrible disservice to your credibility. You know there was no rush to sell. It would be impossible to do this because of SEC regulations. Writing like this is for amateurs and I believe you are of higher standards. I think that causing knee-jerk reactions are wrong. I wish you would have done more research and looked for a more probable reason for the sales. [Amarin executives] knew the drug would be approved and recently after FDA approvals most stocks have sold off. Logically this would be the best time to exercise stock options and sell them before being frozen out during negotiations with drug companies for the sale of the company. Stock options in a buyout very rarely obtain a high price, so this sale was a very logical step. I would hope that you explore this in another article for your readers. I still remain a follower of your Twitter information, and I think you a man enough to consider what I have written." Amarin's insiders absolutely rushed to sell company stock. That's an indisputable fact. It matters not that these insider sales were pre-arranged through 10b5-1 trading plans. Amarin CEO Joe Zakrzewski and his minions were so impatient to sell their company shares that they set up plans in advance that would exercise options as soon as the FDA approval became official, then sell the shares underlying those options one day later. Why the rush to sell, Joe Z? If you truly believe in the blockbuster potential of Vascepa, if you believe FDA will grant NCE status later this month or that Amarin is going to be acquired soon for a large premium, why the rush to sell company stock the day after Vascepa's approval? I still believe Amarin has a legitimate shot at getting NCE status for Vascepa, but I also believe the insider sales are a real confidence knocker and bolster the bear thesis that FDA won't grant the five years of market exclusivity. On the same topic, Vincent M. writes: "Why is it that you never print the whole story. You say you have always liked Amarin and yet you put a negative spin on everything, misleading investors." You can like a stock and still be critical. If you're going to own Amarin, you need to recognize and evaluate the risks related to Vascepa's NCE status or the uncertainties around the drug's commercialization. You should be asking yourself why executives are talking highly about the company's prospects (and, by proxy, its stock price) while at same time selling their own stock. Successful investors weigh rewards and risks. Sadly, based on the feedback I've received over the past several weeks, Amarin fans seem to be focused only on the former while ignoring the latter. That's not smart. @jimcasada tweets: "What's going on with NWBO? Who's been buying lately?" Northwest Biotherapeutics (NWBO) CEO Linda Power used to spend a good part of her investor presentations promising to be the next Dendreon (DNDN). You think she regrets those statements now? Northwest Bio has always been un-investable and remains so. See you back here in two weeks! --Written by Adam Feuerstein in Boston.
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