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TheStreet Open House

Biotech Stock Mailbag: Raptor, Chelsea, Oncogenex, More Hate Mail!

NEW YORK (TheStreet) -- This week's Biotech Stock Mailbag opens with an email from Charlie R.:

I read your tweets so I saw your skepticism on Raptor Pharmaceuticals (RPTP) and its Huntington's study. Sounds like you don't believe this any more than Prana Biotech's (PRAN) results from earlier in the week, but is there a way to say if one is better than the other?

With Prana Tuesday and now Raptor Thursday, you're seeing companies seeking to salvage something positive from failed studies in Huntington's disease. From a stock perspective, the strategy has been somewhat successful -- both Prana and Raptor are higher after their respective announcements and conference calls. It's still going to take a lot more to prove either of these drugs work in Huntington's. The data promoted this week were weak.

Analysts on Raptor's call Thursday didn't ask the obvious question: How did RP103 perform in the subset of Huntington's patients who were taking concurrent tetrabenazine?

The answer is RP103 seemingly harmed these patients. Funny, but you didn't hear Raptor mention this in its press release or discuss on the conference call. I wonder why? Probably for the same reason analysts didn't bother to ask the only question which matters.

Total Motor Score (TMS) progression for Huntington's patients treated with RP103 plus tetrabenazine was 7.7 points compared to 6.4 points for patients treated with placebo plus tetrabenazine. Higher numbers indicates faster progression, so the RP103 patients performed worse.

Raptor didn't disclose these negative data but they can be calculated using the TMS progression scores for all patients and the subgroup of patients who weren't treated with concurrent tetrabenazine, which the company did disclose.

The company's executives are disingenuous for hyping the "good" data-mined results while ignoring the "bad" data-mined results, which they clearly have on hand but want to hide.

Tetrabenazine is the only drug currently approved to treat the deterioration of motor function in Huntington's patients. Why would RP103 be effective in patients not treated with concurrent tetrabenazine but harm patients who do take the drug?

Raptor executives didn't have a very good response on the conference call, other than to say tetrabenazine might be "masking" the effect of RP103.

Okay. Possible. But here's another equally plausible explanation: The study was not controlled for tetrabenazine use, meaning patients were free to start the study on the drug, or not, or even begin taking tetrabenazine during the study.

Why is this significant? Because patients are prescribed tetrabenazine when their motor function starts deteriorating. Therefore, the patients not on tetrabenazine are self-selected for slower Huntington's progression. These patients should already have lower TMS progression scores, so Raptor's data-mined results are not surprising nor likely attributable to RP103. [It really makes no sense for RP103 to work better without tetrazenabine than in combination.]

Furthermore, RP103 causes diarrhea and bad breath, meaning Raptor's study could not be blinded. Patients knew if they were being treated with RP103 or a placebo, which likely skewed results in RP103's favor.

It's very difficult to believe any follow-on study of RP103 would confirm the benefit observed in Raptor's post-hoc analysis of the failed phase II study.

Pole567 asks:

Thanks for the great call on Chelsea Therapeutics' (CHTP) FDA approval but what is happening with the stock now?

The Chelsea approval trade is over? That's as good of an explanation as any for the stock trading down following FDA's approval of Northera on Tuesday. "Trading down" is relative, of course. As I write this column, Chelsea shares can be bought for $5.93, so still higher than pre-approval prices. The stock is up 34% for the year.

With the immediate post-approval euphoria subsiding, investors are also probably thinking about Chelsea's next financing. Even if the company does partner or sell itself to someone, raising money first won't surprise anyone.

The ongoing confirmatory, post-approval studies of midodrine in orthosatic hypotension being conducted by Shire (SHPGY) (under threat from FDA) might also be weighing a bit on Chelsea's stock price.

This is a strange situation. FDA approved Shire's midodrine under an accelerated approval review in 1996, which required the company to conduct a post-approval study to confirm the drug's benefit in orthostatic hypotension patients.

Shire never performed the confirmatory studies and then stopped marketing midodrine in 2010 when generic copies entered the market. But FDA still insisted that a confirmatory study be done and threatened to pull the drug off the market if Shire -- midodrine's NDA holder -- didn't comply.

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