Biotech Stock Mailbag: Orexigen and Vivus
BOSTON (
) -- As the end of 2010 draws near, I'm getting close to four years and 200 Biotech Stock Mailbags. If there were TV syndication, I'd be rich!
The big news of the week was definitely
Orexigen Therapeutics
(OREX)
and the positive FDA advisory panel for its weight-loss drug Contrave. I'm still recovering from the
suspense and stress of the live blog
. Let's start here.
Jack C. emails,
"I would like to thank you for carrying the Orexigen FDA hearing yesterday. It was a thriller of a day. Could you tell me what you think lies ahead for Orexigen in terms of stock prices? What do you see as the best scenario if it gets approved in January?"
Orexigen closed Monday at $4.76. The stock was halted all day Tuesday for the Contrave FDA panel. Orexigen opened for trading Wednesday at $11 (!!) and closed at $8.77, with almost 30 million shares traded. Wow!
More wow!
Vivus
(VVUS) - Get Report
shares closed Wednesday at $9, about $2 higher than the stock trading before the Orexigen panel. Investors apparently believe what's good for Orexigen is also good (and maybe better) for its closest competitor.
If Tuesday's panel was a positive indication that FDA approval of a weight-loss drug sometime in 2011 is possible, then shouldn't Orexigen and Vivus trade more in parity in terms of market value?
As it stood Thursday morning, Orexigen's enterprise value was around $300 million while Vivus' enterprise value was approximately $580 million. If the approval chances for Contrave and Qnexa are relatively equal, either Orexigen's stock price deserves to be double (call it $16, roughly) or Vivus' stock price should be half ($4-$5).
Are the approval chances of Contrave and Qnexa equal? The market today says no. Qnexa is worth more, which is strange to me because the FDA advisory panel for Qnexa was negative and the Contrave panel was positive. Shouldn't the sentiment be reversed, or, at best, equivocal?
Valid arguments can be made for and against the approval of both Contrave and Qnexa. Contrave is the only weight-loss drug to receive the endorsement (albeit with some reluctance) of an FDA advisory panel. Qnexa appears to have the strongest weight-loss ability because it met both of FDA's efficacy criteria. Contrave, met only one of FDA's efficacy criteria, a point of criticism raised even by the panel members who voted to recommend approval.
The safety risks from long-term use of both Qnexa and Contrave have not been completely assessed. Qnexa has two-year data that seem to provide some reassurance that chronic use is safe, but the data have not been submitted to FDA for review yet. Contrave has only one-year data and a cardiovascular profile similar to sibutramine, the weight-loss drug recently pulled from the market. Yet the experts on the FDA panel, fully knowledgeable of this, still felt comfortable enough with Contrave to recommend a post-approval cardiovascular outcomes study along with the approval endorsement.
Don't completely discount the possibility that the FDA turns away both Qnexa and Contrave, despite the positive panel vote. The influential drug safety bulldog Dr. Sidney Wolfe of Public Citizen is already howling in the FDA's ear to reject these weight-loss drugs, reminding FDA not to repeat the mistakes made with sibutramine or Avandia.
One guarantee I will make: The twist and turns in the obesity drug saga will continue well into 2011. Next up will be the FDA's approval decision on Contrave, expected Jan. 31. A delay seems more likely than not given Tuesday's panel members demanding that a risk-management plan and a design for a post-marketing safety study be well in place before Contrave's approval. Time seems short to get all that work done before the end of January.
After the Contrave decision, you should be watching Vivus and its resubmission of additional Qnexa data to the FDA. If the FDA accepts the new data for review, a second approval decision date for Qnexa could come up in the middle of 2011.
Via Twitter, @ywsr asks,
"How real is BioVest International?"
(BVTI.PK)
Not real enough to believe with any confidence in the near-term approval of BiovaxID, the company's experimental vaccine for the treatment of non-Hodgkin's lymphoma.
Biovest completed a phase III study of BiovaxID several years ago but only recently emerged from bankruptcy. The company has not yet announced a regulatory strategy for BiovaxID, but based on my emails with the company, I suspect Biovest will move ahead with an FDA approval filing relatively soon based on the available BiovaxID data.
If that is what Biovest decides to do, my best guess would be an FDA rejection, with the agency asking the company to conduct another BiovaxID clinical trial.
BiovaxID is made from cells taken from a patient's own tumors. The vaccine works by training the body's immune system to recognize and attack a protein found only in cancerous B cells.
In the company's phase III study, patients with non-Hodgkin's lymphoma who were treated with BiovaxID experienced a median disease-free survival of 44.2 months compared to 30.6 months for patients treated with a control vaccine. After five years of follow-up, the BiovaxID patients experienced a 38% lower risk of disease recurrence compared to patients receiving the control vaccine.
These data were presented at the plenary session during the American Society of Clinical Oncology (ASCO) annual meeting in 2009. Despite the imprimatur that an ASCO plenary session brings, there are reasons to be skeptical about these seemingly positive results.
Biovest first announced the results from this study of BiovaxID in June 2008 followed by the May 2009 ASCO presentation. Yet after that, Biovest's stock price tanked, no partner came knocking and the company went bankrupt.
Investors and potential partners were clearly skeptical about the BiovaxID data, and rightly so because the results likely over-stage the vaccine's efficacy. The study, as designed, uses an unconventional accounting of patient responses, essentially not starting the disease-progression clock until six months after patients are treated initially with a standard regime of drugs used to put the cancer into remission.
The disease-free survival benefit reported in this study was barely under the limit of statistical significance. If patient responses were counted in a more traditional way, i.e., as soon as the patients were admitted into the study, the results likely would not have looked so robust.
At this week's American Society of Hematology (ASH) meeting, Biovest researchers presented a new analysis of the BiovaxID study that purports to show even more robust results from a sub-group of patients with tumors that contain a specific protein fragment known as IgM.
When patients with IgM-positive tumors were treated with personalized vaccine containing IgM, the median disease-free survival was 52.9 months compared with 28.7 months for IgM-positive patients treated with a control vaccine.
That's a great result and very encouraging, except the entire analysis of IgM (and another, ineffective protein fragment known as IgG) was done retrospectively and would therefore need to be confirmed in a future, prospectively designed study.
Biovest may try to convince the FDA to accept the post-hoc IgM analysis, but the agency isn't likely to bite, especially given the unconventional way in which the original trial accounted for disease relapse.
If Biovest is going to move forward with BiovaxId, a new study will be needed. That means more money will need to be raised from investors or a potential partner found.
Two related emails. Tim D. asks,
"What is your take on Seattle Genetics (SGEN) - Get Report in light of the recent information released at the ASH conference."
Manny D. asks,
"What were thoughts on the Onyx Pharmaceuticals (ONXX) data this week?"
Both Seattle Genetics and Onyx Pharma shined at the ASH meeting. Seattle Genetics' "armed antibody" drug brentuximab vedotin was expected to post strong data from two separate studies in patients with Hodgkin's lymphoma and anaplastic large cell lymphoma, respectively. The results were, for the most part, right on target, and Seattle Genetics is going to seek FDA approval in the first half of next year, ahead of previous guidance.
Seattle Genetics' stock sold off this week following the data presentations, which I chalk up to a mixture of sell-on-the-news and legitimate arguments about the commercial potential for brentuximab in these two forms of blood cancer. It's not like investors were discounting the drug because the company's current valuation stands at $1.5 billion to $1.6 billion.
If you're a believer in Seattle Genetics as a technology platform for armed antibody drugs -- and there are certainly good reasons to believe that -- then the stock has value well beyond whatever is currently being assigned to brentuximab.
Moving to Onyx, the Street was discounting the carfilzomib data in multiple myeloma ahead of the ASH meeting, in part because Onyx has a bad habit of snatching defeat from the jaws of victory. Not this time it turns out, because the carfilzomib data were super.
Two carfilzomib data points that most impressed: The 19% response rate in multiple myeloma patients who progressed after treatment with Velcade immediately before entering the study. These are the patients in the study who had truly run out of other medical options, so the 19% response rate (coupled with a relatively mild side effect profile) is a significant clinical benefit.
In a separate study, carfilzomib coupled with Celgene's Revlimid demonstrated strong response rates in treatment-naïve multiple myeloma patients. These data aren't going to be part of Onyx's initial FDA approval filing, but they definitely suggest a broader and more lucrative role for carfilzomib in multiple myeloma.
Onyx shares traded higher after the ASH presentation, in contrast to Seattle Genetics, but again, that's likely due to lingering investor distrust of Onyx and the fact that carfilzomib in multiple myeloma is a bigger commercial opportunity than what Seattle Genetics has today with brentuximab.
Dan O. emails,
"What is happening to Avanir Pharmaceuticals (AVNR) . Is this normal for a stock to blow up after receiving approval from the FDA? Thank You!!"
Avanir shares are down about 20% since Neudexta was approved in late October for the treatment of the neurological condition known as pseudobulbar affect.
I'd call this sell off the "new" normal. Biotech and drug stocks have a tendency these days to run up into FDA drug approvals and sell off afterwards even if full approval is granted. That's a very common trading pattern, so be cautious if you're considering buying a biotech stock immediately after a drug approval. Waiting will often offer a more advantageous price.
With regards to Avanir specifically, the stock sold off because a post-approval stock offering was widely expected (and Avanir did just that in late November) plus there is considerable debate about the number of patients in the U.S. with PBA.
Without getting into the actual estimates, Avanir says the number is high, a lot of investors think the patient numbers are rather small, which means Avanir will more than likely need to pull off a strong Neudexta launch in order for the stock to recover and/or head higher than where it was right after the approval.
Don't forget to vote for the
. The nominees are Mitch Gold of
Dendreon
(DNDN)
, Leonard Bell of
Alexion Pharmaceuticals
(ALXN) - Get Report
and Kevin Gorman of
Neurocrine Biosciences'
(NBIX) - Get Report
.
One of these executives will serve as the opposite bookend to
Amylin Pharmaceuticals'
( AMLN) Dan Bradbury, who was voted this year's
.
--Written by Adam Feuerstein in Boston.
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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;
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