Biotech Notebook: Vertex, Medarex

Why telaprevir dosing is key for Vertex; where in the world is Medarex CEO Howard Pien; what updates to look for in biotech earnings; and more.
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(Editor's note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

Second-quarter earnings are right around the corner. My colleague Elizabeth Trotta is compiling a complete

second-quarter earnings preview

, so please read it for all the details, including consensus expectations.

Generally, big-cap biotech earnings should be strong this quarter. As always, investors want to see strong top- and bottom-line growth. This is also the time of year when fast-growing biotech companies are expected to raise financial guidance, so look for that, too.

Here's a quick take on the key issues facing each of the big-cap biotechs heading into earnings season:

  • Genentech (DNA) : Investors will be watching Avastin sales for the quarter for signs of strong uptake with metastatic breast cancer patients.
  • Amgen (AMGN) - Get Report: With denosumab osteoporosis data expected later in the quarter, the focus now will be on the anemia drug franchise. Have Aranesp sales stabilized? What is the risk that further restrictions will hit sales once again? Also pay attention to any discussion about strategic plans to market denosumab. Will Amgen partner the drug to reach general practice doctors?
  • Biogen Idec (BIIB) - Get Report: We're right on top of the two-year anniversary of the Tysabri re-launch in multiple sclerosis, so a safety update on the drug will be key. Have there been any new, confirmed cases of the deadly brain infection PML?
  • Gilead Sciences (GILD) - Get Report: Prescription-tracking data have suggested a flattish quarter for the company's HIV drug franchise, so a lot of attention will be paid to the final top-line sales figures. Consensus top-line estimates for the year are already well above the company's guidance, so a boost to that guidance by management would be well received, if not expected.
  • Celgene (CELG) - Get Report: Revlimid, Revlimid, Revlimid, especially the cancer drug's performance in Europe. What will management say about Vidaza sales for the rest of the year given the setback with its chief competitor, Dacogen?
  • Genzyme (GENZ) : The company previously reduced earnings guidance for the year, due to the delay in approval for the new Myozyme manufacturing plant. The focus will be on stronger-than-expected top-line growth for the key enzyme replacement therapies.

The next meaningful update in the race to develop new drugs from hepatitis C should come soon from

Vertex Pharmaceuticals

(VRTX) - Get Report

.

Vertex and partner

Johnson & Johnson

(VRTX) - Get Report

are running a pilot study to determine whether its drug telaprevir can be dosed twice daily with the same efficacy and safety as the current three-times-per-day regimen.

Obviously, less-frequent dosing is more convenient for patients. If telaprevir can be administered twice a day, it will help Vertex fend off competition from other hepatitis C drugs in development that can be dosed once- or twice-daily.

This telaprevir dosing study closed patient enrollment in March, so an interim analysis of 12-week on-treatment results should be available soon.

Effective Aug. 11, the U.S. Food and Drug Administration is changing the way it responds to new-drug applications, which means investors will see different language from companies when drugs are not approved.

The FDA will no longer issue "approvable" or "non-approvable" letters when a drug application is not approved. Instead, the agency will issue a "complete response" letter to let a company know that a drug review is complete but the drug in question is not ready for approval. The complete review letter will outline the steps required by the company to get the drug ready for approval.

There will be no change for drugs deemed ready for approval; in these cases, the FDA will continue to issue "approval" letters.

It remains to be seen how companies will choose to communicate the contents of complete response letters to investors. In the old system, an approvable letter could be a relatively insignificant event (i.e., if full approval is contingent only on final drug-labeling discussions), or it could signal a lengthy delay (i.e., if the FDA wants to see more clinical data or asks for an entirely new clinical trial).

A non-approvable letter is akin to the FDA rejecting a drug, so clearly, that's a bad thing.

With any hope, companies will do the right thing and disclose the details or contents of the FDA's complete response letter. If not, investors may be left in the dark.

JP Morgan analyst Geoff Meacham cut short an ongoing series of biotech CEO/CFO conference calls he was holding on a regular basis. Upcoming question-and-answer sessions with Celgene COO Bob Hugin and

Medarex

(MEDX)

CEO Howard Pien have been cancelled.

Hugin is a fixture on the investor conference circuit and is generally widely accessible, so not hearing from him isn't a big deal. Not so with Pien, who has been almost invisible since taking over the top job at Medarex in May 2007. The man is vapor, like Dick Cheney in his undisclosed location.

Pien has laid low while Medarex's stock price -- down 50% over the last year -- wallows in the mire. It appears that CFO Chris Schade actually runs the company; what Pien does is anyone's guess. Seemingly, not much.

My rant does have a point, and it's this: My friend and former colleague Herb Greenberg used to have fun running an annual contest to name the worse CEO of the year. Greenberg no longer runs in media circles, so his contest-running days are over.

So, I'll pick up the slack. Pien is definitely a contender for worst biotech CEO of the year. If you have any suggestions, email them to me. I'll gather all the candidates and in December, I'll choose a winner. Or, is that loser?

Eli Lilly

(LLY) - Get Report

bought

SGX Pharmaceuticals

(SGXP)

for $3 a share Tuesday. SGX went public in 2006 at $6 a share.

Bristol-Myers Squibb

(BMY) - Get Report

purchased

Kosan BioSciences

in May for $5.50 a share. Kosan went public in 2000 at $14 a share.

Stiefel Labs

bought

Barrier Therapeutics

(BTRX)

in June for $4.15 a share. Barrier went public in 2004 at $15 a share.

If there's a lesson here, perhaps it's not to buy into biotech IPOs. Luckily, with market conditions the way they are, there aren't many (or any) of those around.

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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to send him an email.