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(TheStreet) -- Happy Valentine's Day. I send my love to all biotech investors. Let's get this week's Biotech Stock Mailbag started.

Samuel L. writes:

I'm an InterMune (ITMN) investor hoping you can help clear up some of the recent confusion or controversy surrounding its IPF drug and that of the competitor [Boehringer Ingelheim.] Obviously, the market seems worried about it with the stock [InterMune] being down, but is that justified?

Let's take a look at the InterMune chart.

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ITMN data by YCharts

The sharp selloff on Jan. 31 was caused by an article from BioPharm Insight, a subscription-based research/news service catering to investment fund managers and hedge funds, reporting positive results from two phase III studies of Boehringer's idiopathic pulmonary fibrosis (IPF) drug nintedanib. Boehringer (BI) has not reported data from the nintedanib studies. Biopharm obtained the data from an unnamed source described as being "close to the situation."

I want to talk about InterMune's soon-to-be-completed phase III study of Esbriet, but first, is anyone else surprised by the leak of the BI nintedanib phase III data? This was not someone merely speculating about the study results. The level of detail reported suggests the source was a person inside BI with access to the nintedanib data, or one of a handful of outside study investigators who would have been briefed on the data by BI.

There is one other plausible explanation: An investor obtained the data from a BI employee or outside investigator and then shared it with Biopharm.

If you didn't get a chance to read the Biopharm story on the nintedanib data, here are the key paragraphs. The "he" is the unnamed source:

The pivotal INPULSIS1 and INPULSIS2 Phase III trials, with a combined total of 1,066 patients, produced identical and highly statistically significant results on its primary endpoint in annual decline of Forced Vital Capacity (FVC), the source said. Pooled data from both trials should also show positive data on secondary endpoints such as time to first acute exacerbation and respiratory mortality, he said.

Safety events were also negligible as the major side effect was diarrhoea, with 50% of patients experiencing at least one diarrhoea episode (compared to 35% in the placebo arm), and discontinuations due to this side effect was less than 5%, the source said. Discontinuations due to the drug was also very low, he added. These results are incredibly convincing from an efficacy and safety profile in IPF all comers, the source said. The data package will no doubt secure approval with two positive, well executed and adjudicated global Phase III trials, he said.

BI has been publicly silent in the wake of the nintedanib data leak, except for this tweet:

I've tried to get someone, anyone, at BI to explain what the hell happened, but the company isn't returning my phone calls or emails. In private conversations, the company is reportedly telling people the data from the nintedanib phase III studies won't be presented officially until the American Thoracic Society annual meeting in May. Until then, BI has no comment.

It's difficult to fully evaluate nintedanib until we see the actual study results, but the level of specificity disclosed in the Biopharm report strongly suggests the data are positive and that the drug works in IPF. Can you imagine the shit storm if the nintedanib studies are actually negative?

The nintedanib side effect profile from the phase III studies described by Biopharm is a bit of a head scratcher. Why are 35% of IPF patients treated with a placebo reporting diarrhea? Seems high. We know nintedanib causes higher rates of diarrhea and other GI side effects from the phase II study. Discontinuations due to diarrhea in the phase III studies described as being less than 5% by Biopharm is good considering the discontinuation rate in the phase II study was 12%. Does this make sense?

And if the nintedanib phase III studies are positive, why did BI start another phase III study last November using an unconventional primary endpoint?

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We'll have to wait until May for answers, unless more data leak.

Moving to InterMune, I'm bullish in that I believe the Esbriet phase III "Ascend" study will be positive and there's more upside than downside in the stock.

Recall, only one of the two phase III "Capacity" studies achieved the forced vital capacity (FVC) primary endpoint at 72 weeks with statistical significance. This led to FDA rejecting Esbriet. The Ascend study is InterMune's next shot at getting Esbriet approved in the U.S.

InterMune designed the Ascend study with knowledge of the mistakes made with the Capacity studies. Among the important changes: 1) More patients, better statistical powering, 2) 52 week duration instead of 72 weeks (Esbriet effect is stronger at 1 year); and 3) tightened enrollment criteria to capture patients with more progressive IPF and therefore more likely to benefit from Esbriet treatment.

Taken together, the design of the Ascend study increases the likelihood of Esbriet demonstrating a statistically significant benefit in FVC.

InterMune is expected to announce top-line results early in the second quarter.

After that, InterMune will present the full data from Ascend at the same ATS meeting where BI will present the nintedanib data. With all caveats about cross-trial comparisons recognized, we'll be able to judge which drug looks better. Neither of the drugs will work forever, so assume IPF patients will likely receive both at some point.

Pankaj A. writes:

I would like to know your thoughts on Ohr Pharmaceuticals (OHRP) . Do you think valuation is justified?

I'm not a fan of Ohr because I don't believe squalamine eye drops will be effective in treating "back of the eye" diseases like wet age-related macular degeneration (wet AMD).

A bit of history: Squalamine is an old anti-angiogenic drug first developed by Genaera as an intravenous treatment for wet AMD. Studies showed the drug to be inferior to intravitreal (into the eye) injections like Roche's Lucentis (and now Regeneron Pharma's (REGN) - Get Regeneron Pharmaceuticals, Inc. Report Eylea.) Genaera eventually went out of business. In 2009, Ohr acquired squalamine for $200,000 and reformulated the drug into an eye drop.

Ohr has been developing the squalamine eye drop ever since, claiming to have data demonstrating the drug can reach the retina where it's needed to block leaky blood vessels which cause the vision loss in patients with wet AMD.

Hmmm. Color me skeptical. If an anti-angiogenic eye drop were so easy to formulate and with billions of dollars in sales at stake, you'd think research powerhouses like Roche and Regeneron would have figured it out already or gobbled up Ohr. Neither has happened.

Medicinal eye drops are very effective for diseases that affect the front of the eye, but they have a difficult time getting to the back of the eye. Generally speaking, fluid flows from the back of the eye to the front, so an eye drop medicine needs to swim "upstream" to reach the back of the eye. Tough to do.

Ohr is not the first company to try. GlaxoSmithKline (GSK) - Get GlaxoSmithKline plc Sponsored ADR Report formulated its anti-angiogenic drug Votrient (pazopanib) into an eye drop and conducted a large phase II study in AMD patients using Lucentis and placebos as comparators.

The study failed. Improvements in visual acuity for Votrient eye drops were lackluster relative to Lucentis. Votrient eye drops were also unable to reduce the frequency of Lucentis injections by 50% -- a key criteria of success for Glaxo. As a result of the negative phase II study, Glaxo dropped the development of a Votrient eye drops.

The negative results from the Votrient AMD study bode poorly for Ohr's squalamine. Votrient is a real drug, approved for kidney cancer and sarcoma. Squalamine's clinical history is unimpressive by comparison.

Ohr's ongoing phase II study enrolls 120 wet AMD patients treated at Day 1 with Lucentis. The patients are then randomized to receive either squalamine eye drops or a placebo for nine months. Lucentis will be administered to patients on an as-needed basis.

The study's primary endpoint is 1) to determine if squalamine eye drops can reduce the number of Lucentis injections required; 2) delay the time to Lucentis pretreatment; and 3) visual acuity gains. The study is powered to detect a 1.5 Lucentis injection difference between the arms.

Interim data are expected in the second quarter.

Let's assume squalamine does reduce Lucentis injections by 1.5 over nine months. That implies a 2-injection reduction over a year. Is that clinically meaningful?

The most conservative dosing schedule on Lucentis' label calls for one injection per month, or 12 per year. In the real world, AMD patients are injected with Lucentis about eight times in the first year and five times in the second year, according to Genentech.

I'm sure Ohr will claim 10.5 injection of Lucentis per year instead of 12 (or 6.5 injections instead of 8) is a significant reduction in frequency, but it wouldn't have passed muster with Glaxo in the Votrient AMD study.

Ohr shares traded flat for the second half of 2013 but have doubled in value since the middle of January, mainly due to momentum investors and the bubble market for low volume, highly speculative biotech penny stocks.

The stock has been especially active this week because of Brean Capital analyst Jon Aschoff hyping a Feb. 19 presentation at the Macular Society Meeting in which a researcher is apparently presenting squalamine treatment data on five patients diagnosed with proliferative diabetic retinopathy. The title of the presentation includes the word "regression," which has Aschoff very excited.

Aschoff is the only analyst covering Ohr, which had $6 million in the bank as of June 30. He probably doesn't need to try so hard to get the banking business.

Mark O. asks:

Awhile ago, you criticized Ampio Pharmaceuticals (AMPE) - Get Ampio Pharmaceuticals, Inc. Report for not offering any details of their drug for knee arthritis. But Ampio just published the study and I have not heard anything from you on the subject. Did the company provide the level of information that makes you change your mind about them? Thanks for your time and consideration.

I wrote that column last November. And yes, I did lay into Ampio for touting the pain-relief efficacy of its osteoarthritis drug Ampion in multiple press releases but refusing to provide actual clinical data to back up their claims.

On Feb. 4, the Ampion "Spring" study was published in PLOS One, the open-access science journal. The PLOS One paper answers some of my questions about Ampion but raises others. Let's go through it.

It's wise to start with a look at the authors. In this case, the Spring study paper was written by Ampio employees, Chief Scientific Officer David Bar-Or and Chief Regulatory Affairs Officer Vaughn Clift. They're hardly objective. Two of the Spring study's non-Ampio authors, Drs. Matt Phillips and Brian McGrath, own stock or stock options in Ampio.

On Aug. 14, Ampio issued a press release announcing the Ampion study achieved its primary endpoint [reduction in knee pain] with "high statistical significance." Both the 4 ml and 10 ml doses of Ampion provided osteoarthritis patients with pain relief but there was no "significant difference" between the efficacy of the two Ampion doses, the company said.

Ampio, in its Aug. 14 press release also said, "Patients receiving Ampion achieved a significantly greater reduction in pain (WOMAC A) from baseline to 12 weeks compared to saline vehicle control (p=0.0038)."

Here's how the results of the study are described in the PLOS One paper:

LMWF-5A [Ampion] resulted in a statistically significant improvement in pain as compared to vehicle control (-0.93 vs -0.72, respectively). An injection volume effect was not observed (p = 0.64). The estimated difference from control was -0.25 (95% CI: 20.08 20.41), p= 0.004.

According to my calculator, the difference in pain relief between -0.93 (Ampion) and the study control (-0.72) is -0.21, not -0.25.

I don't know if the difference between -0.25 and -0.21 changes the outcome of the Ampion study, but the credibility of the published paper falls when an obvious math error makes it through the data analysis, writing and review processes. [See my comments about the financial conflicts of study authors above.]

The lack of an "injection volume effect" refers to there being no difference in pain reduction between the Ampion 4 ml and 10 ml doses. Ampio claims a win on the Spring study primary endpoint by pooling data from the 4 ml and 10 ml doses of Ampion compared against placebo. Was that allowed, per the study's protocol and statistical analysis plan?

Not clear.

A copy of the Spring study protocol dated May 15, 2003 (available on the PLOS One web site) describes the primary endpoint as assessing the difference in pain reduction between 4 ml Ampio and 4 ml placebo and 10 ml Ampion and 10 ml placebo. There is no mention of pooling data on doses to assess the primary endpoint.

But there's also a separate statistical analysis plan dated Aug. 8, 2013 (also available via PLOS One) which includes pooled Ampion dose data as a part of the primary endpoint analysis.

Ampio completed the Spring study in June 2013 and announced results on Aug. 14. Does this mean the statistical analysis plan was implemented after the study was completed and days before the results were announced? Strange.

From the PLOS-One paper, here's what the pain reduction endpoint on the pooled Ampion doses looks like graphically:

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Notice there's no statistical difference between Ampion and placebo at 10 weeks. Only a sharp uptick in the pain scores for placebo patients between weeks 10 and 12 saves the day for Ampio and turns the study positive. The ability of Ampio to reproduce this result in the second phase III study -- not yet completed -- should be a concern.

The PLOS-One paper does break out response by Ampion dose. There doesn't appear to be a dose response, meaning the 4 ml Ampion works better than the 10 ml Ampion. No explanation for why that may be so. The paper also does not include statistics for the individual doses, so it's not clear if 4 ml Ampion, on its own, is statistically superior to placebo.

Ampio claimed both doses of Ampion on their own were statistically significant in a Nov. 4, 2013 press release. But if that's true, why not mention in the published paper?

The baseline characteristics of patients enrolled in the Ampion study resemble those enrolled in the Sanofi (Genzyme) study of Synvisc which formed the basis for that drug's approval. The Ampion study also enrolled a group of patients with more severe osteoarthritis. Last November, I wondered about the discontinuation rate in the study but the PLOS-One paper shows dropouts were minimal. All points to Ampio.

Before Ampio conducted the Spring study, a smaller study of Ampion was run in Australia. That study, using the same pain reduction endpoints, failed, according to the Spring study protocol:

Efficacy: Overall pain (as assessed by the pain numerical rating score) and WOMAC scores were reduced post-dose for each of the treatment groups for the duration of the study (p < 0.05), except placebo at Day 84. There were no statistically significant differences between changes from baseline in pain NRS or WOMAC scores for patients who received Ampion (with betamethasone/lignocaine or with betamethasone/saline) compared with patients who did not receive Ampion (saline with betamethasone/lignocaine) and between patients who received Ampion compared with patients who received saline.

Why worry about an old study conducted in Australia? Because in two press releases dated Jan. 31, 2012 and April 30, 2012 Ampio said results from the Australia study of Ampion were positive.

Ampio justifies calling the Australian study a success by using patients treated with Ampion as their own control i.e.. comparing pain scores at baseline and later in the study. The real analysis compared Ampion to placebo and found no difference.

Spin baby, spin!

We wait for the results from the next Ampion phase III study.

-- Reported by Adam Feuerstein.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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