Biotech Stock Mailbag: Amarin, MannKind, Palatin

BOSTON ( TheStreet) -- This week's Biotech Stock Mailbag:

I need to elaborate on a point about Amarin ( AMRN) I first made Tuesday on Twitter.

It didn't take long for responses to roll in...

No, I'm not.

Nope. I mean FDA will reject Vascepa for the "Anchor" mixed dyslipidemia indication. There will be no approval in December or earlier.

Thank you.

And if FDA rejects Vascepa for the "Anchor" indication -- as I believe the agency will do -- my "brass ones" will take on a high-gloss shine, right?

FDA will reject Vascepa for the "Anchor" indication because Amarin lacks clinical data demonstrating a cardiovascular benefit for its prescription-grade fish oil in this mixed dyslipidemia population. There is no urgent or unmet medical need for these people, but there is considerable doubt raised by recent published studies showing fish oil does nothing to reduce death, heart attacks or strokes.

FDA can ill afford a repeat of the niacin situation in which a heart drug ( Merck's ( MRK) Tredaptive) is approved based solely on an improvement in a laboratory measurement. Then, years later, the drug is found to have no real clinical benefit.

Amarin wants FDA to approve an expansion of Vascepa's label to cover the treatment of 36 million Americans with mixed dyslipidemia. These are people already on cholesterol-lowering statins but who still have moderately elevated levels of triglycerides, a fatty substance found in the blood.

Right now, Amarin has zero data proving these patients benefit from taking a prescription-grade fish oil like Vascepa. The company's FDA submission is based on a phase III study dubbed "Anchor" showing reductions in measurements of triglycerides and "bad" cholesterol. That's not enough. FDA has no incentive and is under no pressure to approve Amarin's application without data demonstrating real clinical benefit. A Special Protocol Assessment (SPA) agreement between Amarin and FDA for the "Anchor" study does not compel the agency to approve Vascepa.

The wait for more definitive Vascepa outcomes data is not too long. Amarin's 8,000 patient "Reduce-It" study is expected to complete in 2016 and is designed to determine whether the addition of Vascepa to statin therapy reduces the risk of death or other major cardiovascular events like heart attack and stroke. If in two years Amarin demonstrates Vascepa significantly improves survival or reduces the rate of heart attacks and strokes in mixed dyslipidemia patients, then FDA will approve an expansion of the drug's label. If not, FDA won't need to waste its time.

I emailed Dr. Steve Nissen, well-known Cleveland Clinic cardiologist, to ask his opinion. Should FDA approve Vascepa for mixed dyslipidemia based solely on the data from the "Anchor" study?

Nissen's response:

Adam, I strongly oppose approval of fish oil for treatment of mixed dyslipidemia in the absence of outcome data. To date, all of the contemporary studies of fish oil have failed to show a cardiovascular benefit. The FDA should wait until the REDUCE IT trial is completed before considering this application. Similarly, physicians should not prescribe fish oil products except for the few patients with triglycerides about 500 mg/dL. Unfortunately, the prior fish oil products did not conduct any outcome trials, leaving the medical community with many questions, but no answers. We should not make the same mistake a second time.

I couldn't agree more, Dr. Nissen. And I believe FDA feels the same way. We'll know for sure in December.

An email from Tim:

You have recently written about the predicted failure of MannKind (MNKD) and its shares. You even used some diabetes "expert" to further your views. But, itseems you failed. The shares have exploded in the last 2 1/2 months. I suspectyou have lost a lot of relevance (assuming you had some at some point). $1.75Billion now.

Tim is correct, MannKind's stock price has increased dramatically. Here's a three-month chart comparing MannKind to the Nasdaq Biotechnology Index: ^NBI Chart ^NBI data by YCharts

MannKind's market value is now closer to $2 billion, making the stock even more over-valued than it was three months ago.

Tim mis-labels the speculative bubble in MannKind's market value for confirmation that the company's inhaled insulin product will be a commercial success. Sorry Tim, you've got it all wrong.

I'm certainly not surprised to see MannKind's stock price rise ahead of the Afrezza study results in August. This is a classic run-up, turbo-charged by the biotech bull market and retail investors' cultish adoration for Al Mann.

I called it last April, when I said to expect MannKind shares to trade higher:

Sure enough, the run up into the Afrezza data is under way, with MannKind shares closing in on $4. Enterprise value is now a ridiculously high $1.2 billion. Stupid but no surprise given the retail investor cult still worshiping at the feet of company founder Al Mann.

The MannKind bear thesis stands.

Ed S. emails:

"I wanted to get your thoughts on Palatin Technologies (PTN). Looks like they are going to phase 3 with their female sexual dysfunction drug. Thoughts? I think the stock is way undervalued due to its potential. Plus, I see no competitors in sight."

Palatin is developing bremalanotide for the treatment of female sexual dysfunction (FSD) -- a potentially lucrative and untapped commercial market but one that's also caused major headaches for Procter & Gamble ( PG) and BioSante. Let's take a closer look at Palatin's effort.

Three different doses of bremalanotide were compared against a placebo in a phase IIb study enrolling 397 premenopausal women with a diagnosis of FSD. You can download a poster of the study results.

Here's a schematic of the study design. Note the at-home, self-dosing part of the study is 12 weeks long. This will be important later on.

The primary efficacy endpoint of the study is described this way on the poster:

The primary efficacy endpoint was each subject's change, from DB double blind baseline to end of study (EOS), in the number of satisfying sexual events (SSEs) during the 28 days preceding these time points, as recorded by a response of "Yes" to item 10 of the Female Sexual Encounter Profile -- Revised questionnaire (to be completed at home within 24 hours after each sexual encounter).

Let me explain in simpler terms. Before the study begins, the women are asked to record the number of times they have satisfying sex over the course of a month. The women are then randomized to receive one of three doses of bremalanotide or a placebo. The women don't know which treatment they are receiving. During the third month of self dosing at home, the women are again asked to record the number of times they have satisfying sex. The study's primary endpoint measures the change in the amount of satisfying sex experienced by the women participants from baseline to the end of the study.

Here's where Palatin starts to run into trouble.

According to the poster, 397 FSD patients were randomized into the study. This makes up the intent-to-treat patient population, but...

Among randomized subjects, 327 completed one month of double blind study-drug use at home (composing the modified intent-to-treat mITT population), and 287 completed the study...

When analyzing any clinical trial results, it's important to keep track of the number of patients enrolled and any changes to that number. Companies often like to exclude patients to make their data look better. That's what Palatin tries to do in the phase IIb study: 397 patients were enrolled and randomized, but only 287 patients, or 72%, completed all three months of at-home dosing. Then, Palatin slips in a "modified intent-to-treat" population of 327 patients who only completed one month of at-home dosing.

Guess which group of patients Palatin chooses to assess bremalanotide's efficacy?

This chart displays the mean change in sexually satisfying events (SSE) from baseline to end of study:

Did you see the big red flag waving? Count the "Ns" representing the number of patients in this analysis. 91+85+75+73=324 patients, which is the mITT patient population, with three patients missing. Also notice that even at the highest bremalanotide dose, the mean change in the number of sexual satisfying events is a paltry 0.6, net the placebo effect.

Palatin designed the study to measure bremalanotide's effect on sexually satisfying events after three months of at-home dosing. We should have been provided data on the 397 patients enrolled and randomized, or the 287 patients who completed the study. What Palatin gives us, instead, is a post-hoc concoction of patients treated with bremalanotide or placebo for only one month.

Why? Palatin doesn't say, but it's safe to assume the analysis of the study's pre-specified primary endpoint was negative. Palatin tries to pass off an irrelevant efficacy analysis as the real deal, but of course, we're all smarter than that.

Bremalanotide needs to be injected approximately 45 minutes before a woman wants to have sex. That's not exactly the hottest form of foreplay, which helps explain why so many women chose not to complete three months of at-home dosing.

Palatin intends to move bremalanotide into phase III studies. I'm not optimistic for a positive outcome.

Chris K. writes:

"Hey Adam, can you comment on Immunomedics (IMMU)? I haven't seen a lot of recent articles on the stock and I'm trying to decide if this stock is a good buy at these levels."

Immunomedics was founded in 1982 and is run by the husband-and-wife team of David Goldenberg and Cynthia Sullivan. They each make more than $1 million annually but over 31 years, Immunomedics has not come close to developing a drug successfully. Epratuzumab, an anti-CD 22 monoclonal antibody, has been the company's lead drug for more than two decades. Amgen actually licensed epratuzumab in 2000 but gave the drug back three years later.

Today, UCB is developing epratuzumab in lupus under a license from Immunomedics. Two phase III studies are underway with top-line results expected in the first half of 2014. Epratuzumab phase II data in lupus were mixed. Speaking to institutional investors, I hear a lot of skepticism about epratuzumab in lupus because the drug doesn't really look any better than the currently approved lupus drug Benlysta. GlaxoSmithKline ( GSK) paid too much for Human Genome Sciences and Benlysta has been a big commercial disappointment.

On its own, Immunomedics is pursuing development of epratuzumab coupled to a radioactive payload in several lymphoma indications. Unfortunately, radio-labeled monoclonal antibodies have been an impossible sell ( Spectrum's ( SPPI) Zevalin.) Even worse for Immunomedics, the lymphoma sandbox is dominated today by Pharmacyclics' ibrutinib. Roche ( RHHBY) is also developing an antibody drug conjugate through a license from Seattle Genetics ( SGEN), targeting the same lymphoma indications. This week, Pfizer ( PFE) shut down development of an anti-CD 22 monoclonal antibody drug conjugate due to lack of efficacy. Immunomedics lacks the financial resources and the drug development expertise to compete.

Immunomedics is developing another radio-labeled monocolonal antibody, clivatuzumab, in pancreatic cancer. We're supposed to see phase Ib data in July.

I wrote this about Immunomedics almost four years ago:

At $3 and with an enterprise value under $200 million, Immunomedics isn't an expensive stock and I guess you can make a viable argument that the stock is undervalued given the phase II and phase III status of its drugs. (This is the bull case made by the analyst at Brean Murray Carret. She has a buy and an $8 price target on the stock.)

Today, Immunomedics is a $3 stock with an enterprise value of $150 million. Not exactly a lot of progress made in four years.

-- Reported by Adam Feuerstein in Boston.

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; click here to send him an email.

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