BOSTON (TheStreet) -- This week's Biotech Stock Mailbag discusses three stocks that I like: Receptos (RCPT) , Celldex Therapeutics (CLDX - Get Report) and Exact Sciences (EXAS - Get Report) . That's never happened before. Call it a Brief Era of Good Feeling.
Receptos' ozanimod is superior to Novartis' (NVS) Gilenya. That's a sweet spot for Receptos since Gilenya is a $2.6 billion-a-year oral treatment for multiple sclerosis. Receptos is conducting phase III studies of ozanimod, also administered as a pill, in multiple sclerosis right now. The wait for results requires some patience -- end of 2016 or early 2017 -- but a positive outcome is likely. If the phase III studies are successful and Receptos secures approvals for ozanimod in multiple sclerosis, the drug could match or surpass Gilenya sales.
TheStreet's Jim Cramer also calls Receptos "one of the most exciting speculative biotech companies he's ever seen," adding in a column on Real Money that it's a company an acquirer such as Johnson & Johnson (JNJ) should consider buying.
From that $2 billion-$3 billion revenue baseline in multiple sclerosis, ozanimod can grow larger, unlike Gilenya. At a European medical meeting last weekend, Receptos presented strong phase II data on ozanimod in ulcerative colitis, a serious form of inflammatory bowel disease. Receptos is starting phase III studies later this year. Ozanimod's efficacy in ulcerative colitis looks equal to the injectable biologics -- Simponi, Humira, Entyvio -- currently approved to treat the disease. Unlike injectable therapies, ozanimod is a pill. Patients prefer pills over shots.
This chart, created by Receptos, compares the ozanimod phase II ulcerative colitis data to the phase III data of currently approved injectable biologics:
Inflammatory bowel disease is a $7 billion-a-year market, including about $2 billion contributed by ulcerative colitis. Crohn's disease makes up a majority of IBD drug sales, and yes, Receptos is running phase II studies in Crohn's as well.
With Receptos, you get a lead drug ozanimod which could generate $5 billion to $6 billion in peak sales from multiple sclerosis and ulcerative colitis for a current market value of $3.3 billion. That's a favorable risk-reward except for time. None of this happens tomorrow, which turns off many short-term investors.
For upside, think about a scenario where ozanimod is equivalent or better than Biogen Idec's (BIIB - Get Report) Tecfidera? And what if ozanimod benefits Crohn's patients? Ozanimod could be a monster-sized drug.
Here's one more chart from last weekend's ozanimod ulcerative colitis presentation showing minimal effect on heart rate following first dose. Recall, Gilenya reached blockbuster status even though its label carries a warning against slowing heart rate, which forces doctors to monitor patients for at least six hours after the first dose.
Burt R. asks, "Can you talk about the impact of Breakthrough Therapy Designation on Celldex Therapeutics? I understand this is good news but less sure if it increases the chances for getting the [brain tumor] drug approved."
For those who missed the news from earlier this week, the U.S. Food and Drug Administration granted Breakthrough Therapy Designation to Celldex's rindopepimut for the treatment of patients with EGVRvIII-positive glioblastoma, an aggressive form of brain cancer. Celldex also tagged rindopepimut with the brand name Rintega.
The simple answer to your question is yes, Rintega's odds for FDA approval are improved with breakthrough designation. What I like best about the news is that Celldex filed for breakthrough designation after a meeting with FDA to share the positive, interim results from the Rintega "ReAct" phase II study in recurrent glioblastoma patients. The FDA's affirmative decision on the breakthrough request suggests regulators were encouraged by the ReAct data and will be more amenable to accept and review Rintega for accelerated approval.
A lot of things need to go right first, but you can put together a plausible scenario under which Rintega is approved in the middle of next year. That's potentially huge for Celldex.
I wrote about the positive, interim results from the ReAct study last November when the data were presented. Rintega plus Avastin significantly delayed tumor progression and prolonged overall survival compared to Avastin alone. The patients enrolled in the study has recurrence of EGVRvIII-positive glioblastoma but had not yet been treated with Avastin.
Celldex designed the ReACT study to be exploratory, meaning it wasn't intended to be strong enough to support a Rintega regulatory filing. But as recounted on its conference call Tuesday, Celldex met with FDA to share the interim Rintega ReAct data and begin discussions on the possibility of using the study as the basis for a regulatory filing.
Celldex's Chief Medical Officer Tom Davis:
First, we have been in initial and formal discussions with the FDA, which led to our decision to apply for Breakthrough designation. We believe the FDA's decision to grant this designation underscores Rintega's therapeutic potential for patients with glioblastoma and speaks to the potential clinical relevance of this particular subset. We have been very candid about the fact that bevacizumab [Avastin] naïve group within ReACT was not designed to be an approval study, but given the dearth of treatment options for patients facing this disease and a statistically significant survival benefit the study demonstrated at the interim, with the urging of our investigators, we feel that we have an obligation to patients to formally discuss the final data set with the regulators assuming that it remains consistent.
Final results from the Rintega ReAct study will be ready for presentation in June at the annual meeting of the American Society of Clinical Oncology (ASCO). If the interim results hold up, Celldex will go back to FDA and seek permission to submit Rintega for accelerated approval in recurrent glioblastoma, supported by the ReAct study results.
If FDA says yes (and the granting of breakthrough status suggests the agency is already leaning in that direction), Celldex could probably complete an FDA submission in early 2016. Historically, FDA reviews breakthrough status drugs with alacrity, which means Rintega could be approved in the middle of 2016. If you want to be more conservative, maybe approval happens in the third quarter. Regardless, Rintega makes it to the market much faster than most people ever expected.
The ongoing phase III "ActIV" study of Rintega in newly diagnosed glioblastoma patients (enrollment complete) could serve as the required confirmatory study to backstop the accelerated approval.
Celldex executives couldn't speak with me this week to confirm (or throw cold water) on my bullish Rintega scenario because they were on lockdown finalizing a follow-on public offering of 7.25 million shares at $24 per share. The sale nets the company $164 million, which could balloon to more than $200 million if the over-allotment is sold.
At the risk of sounding too optimistic (and so unlike my normally skeptical self), Celldex had a great week with breakthrough and the successful stock offering. The middle of the year will be super busy with the final ReAct data, a go/no-go interim analysis from the Act IV study and the FDA meeting on an early Rintega filing. There's a lot to like about Celldex and I didn't even mention the rest of the company's cancer immunotherapy pipeline. I'm loathe to praise a New York Giants fan (and a Patriots hater), but Celldex CEO Anthony Marucci is on a roll.
FKSimmons writes, "What's behind today's big drop in Exact Sciences?"
"Today" was Tuesday. Exact Sciences fell by as much as 16% intraday because company executives, speaking on a quarterly conference call, disclosed first-quarter Colguard colon cancer test volume lower than Wall Street expectations.
Through the first seven weeks of the current quarter, Exact Sciences' lab processed more than 5,200 Cologuard test results. The company said it expected Cologuard test volume to exceed 10,000 at the end of the quarter, but Wall Street analysts were modeling volume in the range of 14,000 to more than 20,000 tests. [Note: Exact Sciences has not provided guidance on Cologuard test volume.]
On its call, Exact Sciences said 6,300 doctors ordered a Cologuard test for patients through the middle of February compared to 4,000 doctors at the end of 2014. Compliance rate, defined as Cologuard tests delivered to patients and returned for analysis, was 75% in the fourth quarter, meeting the company's target.
The Cologuard launch is still in the early stages, but at least on Tuesday, investors freaked out a little over concerns that doctors and patients might be slower to adopt a colon cancer diagnostic test which requires a stool sample to be collected and mailed back for genetic analysis.
Not that you asked for my opinion, but I don't share the worry, mainly because a slow Cologuard launch shouldn't be a surprise. Cologuard is a remarkably sensitive colon cancer screen, especially for the detection of pre-cancerous lesions, but overcoming the "ick" factor was always going to be a challenge. On that front and so early in the launch, a 75% compliance rate, increasing numbers of prescribing docs and growing test volume is encouraging.
Exact Sciences concedes much work remains to be done on reimbursement. Cologuard is gaining traction from Medicare patients following last year's favorable recommendation and pricing decision but private payers are still negotiating with the company to cover Cologuard. Medicare represents about 43% of patients in the Cologuard target market, with commercial insurers the next largest bucket at 40%.
Winning reimbursement and coverage from private payers, like test volume, will be an overhang on Exact Sciences until proven otherwise.By the end of the year, the U.S. Preventive Services Task Force is expected to complete a review of Cologuard and issue a recommendation about its use as a colon cancer screening diagnostic. If the USPSTF grants Cologuard an A or B rating, private insurers will be required to cover the test under Obamacare regulations.
Next week, back to biotech stocks I hate!