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MarketFest, I had the same uncanny ability to sell at/near a bottom. Looking back, with my previous "bet the farm" approach, the only thing that saved me from total annihilation was - a) nervously taking profits as soon as I got them, b) nervously staying out prior to binary events, and c) nervously staying in cash most of the time :o) Other than that I would have quickly lost all my money (I still managed to lose a lot outside of the bio sector).
If one looks at how things are currently shaping up -
1) Global Neurodegenerative rights reassembled - On the plus side, Cortex was able to (somehow) reassemble these rights. That's the good part. The bad part is that this key property, what we once called Cortex's "crown jewels", will soon be sold off in a firesale due to Cortex's increasingly desperate need for cash. $5-10 mil for the crown jewels, including the high impact platform, man this wasn't the outcome I expected when I started following Cortex.
2) The probable demise of CX-717. I'm starting to figure this into my "most likely" scenario. A resurrection is not impossible, but barring a some sort of miracle, CX-717 is most likely dead for ADHD. The dosing restrictions might give it a shot at partnering for AD, but with the Neurodegenerative rights being dealt away soon anyway, tossing a crippled CX-717 into the deal probably won't improve the terms all that much.
3) Non-Ampakine in-license - Try as I may to warm up to this idea, the bottom line is that going this route morphs the company into something I'm not that interested in. I can find other small bio investments without taking on the huge risks of the neurological sector. For better or worse, my interest in Cortex has always centered on their Ampakine platform.
Daviddal, I'm with you on the Israeli company theme (I figure if you can't beat'em, then join'em) :o) There's actually an Israeli Stock Index fund coming out this week. While it doesn't include the small biotechs that you're looking for, it does provide exposure to Israel's broader technology sector, which is booming. The 15 component stocks in this index are - Teva, Check Point Software, Nice Systems, Ormat Technologies, ECI Telecom, Orbotech, Syneron, Given Imaging, Radvision, Alvarion, Audiocodes, Taro Pharmaceuticals, Radware, Alladin Knowledge, and Orckit Communications.
>>> THE PHILADELPHIA STOCK EXCHANGE (PHLX) AND HAPOALIM SECURITIES USA, INC. ANNOUNCE LAUNCH OF THE HAPOALIM AMERICAN ISRAELI INDEXTM (HAISM)
THE INDEX WILL INCLUDE LEADING ISRAELI HIGH-TECH AND
BIO-PHARMACEUTICAL COMPANIES
For more information, contact Barbara Sorid at 215-496-5200 or by e-mail
Component Issues and Contract Specifications
PHILADELPHIA - December 5, 2006 – The Philadelphia Stock Exchange and Hapoalim Securities USA, Inc. announced today the launch of the Hapoalim American Israeli IndexSM (HAISM). HAI is expected to begin trading on Wednesday, December 13, 2006, and will be launched with an opening bell ceremony at the PHLX on that day.
Hapoalim Securities USA, Inc. is a subsidiary of Bank Hapoalim B.M., Israel’s largest bank, whose assets exceed $60 billion.
The Hapoalim American Israeli Index™ (HAISM) is an equal dollar weighted index consisting of 15 highly capitalized Israeli companies that trade significant volumes of ordinary shares or American Depository Receipts (ADR) in the U.S. HAI contains companies that have significant market capitalization and are actively traded and include technology and bio-pharmaceutical companies which account for a major portion of international trade.
Susquehanna Investment Group (SIG) will act as the specialist.
“We are pleased to partner with Hapoalim Securities USA, Inc. on the launch of this important new sector index that reflects the growth prospects of the Israeli economy," said Daniel R. Carrigan, PHLX’s vice president of new product development. “HAI demonstrates PHLX’s international reach for retail and institutional investors who seek multiple asset classes traded on one platform.”
Zvi Furman, manager of Bank Hapoalim’s U.S. operations, said: “The Hapoalim American Israeli Index represents an exciting new way for investors to take part in the ongoing success of Israel’s leading high-tech and bio-pharmaceutical industries. Israeli companies have long been represented on U.S. stock exchanges. Bank Hapoalim is now proud to offer this unique Index, providing investors with the opportunity to gain additional access to the leading sectors of the Israeli economy.”
In addition to being Israel’s largest bank, Hapoalim operates globally and is active in major financial centers in Europe, North America and Latin America, focusing on private banking and trade, corporate and syndicated financing. Bank Hapoalim USA has been serving corporate and private lients in the United States for 30 years.
The Philadelphia Stock Exchange was founded in 1790. The PHLX trades more than 7,000 stocks, 2,308 equity options, 16 sectors index options and currency options. For more information about the PHLX and its products, visit www.phlx.com. <<<
FWIW, I just added 2 more names to my long term virtual bio portfolio, both in the drug development services segment - 1) Covance (CVD), a large player (similar to Quintiles), and 2) Bio-Imaging Technologies (BITI), who provide medical image analysis for clinical trials (analysis of xray, MRI, PET scan images, etc). These guys are still very small, but they are already the world's largest independent/dedicated provider in this rapidly growing area. They also have a medical software business. In Q3 they generated revenues from 223 projects for 100 bio/pharma clients. The FDA is now requiring bio/pharma companies to use a commercial core provider like Bio-Imaging for image analysis, instead of the previously used cooperatives (groups of academic experts). In fact, the FDA recently rejected some Avastin image data because it wasn't analyzed by a commercial core provider like Bio-Imaging. Covance holds an equity position in Bio-Imaging. This looks like a promising area, and one that fits in perfectly with a diversified lower risk "picks and shovels" type approach toward bio investing. The company had a presentation at the recent Montreal Conference.
Ombow, As we know, Lilly and Glaxo both have AMPA upregulation programs (Lilly for many years), so either one of them could logically want to control/have access to the Cortex/UCI broad IP rights. Both companies are challenging the Cortex/UCI broad use patent in Europe (Lilly for a second time). With the Neurodegenerative rights reassembled, a deal would make a lot of sense from either BP's perspective. We now know that Aventis is also sniffing around the AMPA sandbox, based on their recent AMPA upmodulation related patent activity. Also, Cortex's high impacts come from a totally different chemical family, and as we've seen the other 2 main competing families have had toxicity problems.
If a Neurodegenerative deal happened tomorrow, or even a deal to buy all of Cortex, that should really come as no surprise to anyone, since it would only be logical. What is illogical is that Lilly didn't already do it several years ago.
Fearfrost, I only just heard about the company today, so for now I would consider it an entertainment type stock - to watch as it either soars or blows up over the next few weeks. To bet real money, one way is to just wait until after the binary event is over before considering a position. You miss the initial pop, but with the company's future then assured, the stock should theoretically continue to do well over the long haul. In Northfield's case though, even if things go well with the Phase 3, there is still the long wait for FDA approval, which will be another nail biter. IMO as a reformed bio-gambler, binary events should generally be avoided. They're fun to watch though :o)
Dew, board, Northfield -- Here's an interesting play for all you bio gunslingers and crazed bio-kamakazee pilots out there :o) I posted this on the Cortex board but thought it might also generate some discussion over here, since someone mentioned Northfield in a recent post -
Northfield (NFLD) - This company presented at the recent Montreal Conference. They have a blood substitute called PolyHeme which looks interesting (yes this has been a bio graveyard, but it is a critical unmet area), with the Phase 3 results due by the end of the month. A problem with previous approaches is that when naturally occurring hemoglobin tetramers circulate freely through the bloodstream (outside of the red blood cells where they are normally contained), severe organ dysfunction results. What Northfield does is to first lyse/open up the red blood cells, thus allowing the hemoglobin molecules to escape. Then they polymerize the natural small hemoglobin tetramers, forming larger molecules (these larger polymerized hemoglobin groupings do not cause organ dysfunction). Then they go through a purification process which removes the remnants of the lysed red blood cell walls (the part of donated blood that causes not only transfusion incompatibility, but also the short shelf life of donated blood). The purification process also removes any viruses that were in the blood, along with any unpolymerized hemoglobin tetramers.
So PolyHeme consists of polymerized hemoglobin molecules. The shelf life is in excess of a year, vrs 42 days for normal donated blood. And there is no incompatibility problem since the cell walls of the red blood cells aren't present - so PolyHeme can be given immediately to trauma/blood loss patients without having to first test them for blood type (which otherwise takes close to an hour). PolyHeme can be given right at the trauma scene.
The 720 patient Phase 3 is completed, with results by the end of December. They have an SPA which has the unusual aspect of dual primary endpoints - both superiority and non-inferiority, either of which will be sufficient evidence of efficacy to support FDA approval (they have this in writing from the FDA in the SPA). They've done 4 planned interim analyses to evaluate safety, and the FDA allowed the trial to proceed to completion unaltered. So the safety aspect looks promising, which is a large part of the theoretical risk with this approach.
Everyone loves a good binary event, so this will be an interesting one to watch, with the results coming in the next several weeks.
OT - Since it's a slow day, here's an interesting play for all you bio gunslingers and crazed bio-kamakazee pilots out there -
Northfield (NFLD) - This company also presented at the recent Montreal Conference. They have a blood substitute called PolyHeme which looks interesting (yes this has been a bio graveyard, but it is a critical unmet area), with the Phase 3 results due by the end of the month. A problem with previous approaches is that when naturally occurring hemoglobin tetramers circulate freely through the bloodstream (outside of the red blood cells where they are normally contained), severe organ dysfunction results. What Northfield does is to first lyse/open up the red blood cells, thus allowing the hemoglobin molecules to escape. Then they polymerize the natural small hemoglobin tetramers, forming larger molecules (these larger polymerized hemoglobin groupings do not cause organ dysfunction). Then they go through a purification process which removes the remnants of the lysed red blood cell walls (the part of donated blood that causes not only transfusion incompatibility, but also the short shelf life of donated blood). The purification process also removes any viruses that were in the blood, along with any unpolymerized hemoglobin tetramers.
So PolyHeme consists of polymerized hemoglobin molecules. The shelf life is in excess of a year, vrs 42 days for normal donated blood. And there is no incompatibility problem since the cell walls of the red blood cells aren't present - so PolyHeme can be given immediately to trauma/blood loss patients without having to first test them for blood type (which otherwise takes close to an hour). PolyHeme can be given right at the trauma scene.
The 720 patient Phase 3 is completed, with results by the end of December. They have an SPA which has the unusual aspect of dual primary endpoints - both superiority and non-inferiority, either of which will be sufficient evidence of efficacy to support FDA approval (they have this in writing from the FDA in the SPA). They've done 4 planned interim analyses to evaluate safety, and the FDA allowed the trial to proceed to completion unaltered. So the safety aspect looks promising, which is a large part of the theoretical risk with this approach.
Everyone loves to watch a good binary event, so this will be an interesting one to watch, with the results coming in the next several weeks.
Epix -- Wow, from the outhouse to the penthouse! The Predix acquisition really paid off, and fast! I used to follow Epix for their diagnostic imaging programs, but after they got royally screwed by the FDA, I stopped following them. I thought the Predix acquisition was likely a futile act of desperation, but Glaxo obviously thought otherwise. Wow, it just goes to show, this sector is full of surprises. Epix rises from the ashes :o)
Thanks Neuro. I was also wondering if you might want to speculate on the various orphan indications Cortex might be considering for their in-licensing strategy? They reportedly have term sheets out for 4 programs, with a fifth also being evaluated. Just curious what a list of possible neurological orphan indications might look like. Thanks.
BTW, As you said, some of Acorda's preclinical orphan programs look very interesting. I wonder if Acorda could be persuaded to part with one of those?
Neuro, Just wondering what you thought of Acorda and their MS drug? Listening to their presentation at the recent Montreal conference, I thought it looked very interesting. The stock has already skyrocketed, but with a year or so to get the results of the 2nd Phase 3, I figure there should be plenty of time to take a position in the stock. Do you think the seizure related side effects will be a problem for approval? Also, how about the potential for heart related effects? Thanks for any insights Neuro. In addition to the MS drug Fampridine, they also have an approved spasticity drug, Zanaflex, that was acquired from Elan, plus some interesting preclinical programs. Here's a recent article on the company -
>>> Motley Fool
Acorda Calls for 2 More Trials
Monday December 11, 12:56 pm ET
By Brian Lawler
When drug developer Acorda Therapeutics (Nasdaq: ACOR - News) released positive phase 3 results for its multiple sclerosis (MS) treatment earlier in the year, shares skyrocketed. They have been up more than 600% since their lows for the year, seen right before the positive trial results.
On Friday, Acorda updated investors on the progress of its MS drug, named Fampridine-SR. As expected, the FDA is requiring another phase 3 trial of the drug before Acorda can file a new drug application for marketing approval. Interestingly enough, despite some worrying adverse events and the chronic nature of MS (which means patients need to be on the drug for the long term), this second phase 3 study is expected to be no longer than the first short, 14-week phase 3 trial in which Fampridine-SR was tested; it also has the same simple objective of improving patients' timed 25-feet walk.
Additionally, a second trial will be run to test Fampridine-SR's effect on the heart's functioning. This safety study should be watched closely, since Fampridine-SR is a potassium channel blocker. Many potassium channel blockers have been associated with adverse effects on the heart, although in trials to date Fampridine-SR has been safe in this regard.
I fully expect Fampridine-SR to show solid efficacy results in this upcoming phase 3 trial. The shorter-acting version of the drug has been tested for its effect on neurological functioning since the 1970s and has shown effectiveness in multiple clinical trials. The question that remains is whether Fampridine-SR will be deemed safe enough to get approval even with positive efficacy results.
Even if approval happens on the first go-round (which I doubt), I envision Fampridine-SR as having a very restrictive label, considering the drug only improves symptoms related to MS and does not inhibit the progression of the disease. Also, it is associated with some bad side effects.
When retail investors hold a high proportion of shares of a small specialty pharma company like Acorda, the stock price is liable to be mighty volatile. With such a long time to wait before any potential approval of Fampridine-SR, I expect this volatility to continue. More risk-adverse investors would be smart to stay away. <<<
New River article -
>>> It's Time to Get Out of the New River
By Marc Lichtenfeld
Senior Columnist
11/2/2006 12:28 PM EST
URL: http://www.thestreet.com/newsanalysis/investing/10319320.html
Just three months ago, I espoused the positives of New River Pharmaceuticals (NRPH) , expecting the stock to jump if its attention deficit hyperactivity disorder drug, NRP104, received approval and if it was granted a schedule III or IV designation by the Drug Enforcement Agency.
After the stock rocketed 82% on an approvable letter from the Food and Drug Administration, I quoted Dr. Harry Tracy, president of NI Research, who compared the mania to the demand for Dutch tulips in 17th century Holland. But the frenzy hasn't abated, as the stock has continued higher in the three weeks since that last column.
At these levels I believe the stock price is unsustainable, considering that a schedule II classification, which is what the FDA recommended, essentially means there is little incentive for patients and their doctors to switch from Shire's (SHPGY) Adderall XR to New River's NRP104.
There are many bears on the stock, as evidenced by the 7.4 million shares (27% of the float) that have been sold short. That's up from 5.9 million shares on Oct. 10, but given that that was just one day after the stock's spike, it's possible that some shorts have been unable to take the pain and have covered.
The skeptics generally have a few interrelated main points: Revenue expectations for NRP104 are too high, and Shire has no motivation to promote the drug and may renegotiate the terms of the current deal with New River.
It's All About the Label
If the DEA goes against the FDA's recommendation and gives NRP104 the looser scheduling, break out the noisemakers and confetti -- NRP104 becomes a blockbuster drug. But it is fairly unlikely that the agency is going to go against the FDA's suggestion. What remains to be seen is if NRP104 can make anti-abuse claims on the label if it receives a schedule II. If not, there is nothing to differentiate the drug from Adderall XR, Shire's top-selling product.
So far, Shire's management has been saying all the right things. Spokesman Matt Cabrey says, "We do believe that NRP104 has the potential to be at least as successful as Adderall XR." Some on the Street believe Adderall will be a $1 billion drug this calendar year. Shire CEO Matthew Emmens declares, "We will stop promoting Adderall XR, assuming that the [NRP104's] label is superior."
Shire hopes to gain an important foothold with NRP104 before Adderall's patent expiration on April 1, 2009. But if the label is not superior, it's unlikely that physicians will switch to a new drug with no added benefit. It's also difficult to fathom why Shire would put much marketing muscle behind the drug, considering that it may pocket less than 40% of the profits if certain sales thresholds are met. Meanwhile, the company keeps 100% of the profits of its other ADHD drugs.
One hedge fund manager, who is short New River's stock and asked to remain anonymous, expects that Shire's marketing efforts will result in a new drug launch, not a conversion strategy. That is a possibility because Adderall XR is a mixture of amphetamine salts, while NRP104's active ingredient is d-amphetamine. In some circles, NRP104 is believed to be just like Adderall XR, with an amino acid that makes abuse more difficult.
However, because the two drugs are not exactly alike, the companies will have to educate physicians and their patients to the benefits of NRP104 (if the FDA allows them to market the advantages). Furthermore, a study by Summer Street Research earlier in the year showed that polled physicians indicate that NRP104 could capture 23% of Adderall sales with a schedule II. Interestingly, that number only increases to 43% assuming a looser schedule IV classification.
Let's Make a Deal
According to New River's 8-K filed with the Securities and Exchange Commission in early October, the agreement between New River and Shire calls for New River to retain 25% of the profits from NRP104 for the first two years and 50% of the profits thereafter -- if the drug receives a schedule III or IV. A schedule II ruling means the companies split the profits according to a complex formula.
In the example given in the filing, if NRP104 achieved sales of $312.5 million in 2010, New River would keep 58% of the profits and Shire 42%. But keep in mind, this is a drug that some have said would be a $1 billion seller by 2010 -- in which case, Shire's portion of the profits would be even less.
The manager who is short New River states, "The people at Shire are not dumb." He asks and answers his own question, "Why would Shire structure the deal that way, where they give up more profits as sales go higher? It makes sense if it's a niche drug, not if it's a blockbuster."
In Shire's conference call last week, Emmens defended the deal, saying that at the time the agreement was made, it was believed that generic-drug competition would emerge in 2006, Cephalon's (CEPH) Sparlon for ADHD was expected to be on the market shortly, and all of the data on NRP104 were not yet available. In other words, it was a different environment. Sparlon was rejected by the FDA earlier this year.
Credit Suisse First Boston speculates that Shire may seek to restructure its agreement with New River (and not in New River's favor). On the conference call, Emmens stated, "We look at anything else that might happen every single day in light of other options that we could do to invest in our money and renegotiate things."
When I directly asked Emmens whether he would try to alter the deal with New River, he wouldn't deny or confirm the idea. "Any deal or renegotiation with New River would be balanced against other opportunities that are presented to the company," he said.
Within 18 months, it's possible that Shire will have five ADHD products on the market, including NRP104. If the feds don't allow the companies to market NRP104 with the clear benefit of abuse resistance, it's hard to imagine Shire putting too much effort into marketing the joint venture at the expense of its other solely owned products, especially if it will be a tough sell to doctors.
Unless the DEA rejects the FDA's advice, New River's stock is likely teetering on a precipice. Investors have already ignored the schedule II recommendation, so if NRP104 does receive the schedule II as expected, who knows if that will be enough to send the stock reeling? But the events to follow, such as a renegotiated agreement with Shire and disappointing sales, make New River's shares very risky at these levels. <<<
At least in Vegas they give out free drinks..
Dew, I checked out Nuvelo several years ago, but was put off by the way Alfimeprase had to be administered - via a catheter to the site of the clot, not exactly an easy or standardized procedure. So I dropped them from consideration. Too exotic for me, give me the boring stuff :o)
Reading Peter Lynch's book "One Up on Wall Street", he said some of his best investments were in companies so boring and dull that almost no one else followed them. A rock pit/quarry turned out to be one of his most successful picks. A maker of concrete was another. He also made a ton on Waste Management and other toxic waste related investments, which combine the themes of dull and disgusting - his ideal criteria for low risk, underfollowed, highly profitable niche companies.
I figure a similar strategy can be followed within the biotech/pharma sector. The generic sector (Teva, Barr) is a good low risk example, particularly the bigger players, but also smaller companies due to takeovers. Enzyme replacement therapy is lower risk (Genzyme, Biomarin). Some drug delivery areas can be lower risk (Durect). I figure infectious disease has at least some lower risk aspects to it (Cubist, Gilead, Idenix, Vertex). MAB providers seem like lower risk (Abgenix, Medarex, PDLI). Companies with steady predictable revenues from an approved blockbuster seem like a good long term bet (Celgene). Otherwise risky companies who have many irons in the fire can be less risky (Exelixis, Myriad, Spectrum). Just spreading the money around and avoiding too many microcaps is a good way to survive the 80% blowups. That's a fairly easy strategy to implement since there are so many promising bio companies out there to choose from.
Bladerunner, Stoll's timeline estimate for CX-701 is to start the Phase 1 in Q3-07. So if the compound is then ready to start Phase 2a in say early 2008, with results by Fall 2008, there's the 2 year timeframe to get it to where CX-717 was. In discussing the in-licensing idea in a conf call last year, Dr. Stoll pointed out that sitting around for a couple years waiting for a backup compound to get up to speed was a very unattractive option for a CEO. In addition to the boredom, the failure of CX-717 combined with the difficulties with the high impacts makes the idea of diversifying the pipeline seem only prudent. I'd have no problem with that if there was adequate funding to do both. But there doesn't seem to be adequate funding for even one path much less two. Somehow Cortex will get by, they always have, but significant dilution is the price.
Fearfrost, Neuro made that $5 mil estimate a while ago, saying that $10 mil upfront for the Neurodegenerative rights might happen, but that $5 mil was more likely, plus say $5 mil/year to fund Cortex's ongoing high impact R+D. The problem in getting anything more in a deal is that the lead high impact compound is still in the very early "lead optimization" stage.
There is another approach which Cortex could conceivably take (but almost certainly won't, based on Dr. Stoll's pro-inlicensing sentiments). It would be to keep all the current rights for now, forgo the non-Ampakine in-licensing strategy, and tighten our belts severely for 2 years while we get CX-701 to the ADHD Phase 2a/b stage, and then outlicense it for ADHD. By then we'd also have the lead high impact in the clinic, and could do a good sized BP deal for that too (with the global Neurodegenerative rights). Those two large pharma deals accomplished, Cortex could then use the ample proceeds to then do the non-Ampakine in-license strategy, as well as also working on an Ampakine orphan. I don't think this will happen, but it does represent an alternative to the path we're heading toward now.
Bladerunner, Thanks for your insights. I've been shying away from cancer companies the last few years, but since I only hold the stock in a virtual/imaginary bio portfolio, I figure what the heck :o) What struck me was Spectrum's very broad pipeline, late stage programs with good Phase 3 results, good cash levels, focused management, plus their generic business, and the CEO's ability to avoid over-dilution. There seems like a lot of value there, and the stock looks amazingly cheap.
Medarex is another stock that looks chock full of value, with both in-house programs and dozens of partnered MAB "shots on goal". I figure it's just a matter of time before the value there is realized. I actually liked Medarex somewhat better than Abgenix, but Abgenix got lucky with P-Mab and got munched.
Many thanks Neuro. Well, we'll see what Dr. Coleman can come up with to re-fill Cortex's pipeline. I'm still trying to warm up to the non-Ampakine idea, but grudgingly I guess it does make sense, since the global Neurodegenerative as well as Schizo/Depression rights will all be gone. Hopefully we'll still have CX-701/ADHD for a couple years to keep us old AMPA upmodulating diehards happy :o) I still wonder where all the future money is going to come from though. Perhaps just having two new orphan Phase 2 programs will be enough to generate Wall St interest and get the stock price up? I figure Cortex needs about 2 years worth of money to get to the point that CX-701/ADHD can be out-licensed (Phase 2a), which would bring in some decent additional money. Until then things will be tight.
Dew, OT - Yes, it's the German Merck. Concerning Biomarin, I always liked the low risk aspect of their enzyme replacement programs, plus the orphan advantages. Genzyme blazed the trail, and the odds of success with these programs was very high - just the replacement of a natural compound that a patient is missing. I lost some faith when their Neutralase program flopped (an enzyme to reverse Heparin), and then the previous CEO screwed up with the Orapred acquisition. But what an amazing buying opportunity that turned out to be.
The current Phenoptin (6R-BH4) PKU program looks like a virtual slam dunk, but once past that things start getting much riskier as they move into the more systemic indications. I see Cramer is now high on the stock, as a potential takeover play. It's had a big run, though I would just hold on to it for the long haul. If the broader 6R-BH4 indications pan out, this is a monster homerun stock. The broader indications are considerably riskier however.
OT - Also participating in that Montreal Conf was Spectrum Pharma, a cancer/generics company I followed somewhat several years ago, but lost track of. Anyone out there following this one? They've made a lot of progress, with Satraplatin's Phase 3 looking very good (prostate cancer), fast tracked and NDA filing for approval this month (had an SPA). They also have Levofolinic Acid, a late stage colorectal + bone cancer program which they in-licensed last Spring, has also filed the NDA for approval. The rest of their broad pipeline looks good too, with four Phase 2 programs (2 of those soon to start Phase 3), a bunch of earlier ones, plus their generic business (3 approved and several others). All this, plus $50 mil in cash with approx $20 mil more in milestones likely in 2007, and a market cap only around $150 mil. Pretty amazing. The company had a lot of trouble 4-5 years ago, and apparently is only now starting to regain the favor of Wall St. I've put them into my virtual bio portfolio, which is up to 20 stocks and counting (see below) -
Biomarin, Barr Labs, Celgene, Cortex, Cubist, Durect, Exelixis, Genzyme, Gilead, GTCB, Idenix, Medarex, MGI Pharma, Myriad, PDLI, Pain Therapeutics, Senomyx, Spectrum, Teva, Vertex (Abgenix and Kos were bought out). In addition, the entire generic industry looks very interesting, so perhaps an ETF will eventually come out to cover that sector. A few other ideas -- an Israeli Index that's about to come out on the Phila exchange (although with the Israeli market at/near all time highs, one might want to dollar cost average). Uranium also looks like an intriguing long term speculative idea (Cameco in Canada is world's largest producer).
Neuro, I was also wondering if you had any opinion on a company called Pozen? Listening to their presentation at the recent Montreal Conference, their approach sounded interesting. They're combining the current migraine med Sumatriptan with the NSAID Naproxen within the same pill. Another product is a combination of Naproxen with an acid inhibitor (Omeprazole) in the same pill. This approach sounds so logical/simple/low risk, but I wonder how this combination approach might hold up from a patent perspective? Any other considerations which could limit this approach? Thanks for any insights.
I still can't believe we're only going to get a lousy $5 mil upfront for the global Neurodegenerative rights (based on Neuro's recent estimate, plus $5 mil/yr for high impact R+D). Wouldn't it seem that Cortex could have gotten at least that much 5 years ago? The N. Amer Neuro rights have always been considered the big prize, Cortex's crown jewel. And now even the reassembled GLOBAL rights will only bring in enough upfront money to run Cortex for 3 or 4 months. That's pretty disgusting..
Neuro, It sounds like a global Neurodegenerative BP deal (including high impacts) is likely to happen in 2007. I had a question concerning the potential carveouts from such a deal -
1) ADHD
2) Sleep Related
3) Orphans like Huntington's, Frag-X, Post ECT
Just wondering which of the above you think Cortex can/will try to carve out, and approx how much smaller the BP deal might be with the carveouts vrs without? (I'm assuming Cortex's primary carveout goal will be ADHD, even if a backup like CX-701 is needed). Thanks Neuro.
Dew. Any opinion on Spectrum? It now looks like Satraplatin could be a winner, plus they have a nice pipeline, a small market cap, and $50 mil in cash with more coming. Wall St seems to have avoided the stock until recently due to their past problems. Just curious what you thought of them. Thanks.
Dew, PGS, Thanks. It's a shame that the CTIC board was unsuccessful in their attempt to dump Bianco. I assume he's given up the jet, but I suppose he still needs the bodyguards even more than before :o)
Daviddal, Truth be told, the neuro sector is generally not an area I would choose to be in as an investor. Sorry to say that, but the risks here are notoriously high. It's an interesting sector to follow though. The sector is fraught with bio graveyards and landmines, like Traumatic Brain Injury and Stroke. When you think about it, there really aren't many areas within the neuro sector that are anything close to resembling lower risk. I only follow two other neuro oriented stocks. PTIE is one, with Remoxy (an abuse resistant version of Oxycodone), and Durect another (long acting Bupivacaine, a local anesthetic formulation that last 2-3 days, and other drug delivery based programs). These aren't exactly exotic technology platforms that could change the world, like high impact Ampakines, but as investments they have a really good chance to succeed, unlike the more exotic stuff. The sexy stuff may be fun to follow, but for actual investing, give me boring every time (the Peter Lynch and Warren Buffett approach) :o)
Dew, Offhand, do you know what has become of Pixantrone? That looked very promising as I recall, but I haven't really followed CTIC for quite a while. CTIC should have just dumped Xyotax and concentrated on Pix. Didn't they partner it off on the cheap a while back? Thanks for any info.
PS - Your comment about the danger of stock threads with devoted longs who have seemingly done tons of DD rings true (Cortex comes to mind, lol) :o)
On the subject of orphan indications, it looks like these will be Cortex's main in-house focus going forward (and exclusive clinical focus once CX-701/ADHD is outlicensed). This was the approach used successfully to build Genzyme, and now Biomarin (although admittedly, enzyme replacement therapy is a lot less risky than neuroscience).
The orphan approach can be a very sound strategy for a small bio company. With orphan indications, the end market is often way too small for large pharmas to bother with, but can be ideal for a little company like Cortex. I'm really getting curious as to what programs Dr. Coleman & Co have come up with. I'm trying to warm up to the idea, since it looks like it's definitely going to happen, with an announcement probably by the end of Q1.
On the plus side from an overall risk perspective, it diversifies the pipeline away from total reliance on AMPA upmodulation. It also instantly gives us a Phase 2 program or two, and as we know, bio companies are valued in large part by how far along their clinical programs are, as well as how many different programs they have. Of course the downside is that Cortex will have to somehow raise the money to acquire and advance these new programs, along with simultaneously advancing CX-701 toward ADHD. Should be interesting.
Brigrajac, Concerning Org-24448 as a monotherapy for schizophrenia, I'm not all that optimistic about its chances, except as a way to improve cognition in these patients. Its best chance is probably as a combo treatment to go along with the usual antipsychotic meds, as a way to improve the cognitive impairment aspect and possibly lower the dosing requirements of the schizo med. The best we can probably hope for from the mono trial is some evidence of improved cognition.
I'm actually not all that enthralled with Org-24448. It's nice that it's there and in multi-Phase 2 trials, but it's considerably weaker than CX-717, has a shorter halflife, and reportedly has some less than desirable metabolic issues (which according to Dr. Stoll is why it was modified structurally to create CX-717). Even CX-717 has turned out to be a little on the weak side, considering the higher than expected dosing levels required for the various indications. CX-701 and CX-1501 are reportedly considerably more potent than CX-717, and with longer halflives.
I think it was Neuro who said that CX-929 must have had some tox issues, since there's been an apparent timetable delay in the lead high impact program over the last year or so. There also seems to have been a shift in strategy toward ultra short acting high impact compounds, based on Dr. Lynch's presentation a while ago. The presentation yesterday by Dr. Stoll showed some really dramatic results in Huntington's knockout mice using daily high impact injections (the compound had a halflife of only 20 minutes in mice). If such a "pulse" dosing strategy works in humans in upregulating BDNF, it could greatly reduce the excitotoxicity side effect problems that appear to be inherent in the high impact approach generally.
It now looks like a BP is going to get the high impact program sometime in 2007, with Cortex's role then being to generate additional new compounds for them. That will leave ADHD and possibly a few orphans like Frag-X and Huntington's for Cortex to pursue on its own. Otherwise, Cortex's clinical activities will focus on their new in-licensed non-Ampakine orphan programs. I figure there will be a 2 or 3 prong in-house clinical strategy to start out with -
1) Non-Ampakine orphan Phase 2 (program #1)
2) Phase 1 for CX-701, then a Phase 2 for ADHD (to be outlicensed after Phase 2a/b)
3) Non-Ampakine orphan Phase 2 (program #2)
Once a high impact is available, Cortex could then run trials for Frag-X or Huntington's, assuming these orphans have been carved out of the high impact Neurodegenerative BP deal. Going after these indications with a low impact probably doesn't make too much sense.
I wish they'd throw some of that kind of money our way :o)
Dew, QT changes have always seemed like the 3rd rail / kiss of death for prospective drugs, but I wonder how serious the actual long term clinical risks are for patients?
Dominate, OT - As I recall, the big issue with Iloperidone has always been the cardiac side effects (QT interval changes). It's efficacy wasn't the big question mark, since it's one of those "me too" type atypical antipsychotics. I'd be interested in getting Neuro's take on it's sales potential.
I used to follow Titan several years ago, and always liked their Spheramine Parkinson's treatment. It's not very practical from a business perspective, but the science is pretty cool. They implant dopamine producing retinal pigment cells into the substantia nigra area of the brain. The cells adhere to a proprietary gel like material of microscopic spherical particles, and this prevents the retinal cells from migrating once inside the brain, and also helps keep them viable. Amgen also had a surgical program where they did a direct infusion of GDNF growth factor right into the brain. Of course the high impact Ampakine approach is a much more practical approach to treating Parkinson's, being non-invasive. Boy, looking at that phenomenal Huntington's rat data at yesterday's Cortex presentation, one can only imagine how big the high impacts could one day be.
OT - Listening to Celgene's presentation at the Montreal Conf, one can only say "wow". This has been one of my favorites for several years. It's no longer cheap, but this is the next Genentech/Amgen IMO. Teva is another company that seems like a no brainer for the long haul, destined for a $100 bil market cap IMO -
>>> Once-feared drug is Celgene's winner
Stock is up 67% this year on drug that caused birth defects in the '60s - and new blood cancer treatment could fuel future growth. By Aaron Smith, CNNMoney.com staff writer
December 7 2006: 1:27 PM EST
NEW YORK (CNNMoney.com) -- Celgene, the drug company that's cornered the market for blood cancer treatment, continues to wow investors with its constantly climbing stock price, and analysts expect the good times to keep rolling.
Celgene (down $1.60 to $55.98, Charts) has seen its stock price surge 67 percent year-to-date, and it's climbed at nearly 10 times that rate over the last five years. Analysts, according to a consensus compiled by Thomson Analytics, expects sales to double this year, and grow by another half in 2007. The company ranks No. 21 on Fortune's list of fastest-growing companies for 2006.
"They have something that everyone wants: a drug that is an asset, and lots of growth potential," said James Reddoch, analyst for Friedman, Billings, Ramsey. "The stock is doing well because we've seen lots of additional data for Revlimid."
And we're about to see some more at the annual meeting of the American Society of Hematology, to be held in Orlando this weekend. Celgene is expected to release data that could fuel further sales on its drug Revlimid, which the Food and Drug Administration approved in June as a life-extending treatment for myeloma, a type of blood cancer that kills 12,000 Americans a year.
Other companies, including Sanofi-Aventis (up $0.57 to $45.61, Charts) and Biogen Idec (down $0.35 to $51.54, Charts), are also expected to release data.
"Now that Revlimid is on the market, it has totally changed the way people look at this company," said Reddoch of FBR. "The company has gained a lot of legitimacy in the eyes of investors in the traditional sense."
The Summit, N.J.-based company took a non-traditional route to success, putting itself on the map with a controversial drug that other companies didn't dare touch: Thalomid. If the name sounds familiar, that's because the drug is also known as thalidomide, the pregnancy painkiller that was blamed for horrific birth defects in Europe during the 1950s and 1960s.
Few drugs have achieved such notoriety. But Celgene figured out that Thalomid (its brand moniker, a slight tweaking from the original name) can benefit sufferers of leprosy and - much more beneficial from a sales standpoint - myeloma.
The author Rock Brynner - son of the late actor Yul Brynner - gave thalidomide a fitting title when he made it the subject of a book called "Dark Remedy: The Impact of Thalidomide and Its Revival as a Vital Medicine."
So as not to repeat the horrors of the past, the FDA has banned the drug's use by pregnant women. In some cases, female patients are advised not to be sexually active while taking it.
Running out of steam?
But despite its market resurrection, opinions are mixed as to Thalomid's future sales performance. Rachel McMinn, analyst for Piper Jaffray, expects annual Thalomid sales to edge up to $540 million in 2010, from an estimated $428 million in 2006. But Reddoch of FBR expects sales to drop to $265 million in 2010.
So why are analysts still backing this stock? That's where Revlimid comes in.
Sales are expected to go gangbusters. McMinn of Piper Jaffray and Reddoch of FBR both project annual Revlimid sales will exceed $2 billion by 2010.
Much of Celgene's pipeline is focused on Revlimid, which is being studied for a multitude of indications beyond its current use. At the hematology conference Monday, the company is expected to release data on the drug as a potential treatment for non-Hodgkin's lymphoma and chronic lymphocytic leukemia, a malignancy of the white blood cells.
If tests show that the drug is successful in treating these diseases, then doctors might prescribe it to patients before Celgene even has a chance to file it with the FDA.
"They have the one drug and then ways to discover other derivatives for that drug, all of which have potential for other diseases," said Reddoch of FBR.
Revlimid - and its potential to grow sales as a multi-indication drug - is why analysts are so bullish on Celgene.
"This a company where the long-term fundamentals are really, really solid," said McMinn of Piper Jaffray. <<<
Ombow, My advice is to use a mutual fund/ETF for the bulk of your bio investment. If you insist on individual companies, then it is imperative to spread your money around. If you like Cortex's chances, invest a modest amount, with the rest going into a dozen or so other promising bio companies. This approach addresses many of the key challenges one faces as a bio investor -
1) The ultra-high risk of the sector.
2) The large number of promising companies out there to invest in.
3) The emotional downside to being over-concentrated in a single company.
I can't emphasize enough the need for a diversified strategy. This sector is a total minefield, with stocks blowing up routinely. Just look at PARS, CTIC, Epix, Cortex recently, and dozens of others. If you want to survive to fight another day, you absolutely have to be diversified. Just some sage advice from someone who has made just about every investment mistake at one time or another :o)
Dew, I remember Iloperidone from the Titan days, but thought it was pretty much over when they found the QT heart effects. I wonder how many docs will ultimately prescribe it. Seems like all the atypical Schizo drugs have side effect issues of one sort or another.
Dew, These articles are good, keep'em coming :o)
Daviddal, Thanks. I'll have to run the presentation again and check out the slides in depth. There were quite a few new slides this time, and he seemed to go through them very quickly (my brain could probably use an Ampakine as well).
While waiting for the Cortex presentation to begin today, I was listening to another company's presentation on their new antibiotic, which was quite interesting. I've been following one of their competitors, Cubist, which is also at the conference. There are also some big name favorites like Celgene and Sepracor presenting, along with many tiny outfits I've never heard of. I noticed some fallen angels like Discovery Labs were there also. There certainly are tons of interesting bio stocks out there.
Tonyvanw, Maybe Cortex has a scheme to get back the Organon rights for free too :o)
I was figuring Organon to be the partner of last resort for a distress sale of the N.Amer Neurodegenerative rights, but with the global Neuro right reassembled, Cortex can possibly get a true high profile BP partner. That would be quite a coup, all things considered. Too bad we can't get a high impact into the clinic first. That could make for a much larger deal.
When the dust settles, it looks like Cortex's inhouse pipeline will look something like this -
1) In-licensed non-Ampakine orphan program #1, in Phase 2.
2) In-licensed non-Ampakine orphan program #2, in Phase 2.
3) CX-701 in Phase 1, destined for an ADHD Phase 2 and then an outlicense.
Additional activities for Cortex will include BP funded development of high impact compounds for use by the BP partner.
Outlicensed Programs -
1) Organon's Org-24448 Schizo and Depression Phase 2s.
2) BP partner's eventual human trials with a Cortex developed high impact, in Alzheimer's and/or Parkinson's.
Neuro, I taped the entire audio portion of the presentation, but don't hear anything relating to 3 Servier compounds, unless it was on one of the slides. Dr. Stoll clearly says that the global Neurodegenerative rights are back in Cortex's hands, and can be the basis for a global BP deal with the high impacts, so that is unexpected great news.
But if the high impact/global Neurodegenerative deal only yields $5 mil, and there is no CX-717/ADHD deal coming, any ideas how Cortex is going to fund itself, other than via periodic highly dilutive shelf offerings?
Ampakineman, Yes, I'm wondering the same thing - where will all the money come from to advance one or two in-licensed non-Ampakine Phase 2 programs, plus everything else. It would be different if there was a nice CX-717/ADHD deal to provide some non-dilutive funds. As Neuro said, a global Neurodegenerative high impact deal might bring in only $5 mil or so upfront, plus $5 mil/year in R+D funding (and that $5 mil/yr will be earmarked for high impact compound development for our partner, not for Cortex's own inhouse pipeline expenditures).
In going the non-Ampakine in-license route, Cortex will start to morph into something we don't recognize. Coleman is supposedly very sharp, so maybe he's found a few good programs. How we'll pay for them going forward is another question.
Oh well, I have 20 or so other companies to follow if need be, so if Cortex leaves the Ampakine business, I guess there are other fish in the sea. From a long term business survival standpoint, Stoll is probably doing the right thing in diversifying into other platforms. Ampakines are risky as hell. However, a lot more dilution in the near/mid term is the price to pay for diversifying the pipeline.
Truthfully, several years ago Cortex was the type of company I liked to invest in, but it's far too small and risky to meet my criteria now. I would now go for bigger companies with at least a product or two on the market, and in much lower risk areas of biotech. Of course it's all moot in the end, since I don't own any of the stocks anyway.
Thanks Neuro. I'm still confused as to what Servier will continue to own after the dust settles. Even if it's the ex-N.Amer rights for 3 subpar compounds that they never use, wouldn't Servier still be able to block Cortex or a BP from entering their territories in perpetuity?