Biotech Values

[DewDiligence]

GTCB CC post-mortem:

DIC / sepsis for acquired antithrombin deficiency

1. DIC—rather than burns—has been selected by Leo Pharma for the acquired-deficiency indication to pursue in Europe for two reasons: a) the larger addressable market; and b) the greater ease of showing a clinical benefit.

2. The scientific rationale behind testing ATryn as a treatment for DIC/sepsis in spite of the checkered history of AT in this indication is that AT ought not to be given concomitantly with heparin, as has been done in prior studies. Please see the DIC/sepsis abstracts in #msg-10321910 for some of the clincial studies in this arena. Plasma-derived AT sourced by Grifols (the answer to the quiz in #27752) is approved for DIC/sepsis in certain countries.

3. No guidance can be given at this time about the expected size and duration of Leo Pharma’s phase-2 trial in DIC/sepsis. This information will be disclosed once Leo has received feedback from the EMEA on how to proceed.

EMEA re-examination

4. According to the statutory procedure for re-examination, GTC was not permitted to augment the ATryn dossier with data from the phase-3 U.S. trial. (On GTC’s February 23 CC, incorrect information was given to investors on this matter.)

5. New rapporteurs have been selected for the re-examination and a decision could come as soon as June 1, following the CHMP’s monthly meeting. (I was tempted to ask which two countries are the new rapporteurs, but I thought the better of it.)

6. My handicapping of the appeal, FWIW, is that it has a 5% chance to succeed. I originally posted back in February that the chance of success was 5%, then raised that to 15% after the CC in which GTC incorrectly stated that they might be able to submit data from the U.S. study. Since we now know that they cannot do this, I’m back to 5%.

Finances

7. GTC had $26.1 M in cash at 3/31/06 and expects to burn $13-17M between Apr 1 and Dec 31, suggesting that the company will not run out of cash in 2006. However, in reply to a question, Dr. Cox admitted that GTC will raise cash in some manner this year. The good news: if few investors think the appeal stands a much of a chance of working (see item #6 above), a corollary is that the stock price ought not to drop much if the appeal is denied. Hence, a financing in 2H06, while bad, might not be an utter disaster in terms of dilution.

8. GTC’s equity stake in Merrimack Pharma is approximately 1%. The investment is carried on GTC’s balance sheet at cost, which is $1.25M.