Biotech Values

[Summer2762]

I had a large THLD position. I sold most on Friday.

The reason I invested was mostly based on the fact that this trial had too many arms, endpoints and sugroups (all valid). Then also this trial had randomized crossover to one of the drug arms which makes it also a small 2ndline PC trial. I assumed that when they announce the results, since this is a P2 trial, they will be clever enough to pick the one combination that looks the best (e.g., gem vs 340mgTH302 for OS in LA sugbroup and say it achieved statistical significance; amazing HR or median, etc.) and call the trial a success. The reason they can pick a winner combination is that even if TH302 were placebo, each comparison had a 2.5% success and with so many combinations, the probability that at least one or multiple combinations would be a success is substantial.

Another reason I invested was based on an event analysis that showed that overall the patients were doing better than the gemcitabine arm of the past PC trials which in this case was consistently ~4m median PFS. The issue in the event analysis is that we dont know the dropout ratio (e.g., % censored due to AE and other reasons). I assumed about 15% mostly due to the fact the co increased # of patients from 122 to 144 but also # of patients from 165 to 214 (A decrease from 3/4 to 2/3). This change, I assumed, was initiated by DMC due to larger % dropout than initially estimated. In some of the past firstline gem PC trials, the dropout ratios reached ~30%. So I thought DMC informed the co of the mistake in the design and the co corrected it.

The unexpected part was Merck deal which binds success to the official primary endpoint of the trial. So the co does not have the wiggle room I mentioned. Second, the co can do this event analysis better than we can and can estimate dropouts better than we can. For them to sign a deal at this moment means that the odds of success is as I calculated and we have a high dropout ratio.

If you are planning to invest for the PC trial, think what success (say PFS from 4m to 7m) means.

If you are planning to play for long term, see http://www.ncbi.nlm.nih.gov/pubmed/22240283 (ignore the abstract. The overall survival KM is listed in an appendix in the paper as apparently it was probably reached after the peer review).

However, Anti-angiogenics + TH-302 is quite appealing and I believe that's the primary reason of the Merck deal.

Good luck no matter what you decide.