Two Near-Term Biotech Plays

The news wire yesterday (December 30, 2008) reported that two drug companies have been granted priority review status for their new submittals: Northfield Laboratories (NFLD) and Savient Pharmaceticals (SVNT). Naturally both of these stocks shot up yesterday. However, it will take time for the news to filter out. Therefore, the near term run up on these stocks is likely not done. Then of course there is the huge run up (after April 30, 2009) if the FDA approves their submittals. Both of these stocks should do well if there is an Obama stimulus package rally in January. The submittals for both of these companies were granted the same review date, April 30, 2009.

Northfield Laboratories (NFLD) has made an application for US marketing of its PolyHeme blood cell substitute product. This is more specifically a human hemoglobin-based red cell substitute for the treatment of life-threatening red blood cell loss when an oxygen-carrying fluid is required and red blood cells are not available.

Aren’t hospitals always complaining they don’t have enough blood? Or enough blood of a certain type? Well, PolyHeme requires no cross-matching. It is compatible with all blood types. It would seem to me that this would be a very popular product. Of course, it would also have the advantage that it could not possibly transmit some other disease that might be present in human blood (such as AIDS or Hepatitis). The stock definitely seems worth a look.

Savient Pharmaceuticals (SVNT) has been granted priority review for its new gout drug, Pegloticase. Pegloticase is intended to treat cases of gout that have not responded to other therapies. If approved, this drug would likely be granted orphan drug status. This will essentially block other similar drugs from reaching the market for up to seven years.

The one caveat is that Pegloticase has shown that it can cause some bad cardiovascular side effects. Some analysts believe this could cause the drug to be rejected. Still if it receives approval, Pegloticase will likely be a tremendous financial boon to Savient Pharmaceuticals.

Disclosure: Author holds long position in SVNT and NFLD

Comments

[David White:]

I should have noted SVNT hit a high of about $28 last summer on expectations for this drug. There were some cardiovascular complications apparently due to the drug. However, all of the participants stayed on the drug throughout the study without incident. There is a very real risk of rejection of SVNT's new drug by the FDA. However, the granting of priority review status to SVNT for Pegloticase would tend to skew the odds in favor of approval. The fact that Pegloticase would be an orphan drug would also tend to skew the odds in favor of approval. Nothing is without risk.

2008 Dec 31 10:18 AM

[David White:]

Re NFLD's PolyHeme:

I have copied below an excerpt from the Nov. 2008 Journal of the American College of Surgeons about PolyHeme:

Seven hundred fourteen patients were enrolled at 29 urban Level I trauma centers (79% men; mean age 37.1 years). Injury mechanism was blunt trauma in 48%, and median transport time was 26 minutes. There was no significant difference between day 30 mortality in the as-randomized (13.4% PolyHeme versus 9.6% control) or per-protocol (11.1% PolyHeme versus 9.3% control) cohorts. Allogeneic blood use was lower in the PolyHeme group (68% versus 50% in the first 12 hours). The incidence of multiple organ failure was similar (7.4% PolyHeme versus 5.5% control). Adverse events (93% versus 88%; p=0.04) and serious adverse events (40% versus 35%; p=0.12), as anticipated, were frequent in the PolyHeme and control groups, respectively. Although myocardial infarction was reported by the investigators more frequently in the PolyHeme group (3% PolyHeme versus 1% control), a blinded committee of experts reviewed records of all enrolled patients and found no discernable difference between groups.

As you can see from the last comment, the committee of experts found no discernable difference between the controlgroup and the PolyHeme test group. This also brings up another salient point. EMT's could give PolyHeme blood substitute to patients with blood loss, without typing being necessary. This might save a lot of lives. They could carry a supply of PolyHeme, but they could not easily carry an adequate supply of different blood types.

2008 Dec 31 11:42 AM