Don't Believe In Affymax - The Stock Is Probably Worthless

Aug.29.13 | About: Affymax, Inc. (AFFY)

Investors in Affymax (NASDAQ:AFFY) would like you to believe that Omontys will make a miraculous comeback and that Affymax will be a major winner. My belief is that the last AFFY article contained multiple factual errors that when refuted show that the future for Omontys is in fact dire. At the conclusion of this article all doubt should be removed regarding the low likelihood that Omontys returns to market.

Truth #1: The Death Rate of Epogen is 0.0027% vs. 0.024% of OMONTYS

Falsehood #1: The Death Rate of Epogen is 0.85% vs. 0.02% of OMONTYS

This error comes from mixing data from www.drugcite.com with the safety data that was reported by the company. The data from drugcite shows "For each adverse event listed, percent (%) represents percentage of the adverse event to all adverse events reported for the drug. Percent does not represent a rate related to drug utilization." In essence, a comparison between drugcite adverse event rates and those of a patient population is comparing apples and oranges. This is incorrect data analysis and should be discarded in favor of analysis which compares the number of treated patients in each group who die in the same period of treatment. The correct analysis is further explained below.

Truth #2: Europe was never going to approve Omontys due to safety concerns

Falsehood #2: European approval is merely delayed due to ongoing root cause analysis

The most recent Affymax article states that Takeda withdrew from consideration for European approval "because they were doing the "root cause analysis" they would not be able to complete the investigation because it was still in process and "ongoing" despite the fact that severe reactions were not present at the time of the clinical trials." However, there is no evidence to support this conclusion. The truth is that we showed you an excerpt directly from the Committee for Medicinal Products for Human Use that stated the CHMP "was of the provisional opinion that Omontys could not have been approved" due to "study results indicating that Omontys may increase the risk of death or heart and circulatory problems." It is clear that the EU application was withdrawn because Takeda (OTCPK:TKPHF) could not get Omontys approved due to its safety profile.

Truth #3: Fresenius (NYSE:FMS) is running away from Omontys

Falsehood #3: Fresenius supports Omontys

The prior article wants investors to believe that Fresenius supports Omontys based on a letter from Fresenius from February 13, 2013. Again, this is an out of context data point because the recall did not happen until February 23, 2013. Pasting an outdated letter to suggest that Fresenius is comfortable with the Omontys safety profile is not relevant, especially in light of the recent conversation we had with Fresenius IR during which they stated they would not "risk its franchise on a drug with unknowns like Omontys."

Truth #4: Epogen is safer than Omontys

Falsehood #4: Omontys is just as safe as Epogen

The last article wants investors to believe "Apples to Apples (not Apples to Oranges) -- each drug projected to 260,000 doses, the calculation shows that OMONTYS actually has less fatalities than Epogen." Yet again, this is incorrect analysis because the safety data we cited in our prior article was based on patient numbers and not on dose numbers. The safety data that shows Epogen is safer than Omontys is based on 25,000 Omontys patients being treated for approximately 2 months as opposed to 260,000 Epogen patients being treated for a full year when the data is adjusted for the fact that the data covers a period 6x longer for Epogen (12 months) as compared to Omontys (approximately 2 months). It is statistically invalid to do a comparison between the number of deaths in a patient population treated for a year and a patient population treated for only 2 months. The Baird analyst made the appropriate adjustments, and it clearly shows that Omontys is 9x more likely to cause a patient to die as compared to Epogen.

Conclusion

The recent article on Affymax recommending the stock on the potential for Omontys to return to market draws the wrong conclusions based on outdated data and incorrect analytical methods. The truth is that Omontys is more dangerous than Epogen, the EU was well aware of the safety problems, and Fresenius is running away from the drug. It remains our conclusion that Omontys is unlikely to be approved to return to market and that Affymax's stock will probably be worthless.

Disclosure: I am short AFFY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.