Affymax: Emerging Data Supports Conclusion Omontys Likely Dead

| About: Affymax, Inc. (AFFY)

After reviewing the summary adverse event report data highlighting a shocking number of deaths associated with Omontys, (discussed here), we followed-up with the FDA to request more information. Given the sheer volume of adverse events reported, the FDA could only partially fulfill our request thus far. Below is a brief summary of the case narratives that we have received. We are waiting on additional case studies and intend to follow-up on them once we receive them. The cases below paint a very grim picture for Omontys showing that severe adverse reactions resulting in death occurred despite prompt medical attention, and in two cases (9238609 and 9154117), to patients receiving second doses of Omontys. The FDA data, combined with the lack of commentary about Omontys on Fresenius' (NYSE:FMS) or Takeda's (OTCPK:TKPHF) latest earnings calls and the cash burn at Affymax (NASDAQ:AFFY), all lead us to believe that the end is near for Affymax.

Case 9122574

"At 8:16 AM, the first dose of Omontys 15 mg IV was administered and 3 minutes later, at 8:19 AM, the patient complained of "burning all over" and developed shortness of breath. He complained he could not breathe and oxygen 10 liters/minute via nasal cannula was given…Benadryl 25 mg IV was administered at 8:25 AM. The patient appeared cyanotic and immediately became unresponsive…Epinephrine 1 mg x 2 were given at 8:30 AM and 8:33 AM…the patient was pronounced dead upon arrival at the hospital."

Case 8811085

"At 13:17, 10 mg of Omontys was administered intravenously. Two minutes later, the patient shouted out that he was not feeling well. The patient was put in the Trendelenburg position…The patient stated "everything is gray" and he became unresponsive."

Case 9122561

"…a 58-year-old-male, who experienced a life-threatening anaphylactic shock and coded on 11 February 2013 after Omontys administration and subsequently died…At 12:06 pm, the patient received his first dose of Omontys. No other medications were infused one hour prior to the administration of Omontys. At 12:10 pm, four minutes after Omontys administration, the patient called the nurse to report nausea and showed signs of distress…The patient subsequently lost consciousness and cardiopulmonary resuscitation was initiated at 12:20 pm."

Case 9238605

"The patient received medications as usual including first time dose omontys. Four minutes later the PCT noticed that his blood pressure became elevated…The CN attempted to take the patient's blood sugar and at that time the patient stopped breathing and cyanosis was noted around the patient's lips, no pulse was noted."

Case 9171699

"At 7:02 AM, the patient received the first dose of Omontys injection…At 7:22 AM, BP dropped…The patient's skin continued to appear clammy. Respirations were shallow and the patient subsequently became unresponsive…At 7:26 AM, the patient went into cardiac arrest as there was no pulse and no respirations noted."

Case 9236530

"At 8:19 AM, Omontys 2 mg IV was administered. One minute later, at 8:20 AM, the patient complained of itching, shortness of breath and chest pressure. Benadryl 25 mg IV push was given at 8:20 AM. Oxygen 2 liters/minute via nasal cannula was applied. The patient's face became red and her eyelids were swollen. The patient also experienced generalized skin rash, nausea, dizziness, and anxiety. EMS was notified. A second dose of Benadryl 25 mg IV was administered at 8:23 AM."

Case 9238609

"Patient received Omontys 15 mg IVP…this was patient's second dose, the first dose was Omontys 10 mg IVP given on 1/21/13…Patient was unresponsive with no pulse."

Case 9154117

"The patient had no known allergies…At 11:44 am, the patient received her second dose of Omontys. At 12:23 pm, the nurse was called because the patient's blood pressure was 73/28 mmHg and her heart rate was 41 bpm. The patient was found to be unresponsive with no pulse and she was apneic."

Case 9238502

"At 0816AM patient was given ordered dose of Omontys and approximately [ ] [sic] later patient complained that he was burning up and stated that he could not breath. Blood pressure was stable at 154/74 then immediately patient went unresponsive and skin was turning blue."

Case 9238601

12:06pm - Omontys 15mg given IVP by RN
12:10pm - Patient called out for RN to report nausea. Retransfusion initiated. Benadryl 50mg given IVP
12:15pm - 911 called
12:16pm - Oxygen started
12:17pm - Patient placed in Trendelenburg position. Solumedrol 40mg given IVP

Reading between the tea leaves

On 10/31/13, Takeda held its fiscal 2Q'14 earnings call in which there was no mention of Omontys. Omontys is not mentioned anywhere in the earnings presentation and the only sign that it still exists is in a footnote in the data book with the following statement: "An investigation into the root cause of the reactions was initiated and is ongoing." This is exactly the same language Takeda used in a 6/20/13 letter to the EMA and very similar to language that was used in February. With no update, no mention in the primary presentation, and the same vague language about a purported investigation, it sounds like little progress has been made.

On 11/5/13, Fresenius Medical Care hosted its 3Q earnings call in which there was no mention of Omontys returning to market, and in fact, a significant portion of Q&A was devoted to discussing how soon Fresenius would be able to introduce Roche's drug, Mircera, into its U.S. dialysis centers (Mircera is a drug that is already FDA approved, Fresenius has experience administering it in Europe, and it is a drug that has similar dosing benefits to Omontys in that it is dosed once every two weeks without the same negative side effects). When asked about the timing of bringing Mircera to its U.S. centers, Fresenius' CEO said "I really can't give you much comment on that at the moment. It would be inappropriate. But we know how we would do it. So, let me leave it at that." Given the substantially similar dosing benefits, but lack of negative side effects, it is likely that the introduction of Mircera in the U.S. could spell the end for the commercial viability of Omontys in the U.S., and AFFY acknowledges as much, saying "If Mircera enters the U.S. market, we believe it will be in direct competition with Omontys, if Takeda is able to reintroduce the product, because of Mircera's ability to be long-acting; therefore, it could potentially limit the market for Omontys."

Also on 11/5/13, Affymax filed its 10-Q for the period ending 9/30 making no mention of forward progress or a timeline for resolution of the Takeda managed Omontys investigation. Additionally, the financial statements showed SG&A expenses burned through approximately $2mm in the quarter -- despite most restructuring actions and the associated costs having been completed in prior periods - and a cash balance of less than $7mm at the end of the quarter. Given the rate of cash burn, the administrative costs the company would bear in a bankruptcy, the outstanding litigation as well as potential future product liability claims, we believe the end is near for Affymax. Importantly, in the event that the Omontys investigation remains ongoing, we expect Affymax to file for bankruptcy well before it runs out of cash so that Affymax can insure it has enough cash available to navigate bankruptcy. Accordingly, we believe a bankruptcy filing could come as soon as January, at which time cash may be below $5 million.

We remain short AFFY with a price target of $0.44 per share, but the most likely outcome is that the stock is worthless. Our target price is based on a probability weighted basis whereby we assign a 90% probability to Omontys being worthless, and a 10% probability to the upside case of $4.38 per share, implying a $0.44 expected value (assumptions discussed in greater detail here). However, we believe that the data overwhelmingly shows Omontys is unsafe, too many bridges have been burned (FDA, dialysis centers, nephrologists, patients who suffered adverse reactions), and the hurdles for reintroduction are far too high. Therefore the most likely outcome is that Omontys never comes back and the company is 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.

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