Trading Binary Bio Events: Amarin, ChemGenex, AstraZeneca

by: Mike Havrilla

Beyond the Bio Run-Up strategy of selecting a basket of small/micro-cap stocks with pending binary events such as FDA decisions and clinical trial results, another means of achieving diversification is by selecting a basket of companies with different types of pending catalysts. Below are some examples of how to categorize pending bio-catalyst events and some specific examples for each category.

1.) Long-Term Hold: Amarin Corp. (NASDAQ:AMRN) ($2.37, $234 million market cap)

AMR101 (Ethyl-EPA) is a prescription-grade omega-3 fatty acid that has been marketed in Japan for over 10 years as EPADEL by Mochida Pharma. Ethyl-EPA is differentiated from Glaxo's (NYSE:GSK) $1 billion dollar product LOVAZA (omega-3-acid ethyl esters) in the following key areas:

  • no fishy smell / taste
  • lacks Ethyl-DHA omega-3 fatty acid component, which can raise bad cholesterol (LDL) levels
  • potential to address a much larger patient population including those with triglyceride levels of 200-500 mg/dL vs. LOVAZA, which is indicated for patients with triglyceride levels greater than 500 mg/dL

Amarin is fully funded through a potential NDA filing (projected to occur in 2012) with ongoing partnership discussions and the company expects to report top-line results from both pivotal studies next year (the MARINE and ANCHOR clinical trials are being conducted under a Special Protocol Assessment or SPA agreement with the FDA). Amarin is focused on the US market (where Glaxo derives over two-thirds of its LOVAZA sales) and the next catalysts for the company include completing patient enrollment in the pivotal studies and a potential partnership for the US market.

2.) Under the Radar Foreign ADR: ChemGenex Pharma (OTC:CXSPY) ($4.13, $78 million market cap)

ChemGenex received a Complete Response Letter (CRL) from the FDA in April, following a March meeting of the Oncology Drug Advisory Committee (ODAC) for OMAPRO (omacetaxine mepesuccinate), seeking approval for treatment of chronic myeloid leukemia (CML) patients that have a specific (T315I) mutation and have failed standard treatment with GLEEVEC (imatinib).

The CRL did not contain a request for a new clinical study and no request was made to enroll additional patients in the company's pivotal study.

The company is working to validate a companion diagnostic test for the mutation and to correlate positive OMAPRO treatment outcomes in this group, which typifies the trend toward personalized medicine - especially in the field of oncology where a better understanding of cancer at the molecular level has led to niche treatment options rather than a single treatment option for the disease.

ChemGenex has partnered OMAPRO with Hospira (NYSE:HSP) in Europe, Mid-East, and parts of Africa for an upfront payment of A$17.8 million and the potential for an additional A$119.4 million in development / sales milestones while retaining rights in all other regions, including North America. At the end of 1Q10, ChemGenex had A$14.9 million in cash and the Marketing Authorization Application (MAA) review for European marketing clearance is ongoing after being validated for review in November 2009.

3.) Get Paid to Wait: AstraZeneca (NYSE:AZN) ($45.02, $65 billion market cap, 7.6% dividend yield)

AZN is awaiting a FDA Advisory Panel review for its investigational oral anti-platelet treatment (blood thinner to reduce incidence of clots) BRILINTA (ticagrelor) on 7/28/10, seeking approval for the reduction of major adverse cardiac events in patients with acute coronary syndrome (ACS). A final FDA decision on the NDA is expected during late 3Q10.

On 6/2/10, the Antiviral Drugs FDA Advisory Committee voted 14-3 that motavizumab (being developed as follow-on product to SYNAGIS) should not be licensed for marketing to prevent serious respiratory syncytial virus (RSV) disease in high-risk infants with a final FDA decision expected by the end of 2Q10.

Disclosure: Author holds long positions in AMRN and OTC:CXSPY