- Will QRXPY get a surprise and under-the-radar FDA approval?
- How will DNDN's Provenge perform in Europe?
- Is ITMN's drug superior.
- Do CLDX's losses create an enormous opportunity?
In this article, I am looking at four more events in biotechnology that could spark substantial gains during the remainder of this year. Already, I have covered four such events including upcoming data announcements, product launches, and FDA approval decisions. In this second part, we'll focus a lot more on data announcements, and this includes my number one top biotechnology event for 2014, which actually consists of three events.
Another FDA approved opiate?
Alright, here's a real under-the-radar name that could soar if all the stars align, although it's a long shot, a company called QRxPharma (OTCQX:QRXPY), or QRX.
I came across this company after reading a Seeking Alpha article that highlights two near-term catalysts, and in many ways, the likelihood of these catalysts resulting in large gains isn't too far-fetched. It's an Australian company with a market cap of just over $100 million, and its potential upside revolves around three particular morphine/oxycodone drugs: an immediate-release product for acute pain; a controlled-release tablet for chronic pain; and an intravenous formulation for moderate to severe hospital-based pain.
Essentially, there's not much to prove in terms of whether morphine and oxycodone do in fact kill pain, but since the company is targeting specific patient populations with fewer side effects, as explained in the noted article, it might have a real shot at entering the market. The company's immediate-release drug Moxduo IR has already completed extensive trials and has a Prescription Drug User Fee Act (PDUFA) date set for May 25, and then also an Advisory Committee meeting soon after. Thus, Moxduo might very well earn an FDA approval in the near future, and given the decision to approve Zohydro, the company definitely has this action on its side as a way to support the thesis for approving Moxduo in the U.S.
With that said, this will be QRX's third time to file an NDA for Moxduo, but both the safety trial and quality questions raised in prior rejections have been answered. Not to mention, QRX's control release formulation of Moxduo has already completed Phase 1 trials - it's very difficult to inject or snort - meaning the FDA might consider this early data and give Moxduo a conditional approval with restrictions due to the company's attempt, research, and early success at aiding in the major opioid abuse problem in the U.S.; essentially allowing the company to begin building a network for the drug.
Like I said, this is a real toss up on a company that no one is talking about. Currently, the company has $17.2 million in cash, which means that while financing is likely, the company will be able to fund operations for at least a year. Albeit, with its market cap so small and its PDUFA date so near investors might be best served by waiting, and then buying if approved, as its small market cap is sure to allow for further upside following good news. Hence, it is this situation that I will be monitoring closely, and if approved, I'll be ready to invest in QRX.
Provenge launches in the EU
Last year, many thought that Dendreon (NASDAQ:DNDN) was about a year shy of bankruptcy. But, with an EU marketing approval, and plans to begin selling the drug in Germany and in the UK, there has been some newfound levels of optimism.
Specifically, Dendreon's stock has traded flat in 2014, marking the first four month flat trading period that I can remember since 2011. Still, with Dendreon's cash position dwindling, and it having near-term liabilities in excess of $100 million, the company needs to experience success, but the big question, and a major event to monitor, is will Provenge have any success in the EU?
During the company's last quarter, sales fell 12.5% as Provenge continues to face pressure from the more successful, and more convenient to administer, Zytiga and Xtandi. This competition and Provenge's mounting costs have led to a full-year of annual sales declines for the first time since its launch. So, investors must wonder how an EU launch will change the landscape for Provenge.
This is a company that closed its largest manufacturing facility, Morris Plains, to save costs, yet is going to market a drug oversees that requires a tedious logistical process. Not to mention, Provenge's $90,000 plus price tag may not hold up in the EU, which will put more pressure on the company's operating margin, which is currently negative 65%. To me, the EU launch doesn't make sense, and is more a PR stunt to stop the stock from bleeding, and possibly create excitement in its inevitable public offering. But, given the company's decision to pursue the EU, it will be interesting to follow during the remainder of this year.
Will Intermune's Esbriet be the superior side-by-side drug in treating IPF?
Given Intermune's (NASDAQ:ITMN) one-year 275% return, and $3.3 billion market cap, there are high expectations for its Idiopathic Pulmonary Fibrosis (NYSEARCA:IPF) drug Esbriet. This is a drug that's already marketed in Europe and Canada, and generated revenue of $70.2 million last year, which was good for 168% growth.
However, the drug's growth could now really go into overdrive, as strong data suggests that an early 2015 FDA approval is more than likely. Hence, it was this data and peak U.S. sales estimates of $650 million that has allowed shares to soar to such a large degree in the last year.
With that said, there is an underlying controversy surrounding Intermune's Esbriet, and that's how it compares to privately held rival Boehringer Ingelheim's product nintedanib. A couple weeks ago shares of Intermune rallied double digits after Boehringer Ingelhein presented data from two late-stage trials in treating IPF. Boehringer Ingelhein's drug was proven safe and met its primary endpoint of reducing the annual rate of decline in forced vital capacity (FVC) in both of its late-stage studies. However, its INPULIS-1 study was insignificant in reducing flare-ups and improving overall health. Thus, at first glance, Intermune's Esbriet's drug appears superior, meeting both its primary and secondary endpoints.
However, Intermune investors may not want to celebrate just yet. We already know that Intermune's Esbriet reduced FVC by at least 10% in 16.5% of patients at 52 weeks post treatment. In comparison to placebo, Esbriet reduced the risk of death by 43%. The problem for Intermune investors is that we don't yet have a side-by-side comparison of Boehringer Ingelhein's drug, as its known data is still somewhat minimal. Specifically, all we have on nintedanib is an abstract, so we lack full data to see if either drug is superior in certain patient populations. Not to mention, there is still unknown data from Intermune's trial such as mean absolute in FVC for all patients, which means we'll learn more in the coming months.
Therefore, with a $3.5 billion market cap, or five times peak U.S. sales, shares of Intermune are priced for IPF dominance. As a result, it will be interesting to see how the two drugs compare side-by-side once more data is released in the coming weeks and months. If Esbriet remains superior, then Intermune could continue its upward path. But, if nintedanib is better in any key areas, or has an opportunity to control a sizable chunk of the IPF market, Intermune shares could fall significantly.
Last, but certainly not the least
In what may be the most exciting company to follow this year, with the most meaningful catalysts, Celldex Therapeutics (NASDAQ:CLDX) is without question my number one most eventful company to follow this year. The company has a trio of important catalysts, which is what makes it unique, mostly coming in the second half of 2014. However, what makes it my number one most interesting company to follow is not only its three catalysts, but also its stock decline.
First, for a little thought on Celldex's near 40% stock loss in March. The company reported positive data on its breast cancer drug CDX-011 that not many expected back in late-2012, which was then followed by even more encouraging data on the drug, showing how it increased survival in a group of patients who had not previously responded to other treatments. It was this data that really began its ascent from $5 to nearly $40 in 2013. However, at Celldex's peak -- a market cap over $3.4 billion -- its valuation could never be supported by CDX-011 alone, a product with peak sales estimates of $1 billion.
Therefore, with an enormous pipeline, it's likely that much of Celldex's rally and market cap was based on the assumption that the rest or most of its pipeline would also be a success, based off the achievements of CDX-011. Thus, when Celldex announced in its 2014 Business Strategy that it was shutting down an orphan trial on Dense Deposit Disease (NYSE:DDD), using CDX-1135, it's possible that the assumption of countless blockbusters in Celldex's pipeline was proven false, which then shifted sentiment. While some may not agree, I do think it's interesting that Celldex's stock decline corresponds with the announcement of pulling this one study.
With that said, Celldex has more than enough chances to redeem itself later this year.
Its Phase 3 drug Rindopepimut for the treatment of glioblastoma multiforme (brain cancer), has already proven itself effective with consistent overall survival data and immune responses in three Phase 2 studies. However, the company has two final ongoing studies, a Phase 3 trial called ACT IV and a Phase 2 trial called ReACT that was provide even more data. Back in November, Celldex reported positive interim data from the Phase 2 ReACT trial, showing a strong survival trend at 12 months versus 7.9 months in the control group.
This brings up the first catalyst, final results from the ReACT study in late-2014. In addition - the second catalyst -- we'll also have an interim look by the Data Monitoring Committee on the ACT IV study around the same time. If successful, this would mark four positive Phase 2 studies and one Phase 3 trial. Essentially, proof that a drug works doesn't get any clearer, and following successful data Celldex could trade considerably higher.
With that said, Celldex's stock may already be substantially higher by the time these two announcements take place, as data on the solid tumor cohort of the Phase I trial of CDX-1127 is expected to be presented at this year's ASCO meeting. While this is an early stage product, it is very important to the long-term investment thesis for Celldex due to its wide-use implications and market potential.
CDX-1127 is a monoclonal antibody, which works by targeting a transmembrane homodimer, CD27, that plays a role in the activation of lymphocytes. Furthermore, CD27 is present on most T cells and many B and NK cells found throughout the body, and by blocking CD27, much like PD1, it can theoretically boost the function of T cells and other regulatory functions. To get an idea of what analysts expect from this technology: Oppenheimer recently projected $8 billion in sales from CDX-1127 in 2025, assigning a current value to the program of $18 per share, which is equal to Celldex's current stock price.
With that said, Celldex has already initiated two Phase 1 dose escalation trials in solid tumors where patients are tested in five cohorts with 15 patients. In November of 2013, the company reported some data showing that eight patients achieved a stable disease or better with significant tumor shrinkage. However, Celldex still has a lot of potential data from these trials that Wall Street can digest at this year's ASCO, and depending on the outcome, Celldex could trade much higher, and if so, might regain confidence in its pipeline.
In this two part series, I have identified eight events or catalysts in biotechnology that have the potential to drive significant gains in 2014. The flipside is if these catalysts don't work to the favor of the noted companies, each event could also create substantial losses. Albeit, this "flipside" is biotechnology in a nutshell. But, in creating this list I think the point is obvious: Despite large losses in the first quarter of 2014, biotechnology still has a lot to gain, or at least certain companies. Therefore, I suggest following these eight catalysts, because when we look back in April of next year, most of these companies will likely be a lot more valuable, or perhaps cheaper after these events become a reality.