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XenoPort’s (NASDAQ:XNPT) April 6 approval for its restless leg syndrome drug, Horizant, reminds biotech traders and investors of the perils and exhilarations of investing in small-cap biotech securities. Depending on traders’ positions whether long or short in the company’s stock, every FDA decision means loss or gain for a publicly traded company's shareholders. These losses and gains may be small if the drug is simply marketable and a good addition to other drugs for the same indications, or they may be huge if approval is of a blockbuster drug or device representing billions of dollars for the company for a best in class, or first in class drug with huge marketability with little or no competition.

Conversely, a rejection or complete response letter from the FDA, a late-stage trial failure and additional stock offerings (referred to as dilution by investors) to help pay for the necessary trials are all possibilities in these investments. Investors aware of these risks and rewards comb over medical articles, corporate press releases, FDA trial sites and analysts’ writings trying to discern and determine what, if any, position they may want to take in the stock.

The huge interest in these securities is obviously not for the faint of heart or for those whose portfolios cannot tolerate the risks associated with the potential rewards. As investors try to gain an understanding of what merits a trial failure versus success, what can cause an FDA rejection or complete response letter versus an approval, what can cause a NDA (new drug application) to be accepted or rejected, and what the company’s finances are like and how they might pay for the trials and regulatory process, they turn to the analysts and websites focusing partly, or wholly, on biotech plays.

These successful analysts and websites make up the every day vernacular of biotech traders who may follow the analyses of Adam Feuerenstein of TheStreet.com, the biotech run up methodology of trading a security up to a catalyst date of Biorunup.com, the opinions and analyses of TapeBeat.com and the writings of Biomedreports.com. These are but a small sampling of those whose existences and livelihoods depend on the accuracy and clarity by which they analyze findings, formulate decisions and convincingly convey their views to investors.

The first quarter of 2011 was exciting with decisions ranging from the Orexigen Therapeutics' rejection of its weight loss drug, Contrave, to Delcath Systems' NDA rejection of its chemosaturation system used in the treatment of patients with metastatic melanoma in the liver to the long-anticipated Human Genome Sciences' approval on March 10th of its Lupus drug, Benlysta. Biotech investors spent huge amounts of time and money in 1Q 2011, and 2Q 2011 will likely be no different. Some of the catalysts anticipated for this quarter are summarized below with a European CE Mark decision, NDA filing, trial completions and trial data presentations.

IntelGenx Technologies Corp. (OTCQX:IGXT) in a 2010 year in review on March 30th noted that their NDA resubmission is “imminent” for their high strength antidepressant CPI-300. They note that since a patent infringement case by Biovail Incorporation was thrown out in February they are now free to resubmit the NDA after remedying the two issues that initially caused them to receive a complete response letter back in February 2010. In that CRL they were asked to address a “food effect” in which they now plan on a simple label change indicating that the drug must be taken on an empty stomach, and they were also asked to qualify their commercial manufacturing site, something they’ve claimed to have gathered data on and taken care of since. The key word on this NDA resubmission is “imminent”, per their March 30th update.

Adeona Pharmaceuticals (AMEX: AEN) completed the treatment phase of their pivotal clinical trial evaluating the zinc and cysteine-based product, reaZin, in patients with Alzheimer's disease and mild cognitive impairment in late March. This product will likely be labeled as a medical food, and thus would not have to go through the FDA NDA and approval process before being marketed. On April 14th, the data will be presented at the American Academy of Neurology annual meeting in Honolulu, Hawaii. This will be a key date in the life of the company and its stock.

Raptor Pharmaceutical Corp. (NASDAQ: RPTP) is expected to release phase III results sometime in Q2 for its lead drug, DR Cysteamine, for the treatment of nephropathic cystinosis. This is an inherited disease characterized by the accumulation of the amino acid cystine within cells, particularly damaging the eyes and kidneys. DR Cysteamine is a reformulation of the current best in care, Cystagon, which has several harsh side effects and an inconvenient four times a day dosage both of which can compromise the drugs effectiveness due to inability of the patients to comply with the dosing regimen.

Delcath Systems (NASDAQ: DCTH) received a surprising refusal to file NDA in February of this year for its chemosaturation system used in the treatment of patients with metastatic melanoma in the liver. The refusal, according to Delcath CEO Eamonn Hobbs, was due to questions pertaining to their statistical analysis of the device trial data along with the FDA’s request for “additional information involving manufacturing plant inspection timing, product and sterilization validations and additional safety information that we already planned on filing with our 120 day safety update in April”. A more recent PR on April 5th noted that Delcath was meeting with the FDA during that week to discuss the refusal letter. Also in 2Q 2011 is the expected decision pertaining to obtaining CE Mark approval for marketing their device in the European Union. Both of these are huge catalysts for the company and will determine the fate of the device and its potential other indications other than metastatic melanoma.

Titan Pharmaceuticals (OTCQB:TTNP) is completing a confirmatory phase III trial for their subdermal implant, Probuphine, to combat opioid addiction in late 2Q 2011. The initial phase III trial, which completed in 2008, had statistically significant results for Probuphine over a placebo in illegal opioid use for the primary and key secondary endpoints in the trial. The driver for Probuphine’s success is that its active ingredient, buprenorphine, already marketed for this indication can also be abused if crushed and inhaled or if taken in large dosages. Probuphine negates this potential abuse because it administers buprenorphine via a subdermal implant. Anticipation of favorable confirmatory data in late 2Q will no doubt be a driving force as investors research and take positions in the company.

Source: Biotech Catalysts for Q2 2011