6 Healthcare Companies With July Catalysts

 |  Includes: ALXA, AZN, BMY, JNJ, PRTK, SGEN
by: Spencer Knight

The FDA was extremely busy in June approving and rejecting drugs that inevitably shook companies up and down. July is not going to be as busy, but as usual several companies will be dealt a Blackjack while others will bust out. There are actually more FDA advisory committee meetings than PDUFA dates this month; however, oftentimes news from advisory committees can be better, or worse, than a PDUFA because often the news coming out of an advisory committee is a surprise, while a PDUFA is expected.

July 14

The first FDA decision will be for Intermezzo, which is developed by Transcept Pharmaceuticals (TSPT). The drug has been developed for people who wake up at night and have a hard time falling back to sleep, which is a form of insomnia. Intermezzo would be the first prescription drug for this intention on the market and would be taken as a needs-only drug. Intermezzo was rejected in October 2009. Transcept had this to say about the rejection:

In the Complete Response Letter the FDA stated that it believes Transcept has submitted substantial evidence of effectiveness for the use of Intermezzo in the as-needed treatment of insomnia characterized by difficulty returning to sleep after awakening in the middle of the night. The FDA further recognized that the Intermezzo data submitted by Transcept did not indicate significant next day residual effects. However, the FDA indicated that the intended use of Intermezzo in the middle of the night represents a unique insomnia indication and dosing strategy for which safety has not been previously established.

Transcept has been working closely with the FDA to get this problem solved in order to get Intermezzo marketed. The biggest concern the FDA has with Intermezzo is the effects on driving ability for patients the following day; Transcept was able to provide a strategy to keep double-dosing from occurring. Nevertheless, driving impairment could possibly come about if the patient takes the drug within four hours of waking up.

Transcept conducted a highway safety study to show Intermezzo would not have negative effects on driving ability if the drug is accidentally taken within four hours of driving. The results of this study can be found by reading Transcept's 8-K, filed October 19, 2010. In summary, the results showed Intermezzo did cause some effect on driving, but not significant enough to make the study a failure. However, it must be noted the FDA did not give any specifications as to what level of driving impairment would be acceptable. Nevertheless, the study showed Intermezzo was far below the level that would be equal to "driving under the influence of alcohol."

Due to the positive data, Intermezzo is looking strong going into the PDUFA date in two weeks. However, it is important to remember Transcept has stated the FDA may interpret these results differently. The NDA included the highway study, redesigned packaging to hopefully eliminate overdosing, an epidemiology study to show current seven-to-eight-hour hypnotics are incorrectly used in the middle of the night, and comparative data from other hypnotic drugs on the market.

The NDA shows Transcept has gone all out to prove Intermezzo is better than current sleep aids. It is clear Transcept has taken every step the FDA has asked of the company to get Intermezzo to market; therefore, it would not be surprising to see an approval. However, despite the FDA's excitement over the drug, the FDA may still have issues with residual effects the morning after taking the drug.

In terms of share price, investors should expect to see the price run to around the 13 level before the PDUFA. It is difficult to tell whether there will be a huge run-up this time around, as investors will be more cautious of Intermezzo. Similarly, it is difficult to set a price estimate after approval, or rejection, due to the volatile nature of FDA events.

Another event happening on July 14 is an FDA advisory committee meeting to discuss two different intentions for Seattle Genetics' (NASDAQ:SGEN) Adcetris (brentuximab vedotin). Adcetris will be discussed as a treatment for patients who have relapsed from previous Hodgkin's Lymphoma (HL) treatments and systemic anaplastic large cell lymphoma (ALCL). Adcetris has been developed to target cancer cells and destroy the cells without harming healthy cells. As this is an advisory committee, we will know more about the safety the FDA wants after July 14.

From Seattle's recent 8-K on November 1, 2010, the company reported strong results from the trials for Adcetris. For the HL trial, 75% of patients reached the primary endpoint in terms of response levels. Even better for Adcetris is the fact that 34% of patients reached complete remission (CR), with a middle point of 20.5 months. Also, 94% of patients had a reduction of tumors. Seattle Genetics is currently following up on patients to determine a survival rate, but has released an estimate of 89%. Some of the more serious side effects the advisory committee will be looking at for the HL intention will be peripheral sensory neuropathy and upper respiratory tract infections.

Adcetris for ALCL had the same side effects with the exception of upper respiratory tract infections. In terms of the results from the study, 86% reached the objective response with a median of about 12.6 months. Just as the HL form, 57% reached CR with a medial time of 13.2 months. Also, 97% of patients saw some form of tumor reduction. A survival rate has yet to be reached, as the clinical trials have yet to come to an end. Undoubtedly the FDA will want to see these survival rates before the PDUFA date, as that is going to be the biggest safety concern.

July 19

The FDA advisory committee will take a close look at Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca's (NYSE:AZN) dapagliflozin on July 19. As many of you may know, this past weekend Bristol-Myers and AstraZeneca reported some results of dapagliflozin. Dapagliflozin was developed as, and currently will be, the first SGLT2 (sodium glucose co-transporter 2) inhibitor in the diabetes market. Dapagliflozin was developed as a supplement to diet and exercise for patients with type 2 diabetes. Recently the FDA has been extra careful when approving new diabetes drugs, as some of the more recent drugs have been found to cause more problems such as heart attacks.

The most important aspect of dapagliflozin the advisory committee will look at is the recent study that shows cancer rates are higher amongst patients taking dapagliflozin with metformin. Some argue the patients would have already had the cancer forming as it would take much longer than just the clinical trial for cancer to form. Nevertheless, the facts show a substantial difference in dapagliflozin cancer rates.

In terms of type 2 diabetes, the study shows signs of no major hypoglycemia events. Another positive was that patients who took dapagliflozin with metformin showed greater weight loss than patients taking metformin or placebo. An important fact for future FDA approval is that dapagliflozin alone was not inferior to metformin in blood sugar reduction; however, it was superior in terms of reducing morning blood sugar and weight.

Serious side effects were genital and urinary tract infections, both of which the advisory committee will take a close look at. From the 5mg dose, symptoms and signs of genital infection was 6.7% for dapagliflozin plus metformin compared to 6.9% for dapagliflozin alone; and for the 10mg dose the numbers were 8.5% for dapagliflozin plus metformin and 12.8% for dapagliflozin alone. Similarly, in the 5mg dose, urinary tract infections were found to be about equal amongst dapagliflozin plus metformin, dapagliflozin alone, and metformin alone. However, in the 10mg dose, dapagliflozin plus metformin resulted in 7.6% urinary tract infections and 11% under dapagliflozin alone. These side effects, along with the malignancy cases, will be scrutinized by the advisory committee to determine whether the safety of the general public will be compromised.

July 20

The next day the FDA will determine whether or not AstraZeneca's Brilinta will be able to be marketed in the U.S. Brilinta was rejected by the FDA on December 17, 2010. Brilinta was developed as a blood thinner to treat strokes and heart attacks for patients with acute coronary syndrome (ACS). The FDA said it wanted AztraZeneca to analyze the PLATO study more thoroughly to show why there were differences in patients from different regions of the world. The PLATO study was designed to show Brilinta could reach statistically significant endpoints that deal with cardiovascular health and safety in 43 countries.

The main problem the FDA had with Brilinta was when Brilinta is taken with high doses of aspirin; the drug was worse than existing drugs, in particular Plavix. However, an interesting twist is that when Brilinta is taken with low doses of aspirin, the drug performed better. Another interesting aspect of the study was that subjects in America and Canada fared worse than other parts of the world; however, this could be explained by the fact that North American patients were taking higher doses of aspirin.

Despite these problems, the drug may be approved this time around. Although I must admit I am not too fond of companies that quickly turn a CRL into a NDA, I will give AstraZeneca the benefit of the doubt as the company is one of the big winners in the healthcare sector. WIth that said, I do not recommend opening any new positions.

Brilinta may be approved with a restriction stating it may not be taken with higher doses of aspirin above 300mg. Also, the FDA may say the company must undertake more trials to show a biological reason why North American patients were less successful. In this theoretical study, the FDA could ask for more trials on the differences of Brilinta when taken with higher doses of aspirin. I don't see an outright approval with no restrictions, because even the advisory committee last July had issues with patients taking Brilinta and high dose aspirin.

Since AstraZeneca is one of the bigger healthcare companies, the share price may not see a huge jump like we see with smaller companies getting a first approval. However, a 5% jump would not be out of the question, as the drug would further allow AstraZeneca to catch up with the biggest healthcare companies from America. A full approval with no restrictions would give AstraZeneca's share price a 5% gain, while a partial approval with restrictions and requested trials would lower that gain -- especially if more longer term trials are asked for, because that would take away the overall profit margin of Brilinta. On the other hand, if another CRL is issued, we may see another 6-10% drop like we saw this past December after the initial CRL.

July 21

Another advisory committee is scheduled to meet July 21 to discuss Remicade. Remicade has been developed by Centocor Ortho Biotech, which is wholly-owned by Johnson and Johnson (NYSE:JNJ). While Remicade has already been approved for several other indications, this time around it will be discussed as a treatment for pediatric ulcerative colitis (UC). UC is essentially when the lining of the large intestine and rectum became inflamed. This usually causes severe pain in the abdomen. Currently pediatric UC is considered an orphan disease, as there are less then 200,000 patients in the U.S. who suffer from pediatric UC.

The phase three trial that supports the sBLA met the endpoints of the study. The study showed 73% of patients had reached a clinical response while using Remicade at Week 8. The most promising fact of these results is the number of patients that responded was the same as the ACT trial, which was to test adult patients with UC. And since Remicade was approved for adult UC, we should be seeing an approval from the advisory committee. The trial also showed 40% of patients were under some form of clinical remission, even though only 33% had been validated under clinical assessment to have clinical remission of UC. Also, 68% of patients had mucosal healing at Week 8.

While the success rate is strong and efficacy is proven, the advisory committee will pay close attention to side effects from the drug that may cause worse problems. However, the side effects are not too serious as the drug has been on the market for years for other indications. The study showed no serious problems with the drug, but 18.2% of the patients had some form of adverse events and infusion reactions at Week 8. Therefore, we should be seeing a pretty quick and painless advisory committee meeting.

Sometime in July

Alexza Pharmaceuticals (NASDAQ:ALXA) has announced its intention to file an NDA for Adasuve Staccato (AZ-004), which has been developed to treat agitation in schizophrenia or bipolar disorder, in July. A CRL was initially given for the drug this past October due to pulmonary safety concerns. Alexza believes the company has taken the necessary steps for a new NDA. However, this time around the FDA may give AZ-004 to the advisory committee to look closer at the pulmonary issues, because phase three trials showed no serious pulmonary or respiratory effects while the phase one trial showed some problems. The British Journal of Psychiatry has the results of the study; investors interested in AZ-004 should review the data before opening any positions in Alexza.

As Alexza is only submitting an NDA, there should be no share price drop out of the ordinary. Investors may rejoice that Alexza has been able to submit the NDA, which is viewed a positive because the company has been able to complete a project. Also, investors need to keep in mind when the FDA officially accepts the NDA, a share price jump should occur.

Disclosure: I am long BMY.