Dapagliflozin And Libigel Lead 4 October Healthcare Catalysts

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 |  Includes: ANIP, ATRS, AZN, BMY, PCRX, TEVA
by: Spencer Knight

October will present several healthcare catalysts. From large cap pharmaceutical companies that are known throughout the world to small cap biotech companies trying for the next blockbuster drug; October will see four companies face the FDA and two others report anticipated efficacy results.

The first company with an advisory committee meeting on October 17th is Teva Pharmaceuticals (NYSE:TEVA). The committee will be discussing Teva's sNDA for Azilect. Azilect was approved on May 17, 2006 to treat patients with Parkinson's Disease as an initial monotherapy in early stages and as an adjunct therapy along with levodopa for patients with moderate to severe stages of the disease. The treatment the advisory committee will be reviewing is indicated to slow the progression of Parkinson's Disease as an initial monotherapy and adjunct therapy with levodopa. We will know more about the safety issues, if any, after the advisory committee. Some positive momentum Azilect has in its favor is a positively revised labeling in December of 2009. The revised labeling consisted of less medication and food limitations.

With this positive momentum I am expecting to see the advisory committee give a strong recommendation. Also, Azilect will be an important advancement for Parkinson's Disease. The treatment could potentially begin a new trend of slowing the symptoms of Parkinson's Disease and possibly reversing the disease in the future. This may sound farfetched but only time will tell.

Nevertheless, in order to discern the impact a positive review will have on the stock we will need to view the potential of the drug. In 2010 Azilect sales totaled about $318 million; which is up from $243 million in 2009. Overall revenue has increased year over year, and with the new indication we will see this trend continue. Also investors should keep in mind in 2008 Clal Finance's Gal Reiter noted the new indication will push the overall sales of Azilect to $1 billion.

One highly watched treatment is BristolMyers Squibb (NYSE:BMY) and AstraZeneca's (NYSE:AZN) Dapagliflozin. The treatment is intended to treat type two diabetes as an adjunct with diet and exercise. Dapagliflozin has been closely watched because it would be the first insulin independent diabetes drug on the market. Rather than using insulin as most diabetes treatments, Dapagliflozin acts as an SGLT2 inhibitor. Therefore the body does not uptake extra blood glucose filtering through the kidney; which leads to glucose being excreted via urine.

Unfortunately for the two companies the Advisory Committee that viewed the data on July 19, 2011 voted 9-6 against approval. The two biggest concerns were abnormal rates of cancer in the dapagliflozin plus metformin groups. During the trials nine cases of breast cancer were found as well as nine cases of bladder cancer in patients using dapagliflozin plus metformin. On the other hand, the control group, only using metformin, saw one case of breast cancer and one case of bladder cancer. Also, the dapagliflozin plus metformin group saw an increased percentage of urinary tract infections compared to the control group. These reasons may be the downfall of dapagliflozin; which would have been a possible blockbuster drug.

From a bullish perspective, the cancer cases may be able to be managed with follow up trials to discern whether or not the cancers were caused by the treatment or not. Another bullish argument is no cardiovascular side effects arose during the study along with a universal agreement that the treatment is highly effective. However it still cycles back to the 18 cases of cancer in the dapagliflozin group. Obviously these are a very small percentage of the study population, but the FDA has to weigh the risks and rewards of the new treatment. And if the risks outweigh the rewards, we may see a rejection. Even if the FDA approves dapagliflozin, we may see doctors hesitate to prescribe the new treatment knowing patients may develop cancer.

The final PDUFA for October is for Pacira's (NASDAQ:PCRX) post surgical pain management treatment Exparel. Exparel is intended to deliver pain relief by combining the already marketed drugs bupivacaine and DepoFoam. DepoFoam is simply a drug delivery platform that encapsulates drugs, such as analgesics, and allows a long term continuous release to treat pain more effectively. The goal of DepoFoam, especially Exparel, is to give patients a non opioid treatment that can reduce pain to the same degree. Also, DepoFoam does not change the molecular structure of the encapsulated drug.

While DepoFoam is already approved, Exparel will be decided upon within the next four weeks. The one hiccup with regards to the FDA decision is the PDUFA action date was extended three months due to a "major amendment" by Pacira. This amendment was due to the FDA requesting more information regarding the NDA. While many studies (found here, here, here, and here) promote the safety and efficacy of the treatment, I would not be surprised to see another delay or a possible CRL if the company was unable to provide enough information. Keep in mind, I strongly believe Exparel is safe and effective, but the FDA has been known to send CRL's to companies that do not submit orderly information with the initial NDA.

Currently the company trades with very low volume; under 100 thousand shares per day. This could cause an extreme share price pop if traders and investors begin to buy into the company expecting approval. Prior to the June 14th delay, the stock had been rising fairly well in anticipation of approval; but with a gloomy stock market and the three month delay investors have not given the stock as much attention. Please note a pre FDA decision run up began in the first couple weeks of September and this trend should continue through October. Also note, according to Wedbush Exparel will amass peak sales of $362 million in the U.S. and $576 million worldwide.

To put the revenue estimates in perspective, Pacira's yearly revenue from 2010 was $14.56 million and Pacira's combined revenue from 2007-2010 was only $51.84 million. Because of this Pacira's long term stock potential is very strong. From a short term view, the possibility of a buyout, after approval, is something to keep in mind. While investors should not expect a buyout, with around $500 million per year of revenue at stake many larger companies will be interested in at least talking to Pacira. I am expecting a strong catalytic event for Pacira's stock in October. However it is important to keep in mind if a CRL is sent to Pacira, the stock will plummet because investors are looking at Exparel as a "blockbuster" drug for Pacira.

The final, and possibly the most watched event by small cap biotechnology investors is the anticipated release of BioSante (BPAX) and Antares (AIS) two phase three efficacy studies for Libigel. I am expecting to see the preliminary data from one of the studies in October, and the other study in November. While both may be released in November, I am expecting at least one this month. In June I wrote about the positives and negatives of Libigel, as well as the potential of BioSante and Antares as long term holdings. No new data, except the pharmacokinetic study, regarding Libigel has been released since June, therefore the information is still up to date.

Nevertheless, the efficacy data will be very important for Libigel. While previous studies have shown effectiveness and safety, investors want to see the results from the phase three study. If the results come back as optimistic as BioSante and Antares suggest, we may see both stocks rise at least 15-25% in the short term. Also, with positive efficacy results we may see negotiations begin with larger pharmaceutical companies. However it is important to keep in mind a buyout will not occur until the phase three safety study is complete. Since, as we saw with dapagliflozin, an effective treatment may not always be safe for the public.

As you can see above, October will be a busy month for healthcare investors. I am expecting at least one of the action dates to results in a CRL. But as most investors whom deal with the FDA understand, often times the FDA rejects or accepts certain treatments at what seems like a whim.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.