BioPharma Picks For Tuesday August 14

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 |  Includes: ARIA, ATRS, BMY, PSTI, SNTS
by: StockMatusow

Santarus (SNTS) (pps: $6.41 market cap: $403.53M) announced yesterday that the U.S. Food and Drug Administration (FDA) has extended the Prescription Drug User Fee Act (PDUFA) target action date for the review of the New Drug Application (NDA) for UCERIS (budesonide) tablets 9 mg for the induction of remission of mild to moderate active ulcerative colitis from October 16, 2012 to January 16, 2013. The three-month extension is a standard extension period.

I was considering Santarus for a catalyst trade but with the news above, and with less than expected earnings, the stock could be under some pressure today which might make it a decent short term short trade. Consider going long in the stock come November as the company approaches its new PDUFA date in January.

Pluristem (PSTI) Pps:$4.08, market cap: $182.87M. Pluristem continues to be a good pick for me as the stock recently made a new 52 week high last week of $4.40 a share. Sources tell me that the company might have more news coming concerning orphan status and a potential filing for a pivotal phase II for aplastic bone marrow treatment using its patented placenta based stem cells.

Some notable recent developments for the company include:

An announcement from Pluristem yesterday indicated that those afflicted with peripheral arterial disease, or PAD, may soon have an alternative to Bristol-Myer Squibb`s (BMY) troubled anti-clotting drug Plavix, whose drawbacks prompted the FDA to assign a black box label two years ago. People who have reduced functioning of their CYP2C19 liver enzyme cannot effectively convert Plavix to its active form. As a result, Plavix may be less effective in altering platelet activity in those people. These "poor metabolizers" may not receive the full benefit of Plavix treatment and may remain at risk for heart attack, stroke, and cardiovascular death.

The company has selected Cato Research as its contract research organization for its Phase II trial in intermittent claudication (IC) under the auspices of the Paul-Ehrlich Institute.

The trial will evaluate the safety and efficacy of Pluristem's PLacental eXpanded (PLX-PAD) cells in treating IC, a subset of peripheral artery disease (PAD). The prevalence of IC in the United States alone is approximately 14 million patients, representing a cost of approximately $2.5 billion annually to the healthcare system. (References: The SAGE Group and HCUP 2007 Inpatient Data)

On August 6th, the company announced that the life of a patient suffering from bone marrow failure in which there was a dangerous reduction in the number of red blood cells, white blood cells, and platelets (pancytopenia) has been saved using Placental eXpanded (NYSEMKT:PLX) cells. This is the second time in the past three months that a patient suffering from bone marrow failure was successfully treated in a compassionate use treatment with PLX cells with a return of bone marrow function.

The patient, a 54 year-old woman diagnosed with lymphoma cancer, was initially treated with chemotherapy. Her condition continued to deteriorate, necessitating a bone marrow transplant. The transplant, as well as alternate therapies, was not successful. As a result, the woman suffered from prolonged dangerous pancytopenia. PLX cells were then administered to the patient at the Hadassah Medical Center, Jerusalem, under the Israeli government's compassionate use program. Following the injection of the PLX cells intramuscularly (IM), the woman's clinical condition and blood counts improved to the point where the patient was able to be released from the isolation unit and subsequently discharged from the hospital.

My research indicates this company is the real deal, having strong support from The Israeli Government. Pluristem's original intended use of its technology was designed to treat victims of extreme radiation from a dirty bomb - according to a phone conversation I had 2 weeks ago with Dr. William Prather, Senior VP of Corporate Development. The State of Israel constantly faces these types of threats from its enemies, so what Dr. Prather told me makes complete and total sense. He also informed me that tests on lab rats which were given large doses of radiation, were treated with Pluristem's technology - afterwards showing no signs of radiation poisoning.

I strongly feel Pluristem is the best speculative stock around - granted, it carries a lot of risk, but the reward here could be a massive one if the company is successful in gaining an orphan status pivotal phase II compassionate use grant from the FDA.

Ariad Pharma (ARIA) (pps: $19.39 market cap: $3.21B)

On Monday, Ariad reported from its Q2 earnings call it had cash, cash equivalents and marketable securities of $250.3 million, working capital of $218.8 million, and total stockholders' equity of $211.5 million compared to cash and cash equivalents of $306.3 million, working capital of $282.2 million, and total stockholders' equity of $220.1 million at December 31, 2011.

For the six-month period ended June 30, 2012, Aria reported a net loss of $107.2 million and cash used in operating activities of $68.2 million.

The company has filed for regulatory approval of ponatinib in the United States based on the results of the PACE clinical trial and expect potential regulatory approval as soon as the first quarter of 2013. Ariad also expects to file for regulatory approval of ponatinib in Europe in the third quarter of 2012. Subject to obtaining marketing approval, it intends to commercialize ponatinib in the United States and Europe and other select markets worldwide. The company has initiated a Phase 3 clinical trial of ponatinib in newly diagnosed CML patients. They also plan to initiate additional clinical trials of ponatinib, including a clinical trial of ponatinib in Japan, in the second half of 2012.

Ponatinib is an investigational pan BCR-ABL inhibitor that has potential applications in various hematological cancers and solid tumors.

Ariad completed patient enrollment in a pivotal Phase 2 clinical trial of ponatinib, referred to as the PACE trial in approximately 450 patients with resistant or intolerant chronic myeloid leukemia, (CML) or Philadelphia positive acute lymphoblastic leukemia (Ph +ALL). These patients are resistant or intolerant to dasatinib and/or nilotinib, or have the T315I mutation.

In June 2012, the company announced updated clinical data from the PACE trial that showed 54% of chronic-phase CML patients, including 70% of patients who have a T315I mutation, achieved a major cytogenetic response. The most common adverse events considered related to ponatinib included thrombocytopenia, rash, dry skin, abdominal pain, and headache.

I am continually amazed at the support the Ariad stock has received and continues to receive to date. Granted, ponatinib has helped many people who suffer from CML and Ph+ ALL, but I am not sure if this drug will be a front line drug, or a 2nd or 3rd line drug. I expect the stock to run up more for the rest of the year, and then potentially sell off upon the likely FDA approval of ponatinib.

Ariad is also working on AP26113, an investigational dual inhibitor of anaplastic lymphoma kinase, or ALK, and epidermal growth factor receptor, or EGFR - two clinically validated targets in non-small cell lung cancer, or NSCLC.

The company initiated patient enrollment in a Phase 1/2 clinical trial of AP26113 in the third quarter of 2011, and expects to enroll approximately 30 to 50 patients in the Phase 1 portion of the trial. The Phase 2 portion of the trial is expected to begin in the second half of 2012 and is planned to enroll approximately 80 additional patients. Depending on the results of this trial, the company could potentially conduct a pivotal trial of AP26113 in patients with NSCLC commencing in 2013.

I am more bullish about AP26113 than I am about ponanitib, and I am especially bullish in my sentiment about CEO Dr. Harvey Berger. To date, Dr. Berger has not sold a single share of his massive position of over 2 million shares. Dr. Berger has done a fantastic job of getting the Ariad story out there to large institutional investors, which is very important in sustaining a solid base of support for the stock.

Speaking of institutional support, Antares Pharma (ATRS) should be seeing quite a bit more of this over the next 4 to 6 weeks. In my opinion, shorts betting against Antares are making a huge mistake and fail to understand what this company is likely to achieve. For instance, I have had some talks with a few short sellers who on face value, feel a company with a top line of self-injectors called "VIBEX" cannot ever really do any meaningful revenue to support a market cap over $1B dollars and higher.

I reiterate my bullish stance on Antares' unique subcutaneous self-injector Vibex MTX, as the availability of the VIBEX MTX system would give patients and physicians a new option before making the jump to expensive biologics, which are associated with serious and increased safety risks for RA patients.

According to the 12/14/11 Oppenheimer presentation, there are about 2 million RA patients, of whom 30% to 60% do not tolerate oral methotrexate well, yet only 6% to 8% are being prescribed an injectable form of the drug. One of the reasons for this disparity is that RA patients must receive their injections by their rheumatologist.

According to an independent survey of more than 200 rheumatologists, the physicians reported they would double or triple their prescriptions of an injectable form of this drug if something like VIBEX MTX was currently available. I wonder if the short sellers have considered these facts, and if they can rebut these facts with their own numbers?

Many short sellers believe that Antares will not receive insurance support because its Vibex MTX self-injector costs considerably more than oral MTX. The question I would pose them is - why do the insurance companies support much more expensive biologics? It seems to me that insurance companies would first try approving a more reasonably priced form of injectable methotrexate for the RA patients who simply do not tolerate the oral version of that drug before paying significantly more money for the expensive biologics.

To further support their short thesis, the shorts argue that injectable methotrexate is already available in the U.S. for a lower price than the amount at which Vibex MTX will be priced. The fatal flaw with this argument, however, is it focuses on the wrong comparison. Specifically, the shorts are simply making an apples-to-apples comparison of injectable methotrexate. Yet in their quick "DD," they completely missed the reason why the surveyed rheumatologists would double or triple their prescriptions after Antares launches MTX. It's the device, not the drug. Much like music has evolved, Antares is developing the next evolution cycle for the delivery of a decades-proven drug. By combining its state-of-the-art auto-injector to make currently-available drugs much better for certain patient groups, Antares is breaking the mold of the typical device company. Similarly, it is unlike the typical biopharma, as it is focusing on improving FDA-approved drugs with years of demonstrated efficacy and commercial success.

Today, injectable methotrexate is available only as a standard, manually-operated IM needle and syringe. The pre-filled VIBEX self-injector system, on the other hand, will deliver a pre-metered dose of methotrexate subcutaneously without the pain and trouble of a typical syringe. Injecting with Vibex MTX will occur in the comfort of the patient's home, bypassing the need to receive an injection at their doctor's office, and more importantly, saving the insurance companies money from having to up prescribe the more expensive biologics in conjunction with oral MTX.

The global arthritis market and some of its major players along with their biologics and revenues include:

  • Johnson & Johnson (NYSE:JNJ): Remicade: $8.5B
  • Amgen (NASDAQ:AMGN): Enbrel: $3.7B
  • Pfizer (NYSE:PFE): Celebrex, Tofacitini: $2.5B
  • Bristol-Myers Squibb : Orencia: Expects $1.1b 2012

Vibex MTX is not going to dominate market share - it doesn't have to as we can see above. Where the shorts 'fall short' in their thesis are that they fail to consider the massive size of the Rheumatoid Arthritis market. If Antares simply grabs a 10% market share, the company will be seeing revenues over $250M a year on good margins.

Experience with Sub-cutaneous Methotrexate in Europe:

There is commercial proof of concept for a subcutaneous dosage form of methotrexate. In Europe and Canada, Medac International and its licensees market a pre-filled syringe containing methotrexate. Antares' market research indicates that it has captured 20% of the unit market and 80% of sales for all methotrexate formulations in Europe. This particular injector is basically a standard needle which is easier to handle -not nearly as efficient as the Antares Vibex injector.

The VIBEX self-injector system can deliver a variety of drugs without the pain and trouble of a typical syringe, all in the comfort of a patient's home. This bypasses the need to receive an injection at their doctor's office, and more importantly, saves the insurance companies money from having to up prescribe the more expensive biologics in conjunction with oral MTX.

The Obama administration is working to release 2 analyses of the market for injectable drugs, which dominate the list of scarce meds. With injectable drugs being scarce, and the administration along with the FDA working to help solve this problem, growth companies like Antares are in strong position to reap the future benefits from this analyses report.

In relation to Obama's FDA directive in his $3.73 trillion fiscal year 2012 budget announced February 14, is a proposal that seeks to reduce from 12 to seven the years of data exclusivity protection for "innovator" biologics against follow-on biologics. If passed, this will speed up the process of bringing these follow-on biologics, also called biosimilars, to market. This also should greatly benefit companies like Antares

With Vibex MTX, doctors should be able to see more patients per hour without having to take the time to inject some patients at their offices with MTX. Because of this, doctors will not have to carry MTX in inventory, and insurance cost should lower overall.

The beauty about The Vibex line of injectors is once Vibex MTX gains FDA approval (which is virtually certain), further safety studies for device approval is no longer needed for follow-on Vibex Injectors - which will allow Antares to file new drug applications (NDA) within months of each other.

The market is about revenues and earnings - period. Many shorts are not impressed with the sound of "self-injectors," preferring to focus more on what they believe are blockbuster drugs which have far more risk at gaining FDA approval than simple do-it-yourself injectors. To date, I have yet to see a solid short thesis argument against the future success of Antares - and don't expect any reasonable ones soon.

Disclosure: I am long ATRS.

Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.