Seeking Alpha

Probio Invest's  Instablog

Probio Invest
Send Message
Probioinvest is an independent trader with solid track record in biotech trading. He has been interested in biotech companies and trading biotech stocks since 2007. Follow him on twitter @probioinvest
View Probio Invest's Instablogs on:
  • Immunomedics Inc Will Fade Quickly As Share Offering Imminent

    Immunomedics Inc (NASDAQ:IMMU) jumped over 15% in after hour trading on the news that the company initiated Phase III clinical trial of Clivatuzumab Tetraxetan in patients with pancreatic cancer. The sharp rise of the share price is not sustainable as the news is completely expected. In this article, I'll explain why this gap-up will quickly fade and wise investors/traders should take advantages of this nonsensical spike and lock in their profits.

    IMMU is running low on cash

    By the end of Q3 2013, Immunomedics has only $34MM in cash, cash equivalents and marketable securities. The company roughly burned 4-7MM per quarter last year. By the end of Q4 2013, the company will have over $20MM cash. Last time that the company reached this level cash in Feb. 2013, they raised $14MM at $2.3/share. With the start of another Phase 3 trial, which will cost over $100MM, the company will raise money very soon. The secondary offering last year was quite damaging, the share price dropped to $2.11, the 52 week low.

    IMMU has no near term catalysts

    The company's most advanced drug, Epratuzumab, is in two phase 3 trials, EMBODY1 and 2 for evaluating clinical efficacy and safety to treat Lupus. Per the company's presentation, the results won't be ready until Q1 2015.

    (click to enlarge)

    The company won't complete enrollment for the new phase 3 trial for clivatuzumab tetraxetan until late 2015 if everything goes smoothly.

    The company has no significant catalysts for at least one year to excite investors/traders.

    General market correction is imminent

    Multiple factors will likely cause a market correction in early 2014.

    First is Tax Gain Sell. S&P500 rose 26% in 2013. Many investors made huge gains and need to cash in on their stocks in the first quarter to pay hefty capital gain tax. This is called Tax Gain Sell, which is the reverse of Tax Loss Sell, that investors sell their losing stocks in December to reduce tax burden.

    Second, the US government will reach debt ceiling again in early March. Tea Party-oriented conservatives, who failed in efforts to stop the budget deal, say they may have a better chance at attaching new fiscal restraints to legislation raising the U.S. debt ceiling. We fully expect some drama will happen soon in Washington, which will cause some market turmoil.

    Third, QE tapering effects will be felt the market soon and will lead to less risk-taking.

    If the general market pulls back, the red hot bio-techs will be among first stocks to get sold off. IMMU is no exception.

    In summary, we believe the 15% jump just on phase 3 trial start will fade quickly. It won't be surprising if we see IMMU gives up all the gains on Friday, or even close red.

    Disclosure: I am short IMMU, . I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: IMMU, short-ideas
    Jan 10 8:23 AM | Link | 2 Comments
  • Delcath System Could Rise From Ashes

    The year of 2013 is full of stories of phoenix rising from ashes: Chelsea Therapeutics (CHTP), BioCryst Pharmaceuticals (BCRX), EnteroMedics (ETRM)......, just to name a few. More and more pieces of evidence indicate that FDA is increasingly willing to listen to biotech companies' arguments and show lenience if the drugs under review demonstrate reasonable efficacy and safety.

    For example, in February this year, FDA changed stance and allow CHTP to file NDA based on short term benefit of Northera in patients with NOH. Originally, FDA insisted that long-term "durable" effects must be used as basis for approval. Shares of CHTP has soared from under $1 to over $3 in July.

    (click to enlarge)

    Another success story is BCRX. IV Peramivir failed to demonstrate statistically significant improvement over placebo arms in the pivotal phase III trial. However, FDA allowed the company to file NDA probably on the basis that Perramivir is a neuraminidase inhibitor that is quite similar to the other two (Tamiflu and Relenza) that are FDA approved and currently marketed in the US as Influenza treatments. Shares of BRCX soared from $1.2s to as high as $5 in July.

    (click to enlarge)

    Now let's come back to Delcath(DCTH). U.S. Food and Drug Administration's (FDA) Oncologic Drugs Advisory Committee (ODAC) voted down MelblezTM Kit back in May. The company has PDUFA goal date on Sept 13, 2013. Now the company is trading at 0.38. The market cap is $37M, which is below the cash level.

    (click to enlarge)

    But don't be so quick to give death sentence to DCTH yet. Currently the company is working diligently with FDA to find a path forward. There are quite a few catalysts in the near future that could bring DCTH back to life. I'll discuss them one by one below.

    1). FDA positive opinion on Gen 2 adoption and/or a less severe CRL on Sept 13, 2013. The FDA briefing documents released before the FDA panel meeting stated that additional clinical trial data would be necessary to consider the Generation Two filter for approval. The company asked the agency for an urgent meeting prior to the ODAC, which was granted. During this meeting, the company discussed its belief that since the filters are downstream of the melphalan delivery to the liver, they do not impact efficacy. The company is awaiting the FDA's decision on what additional clinical data will be required to approve Gen 2.

    I believe there is quite a big chance that FDA will accept the company's argument. The filter can't play a role in efficacy since the filter is only involved in removing the chemotherapeutic agent after it's done in job in the liver. So regardless of what filters used, when in fact even if no filter was used, the liver would see the same treatment dose and will have the same efficacy response. The company can also leverage both the U.S. EAP and compassionate use data, as well as the European retrospective and prospective safety data collection to support Gen 2 approval.

    I also believe FDA has a motivation to move CHEMOSAT forward and a mild CRL could be possible. After all the clinical studies were completed pursuant to a Special Protocol Assessment (NYSE:SPA) agreement and largely met the predefined criteria. And the kit is still being used in US expanded access program on a compassionate use basis.

    2). Publication of Phase III data to support compelling reimbursement for CHEMOSAT in Europe. The publication plays a critical role in the 7 EU target markets for reimbursement. Right now the publication manuscript has been circulated among the authors and is in the final stages for publication. EU market is a significant market and can bring in substantial revenues if favorable reimbursement decisions are granted.

    3). Partnership news in other major markets. The company is working with a distributor in Australia and New Zealand who is doing a market feasibility study that is scheduled to be completed in the near future. The distributor, according to the company, is a subsidiary of a very large, well-known company that they are not at liberty to name yet. Delcath could also strike a deal in China, which is one of the biggest liver cancer treatment market. The company's EVP and CFO, Graham Miao, is a Chinese well-connected in mainland China and is actively helping the company look for a partner.

    Investor interest in DCTH will definitely increase if any of the near-term catalysts are realized positively. Given that the valuation of the company is below the cash level, the risk/reward is highly attractive. Any positive news could send the shares soaring.

    Disclosure: I am long DCTH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: long-ideas
    Jul 28 10:23 AM | Link | 2 Comments
  • Bear Thesis On Durata Debunked

    Durata (DRTX) has been trading at discount compared to its competitors such as TSRX and CEMP. There have been several arguments floating around among traders and analysts. Below I discuss each bearish reason and then provide the counterpoint argument.

    1. Long half-life of Dalbavancin makes physicians hesitant to adopt it.

    A drug's half-life is the time it takes for half of a given dose to be eliminated from the body or bloodstream. Some Durata bears believe that long duration of Dalbavancin in the blood may be a concern for physicians to adopt it.

    As a matter of fact, the short half-life is the exact shortcoming of many current antibiotics. There are two types of antibiotics: bactericidal and bacteriostatic. Zyvox and Tygacil, are bacteriostatic, which means that although they stop bacteria from growing or reproducing, the patient's own immune system must be strong enough to kill the static bacteria itself. Bactericidal antibiotics kill the bacterial pathogen directly, which is particularly important for patients with weakened immune systems that cannot effectively eradicate the infecting bacteria on their own. Because of the short half-life of many currently available bactericidal treatment options, such as vancomycin and Cubicin, the killing effects of these drugs is limited by the duration of the drug in the blood, and these drugs do not exhibit bactericidal activity for a prolonged, or continuous, period following administration. Dalbavancin's relatively long half-life means that dalbavancin is bactericidal over a prolonged period of time following treatment, as opposed to only a short period after administration.

    Notwithstanding dalbavancin's relatively long half-life, the rate and duration of adverse events in clinical trials to date for dalbavancin are similar to that of the comparator drugs used in the trials, and no negative drug-drug interactions were observed with dalbavancin in clinical development to date.

    2. Dalbavancin does not have oral dosage form and can't compete with Tedizolid or linezolid that have both IV and oral forms.

    First, let's compare dosing schedules of Dalbavancin and Tedizolid or linezolid. For tedizolid or linezolid, patients initially receive the IV dosage form, then switch to the respective oral dosage forms at the discretion of the doctors on or after the second day of treatment. Patients receive once a day for six days of oral Tedizolid or twice a day of oral linezolid. But for Dalbavancin, patients only need to receive IV injection once a week for two weeks. And that's all. No oral dosage form is NOT the disadvantage, but the advantage of Dalbanvancin, because Dalbavancin eliminates the need to take oral tablets on a daily basis. The doctors don't need to worry about that the patients may forget to take the pills at home.

    Additionally, Gastrointestinal side effects and thrombocytopenia are common for Tedizolid or linezolid. According to Trius PR on March 25th, 16.0% patients in Establish 2 trial who took tedizolid developed Gastrointestinal side effects and 20.5% in linezolid. As a result, patients receiving oral treatments have significantly lower compliance rates, and may be at increased risk for hospital readmission. Dalbanvancin's once-weekly dosing will improve patient compliance compared to daily oral dosing antibiotics.

    3. Long-Acting antibiotics will require a change in clinical practice and may hinder the initial uptake by conservative physicians.

    The change in clinical practice from in-patient to out-patient is exactly the value proposition of Dalbavancin. The use of dalbavancin in the hospital may make an overall hospital stay shorter and less expensive. We believe that after dosing a patient with the initial infusion of dalbavancin, hospitals could discharge the patient after only a short stay and then schedule a follow-up appointment for the second infusion. This second appointment would serve the dual purpose of allowing a doctor to reexamine the patient and to administer the second dose of dalbavancin, all while limiting the duration of the patient's hospital stay.

    Durata believes that with effective treatment of patients outside the hospital, the use of dalbavancin could decrease the threat of the spread of MRSA, both to and from a particular patient. Durata also believes that limiting the admission of patients for further treatment in the hospital and avoiding patient compliance and MRSA concerns could decrease readmission rates of patients with ABSSSI and therefore increase reimbursement rates for hospitals.

    Based on a survey conducted by Durata, approximately 69% of the 150 physicians who responded, consisting of 50 hospitalists, 50 infectious disease doctors and 50 emergency room doctors, ranked dalbavancin's product profile at "8" or higher on a scale of "1" to "10," with "1" corresponding with "very poor" and "10" corresponding with "excellent." In addition, in this survey, physicians also favorably ranked specific attributes of dalbavancin's product profile, such as its dosing schedule and compliance levels, and indicated that dalbavancin could allow many patients that are currently treated in the hospital to be treated on an outpatient basis.

    4. Vancomycin and other generic antibiotics are so cheap that dalbavancin won't sell well

    Although generic vancomycin is a relatively inexpensive drug, the overhead costs of treatment with vancomycin can be very high. Among other costs, treatment with multi-day antibiotics such as vancomycin may require the insertion of a peripherally inserted central catheter, or PICC, line to deliver the drug and either overnight hospital stays or, if a patient is treated on an out-patient basis, at least daily follow-up visits. Durata believes that treatment with dalbavancin, even with branded pricing at a premium to generic products, would generally be less costly overall than treatment with a generic antibiotic, such as vancomycin.

    Given above reasons, I Believe DRTX should be valued at least on a par with TSRX. Particularly considering DRTX is more advanced in the regulatory approval process, $400M market cap ($14/share) should be a fair value and will be reached quickly once the market has a better understanding of the company and the drug.

    Disclosure: I am long DRTX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Jul 05 5:03 PM | Link | 1 Comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.