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Saul Kerpelman
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I am an attorney in Baltimore, Md., representing children with lead poisoning. I have been investing in biotech for over a decade. I have an A.B. from Vassar College '76, Phi Beta Kappa; J.D. from Duke Law School '79; M.S. from Johns Hopkins University '08.
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  • Vertex Pharmaceuticals: The Next Big Thing?
    A very interesting company in the biotech space for investors trying to identify the next big successful player is Vertex Pharmaceuticals.  (Symbol VRTX)

    The Cambridge, Massachusetts based company aims for big breakthrough treatments for major indications--and thus if it succeeds could move quickly from development stage biotech to major commercial enterprise.

    The company currently has a market cap of about 8 Billion dollars and has about 200 million shares outstanding.  Revenue last year from collaborations and rights agreements totaled 143 Million, although the company's huge budget for research and development to date has precluded earmings.

    The question, as always for biotechs, is "When do the approved products come and start profitability?"

    The answer for Vertex could be "Very soon".

    The company has not one, but two major drugs that could quickly become cash cows and make the company the real deal.

    First is Telaprevir, the company's most advanced product candidate.  Telaprevir is a new type of treatment for Hepatitis C.  The Hep C market is huge--some analysts estimating it at around 10 Billion dollars annually.  A Goldman Sachs report recommending Vertex predicted Telaprevir might capture as much as 80% of the treatment failure market for the disease.  The company reported excellent Phase III results for the drug, has submitted a licensing application to the FDA, received accelerated review and has a decision date in May.  Telaprevir involves a course of treatment that is only half as long as the usual treatment regimen and thus is very appealing to patients.  
    Although FDA approval is never a sure thing, Vertex is very confident in the success of Telaprevir and has hired 200 additional employees to be able to fully prepared for the drug's launch immediately upon approval.

    Second is the drug designated VX-770, which is a novel treatment for cystic fibrosis.  Phase II results were extremely promising and the company is awaiting Phase III registration results.  If the drug succeeds in the trial early this year,  the company expects to file applications for approval both in the US and Europe in the second half of 2011.

    The bottom line is that the company looks to be rapidly approaching the biotech promised land--Profitability!   Guidance is for the company to be cash flow positive in 2012.  From that point on there is every opportunity for Vertex to be a true global force.

    As of yearend 2010 the company was sitting on over a Billion dollars in cash.

    Furthermore there is a rich pipeline with  promising drug candidates for treating epilepsy and rheumatoid arthritis.

    Recently shares have traded in the high 30's with a 52 week high of 43.94.  With the FDA decision date on May 23, the shares should start to see accumulation and a rapid rise upon approval.

    This is not a one trick pony, but a company that has proceeded the slow, steady, guided by the science route--building a portfolio of potential blockbuster drug candidates--and it seems about to pay off.

    Tags: VRTX, Biotech
    Feb 17 11:48 AM | Link | Comment!
  • Dendreon Is Not In Trouble!
    Just a short note to counter the shameful "article" by Brian Orelli over on Motley Fool yesterday evening, with what one can only characterize as the intentionally misleading headline of "Dendreon's in Trouble".

    Unfortunately unlike this blog on Seeking Alpha, such dreck on Motley Fool routinely makes it onto the wires and also onto the Yahoo headlines for the subject stock--and so can have an effect on the share price and on market sentiment about a company. It's sad but true that a scary headline like that can trigger some to sell first and ask for actual facts later.  It's probably not a coincidence that Dendreon shares are trading down as I write this.  I have to admit that even I, who totally stay on top of developments at Dendreon because I am invested in the company, hurriedly clicked on the headline in Yahoo to see what, if anything new, was up.

    Anyway, the truth is that Dendreon is not in any kind of trouble and that those who read Orelli's post past the irresponsible headline would have found out that he was writing about the old news (August 3) that the FDA had sent Dendreon a warning letter that it didn't like some of the material in a promotional brochure about Provenge that sales reps were leaving with doctors--such horrible stuff as not including the confidence interval in the p value of the survival advantage Provenge demonstrated in its pivotal study.  

    All Pharma companies get such letters for approved treatments and the cure is to pull the offending material and replace it with material that pleases the anal nit pickers at the FDA.  Normal sales force nuisance stuff.

    The incident does, however, shine a light on another phenomenon--websites gratuitously or even maliciously including references to hot stocks like Dendreon just to get hits.  In this brave new internet world in which any schmoe can become a "journalist" just by widely publishing on the internet, there is a very real danger of harm being done by un-policed posters who have no familiarity with journalistic ethics or responsibilities and will publish whatever they need to publish to get eyes on their stuff.

    Com'n Motley Fool!  Allowing that headline when you know it will panic some and mislead?  And knowing it's wrong?


    Disclosure: Long Dendreon
    Tags: DNDN, Biotech
    Aug 10 12:24 PM | Link | 11 Comments
  • Dendreon Update
    Since my first piece on Dendreon on July 7, in which I recommended that readers buy all they could get their hands on, there have been many developments in the world of the company that is the first to get FDA approval for a cancer immunotherapy.  Readers are urged to consult the earlier articles, but in brief Dendreon is the small biotech that has rocked the world by attaining the Holy Grail of cancer research by succeeding in training the prostate cancer patient's immune system to recognize cancerous cells as foreign and to attack and kill them.  Its approved treatment, Provenge, significantly extended the lives of even the sickest of the sick prostate cancer sufferers in 3 separate phase three studies.

    First of all, those who followed my advice are sitting on a 33% gain (29.09 close on July 7 to the current 38.90 as I write) in just 33 days.

    There's no suggestion here that similar jumps are imminent, but good news continues to pile up for Dendreon.

    The scare I originally wrote about--Medicare instituting a review of coverage for Provenge--has died down as investors have consulted the law applicable to the review and as the medical community has weighed in on whether Provenge is "reasonable and necessary" for late stage prostate cancer patients.  As to the law, Mr. Market has confirmed what I wrote on July 7, which is that Medicare's statutory authority to conduct such a review DOES NOT INCLUDE authority to review a treatment's cost.  Therefore the hysterical moment of rumors about denying the treatment as too expensive have pretty much disappeared (except among the hard core Obamacare bashers, who somehow see a conspiracy to kill old people in every bureaucracy).  And as part of the review process, in the public comment portion of the review the medical community has weighed in like an 800 pound gorilla in favor of coverage for Provenge.  Out of close to 800 public comments there were a mere 11 or 12 that one would characterize as "anti-Provenge", while heavy hitter organizations like ASCO weighed in strongly in favor of Provenge not only as "reasonable and necessary", but heralded the treatment as a breakthrough in cancerworld and urged coverage in the strongest possible terms.

    Next, with wonderful timing for the company, since the CMS public comment period was just about to end, the results of the Impact trial--which resulted in FDA approval of Provenge--were published as the lead story in The New England Journal of Medicine, the premier medical journal in the world.  This enabled Dendreon in its public comment to the CMS to append the NEJM article and to agressively assert that the entire CMS review was unnecessary and should be withdrawn as baseless, since the case for Provenge coverage was overwhelming.

    Then they had a Quarterly conference call.  And Wall Street was blown away by its first look at the uptake of Provenge.  While Quarterly revenues from the first sales of Provenge were slightly below consensus analyst estimates at $2.8 Million, the company also wisely revealed the additional fact that in spite of the plant in New Jersey being closed down as part of expansion plans for 10 days in July, July revenue was still $5.2 Million.  They further revealed that doctors in the short period of time since Provenge was approved on April 29, 2010, have already written over 500 prescriptions for full course, $93,000, treatments with Provenge.  Further, the company said that 14 of the 15 regional Medicare contractors--whose policy decisions regarding coverage control pending the completion of the national CMS review--have already decided to cover Provenge.  They reiterated guidance that at least 2000 patients will be treated in the first 12 months of Provenge availability, and that further plant capacity for almost $2.5 Billion of annual Provenge production will come on line in mid 2011.

    The next day, August 4, Dendreon shares touched 40 before settling in the high 30's.  Many analysts reiterated buy ratings with targets in the 50's and 60's for the next year.

    The company did not announce anything, except that there would be a future announcement sometime in the fall or in early 2011, regarding the progress on EMEA approval for Provenge.  But for readers here only I will share that I spoke directly will Hans Bishop, Dendreon's Chief Operating Officer, at the shareholder's meeting in June and he gave me the distinct impression--without literally saying the words--that they do not expect EMEA to require additional trials in order to gain European approval.  I have not spoken with him since, but I would expect this feeling to be even stronger now that the Impact results have been accepted for publication in the NEJM.

    He did directly tell me that the company is likely to partner Provenge in the Asian market, although he provided no time frame for this to happen.

    This is the recent micro stuff--and it's all good.  But please also remember the macro:  this is the company that owns 100% of worldwide rights, not just to the first FDA approved active immunotherapy for late stage prostate cancer, but for a well protected antigen delivery cassette technology that has been validated by the success of Provenge.  That same technology will be tested in multiple cancers in the years to come--giving Dendreon the potential to be a biotech behemoth.

    Cure for cancer?  As shocking as it may be to type that question, it is at least in the legitimate realm of discussion regarding the future of Dendreon.  I remind you--the Provenge researchers themselves have publically opined that when given in earlier stage disease, as doctors may now legally do off label,  to men with earlier disease and thus healthier immune systems, Provenge may prove to be a cure.

    How big would that be?

    Buy all you can and hold long term.


    Disclosure: long Dendreon
    Tags: DNDN, biotech
    Aug 09 4:40 PM | Link | 14 Comments
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