Seeking Alpha

Scrying Biotech's  Instablog

Scrying Biotech
Send Message
Welcome to the wonderful and dangerous world of biotechnology investing. My name is, Michael Webb and I'm here to help guide you safely through it as best I can. I've been investing exclusively in the sector since late 2012 and expressing my opinions here on Seeking Alpha in biotech alone since... More
View Scrying Biotech's Instablogs on:
  • Why Afrezza Is The New Apple Computer

    As many of you are aware, I became associated with MannKind Corporation (MNKD) through the publication of three pre-adcom articles that warned investors of the risks associated with binary events. It was unfortunate that MannKind happened along at the time I chose to tackle the issue of human bias and holding through advisory committee meetings without adjusting one's profile to risk. Unfortunate, because there was nothing about Afrezza that I didn't like as a product and nothing that I didn't admire about Alfred Mann as a person. I take comfort in knowing that there isn't a word I would alter in any of the articles I wrote, and in knowing that a dear friend of mine who heard Alfred Mann speak and met him informally, suggested that he would have loved my fascination with the Tarot and all things mystical.

    No one should presume that the purpose of my article today is to make amends, as there are none to make. I frankly pity those who were offended by me, as remaining so to this day would be an awful burden for them to bear. Rather, I'm here to alert investors to an idea that has taken root in my mind that I can't seem to shake.

    Afrezza Is To Apple Macintosh What Exubera Was To The IBM PC.

    Perhaps it's too late in life for Alfred Mann to be considered the Steve Jobs of diabetes. And perhaps the metaphor itself is difficult for some to condone. But the fact is that some inventions are culturally disruptive in that they change the way we live, work and play. They literally change the way we perceive ourselves to be as human beings and change the way we interact with each other.

    In his final technology products column for the Wall Street Journal - and I never read one of them, Walt Mossberg compiled a list of the 12 most influential devices he had reviewed over the previous 2 decades of his then concluding career. On that list, you'll find 3 Apple icons - the iPod, iPhone and iPad. But the 2 Steves - Wozniak and Jobs got started sooner in life creating disruptive technologies than Mr. Mossberg's career of coverage allowed for.

    Like the diabetes market, the world of personal computing was already established before Apple (AAPL) made the concept popular. Shadow casting monoliths like Xerox and IBM were in full control along with startups like Atari and Commodore.

    In 1981, IBM was poised to dominate the landscape with the IBM PC that imitated most of Apple's disruptive features embodied in the Apple II. But Steve Jobs by this time was maniacally possessed with the idea of making a machine that was easier to operate, less obtrusive and more user friendly. Does that description remind you at all of the qualities Afrezza offers? It should. Because I believe these technologies are remarkably analogous one to another.

    (click to enlarge)

    Macintosh reshaped the way people thought of computing and thought of themselves. You could do things on an Apple that you couldn't do on an IBM like paint your own images and write documents in a way that you could edit them on screen. Of course, we now take these things for granted, but back in the day, these qualities were beyond what the word "innovative" implies. For all the creativity, hard work and good fortune provided, however, it took a partnership to put Apple on top of the world.

    Sanofi Is To Afrezza What Adobe Was To Apple

    Not enough credit was given to Adobe Corporation (ADBE) of Seattle Washington in the development of Apple's iconic image. You see, Adobe created the software that people needed to become their own personal publishers. This made Steve Job's job significantly easier because he could focus on creating the technologies that buttressed the evolution of the individual's personal computing experience. And this is what I believe is happening now with Afrezza.

    Afrezza is the innovating force that will change the way diabetics not only use insulin but become insulin users. No longer will people avoid taking the insulin that could save their lives because they naturally want to avoid the pain of an injection. And no longer will they feel uncomfortable dining with friends by having to escape to some private place to inject a needle when they can simply and easily inhale their medication right at the table. A sick person or addict injects their drug while someone having fun toots on a whistle. The device itself fits in the palm of your hand. You can see a quick video here that demonstrates how it works.

    (click to enlarge)

    Sanofi (SNY) will allow Alfred Mann and MannKind Corporation to return to a focus on innovation just as Adobe once did for Apple. In this clip from the Quarterly Earnings Call that followed the partnership presentation, Alfred Mann's youthful exuberance at 91 years old got the best of him as he blurted out something that was not yet to be publicly made known.

    Adnan Butt - RBC Capital Markets

    If I can get a follow-up, Matt, so what are the plans for cash that you received. How should we view R&D going forward? The company will -- I mean, are there plans to do some R&D or pretty much it's going to be an AFREZZA-focused company?

    Matthew Pfeffer - CFO

    No, there's definitely plans to do R&D. I mean, we have a lot of exciting possibilities in front of us for using this technology in other applications. It was mentioned briefly on the call this morning, although it was primarily about the deal. We did not want people to forget that we view this as a platform technology with a lot of exciting applications and you should expect to hear more from us in the future about that. I mean, it's the obvious next question post Sanofi.

    In that regard, I've been asked this a couple of times on the phone, so probably clarify it, because people will say what rights in those other areas do Sanofi have? They do have a right of first negotiation if we were to take a formulation of inhalable GLP-1 forward. But they have not rights to those -- any other products beyond that. So, I can't say we would mind talking to them about them when they get to the point when that's appropriate. But under the current agreement, the only future potential right they have is on the GLP-1.

    Alfred Mann - Chairman and CEO

    They also have rights to our new process.

    Matthew Pfeffer - CFO

    We've not disclosed that yet Alf.

    Alfred Mann - Chairman and CEO

    Sorry. [Laughter throughout the room.]

    What this spontaneous outburst indicates to me is that MannKind is still hard at work developing new technologies that could be revealed at any moment of any day.

    Licensing Out Modified Technosphere Technology Could Result In Regulatory And Sales Milestones As Well As Royalties

    Obviously, the technology behind Afrezza's Dreamboat inhaler can be tweaked and refined to other licensable applications. There will be other biotech startups whose medications might benefit from a delivery method that emphasizes rapid biologic absorption but has also already passed regulatory scrutiny and been utilized commercially.

    I also believe, however, that MannKind will be tasked to develop something to complement Sanofi's secret marketing plans - accessories, especially by crafting kits designed to bundle Afrezza with Sanofi's traditional insulin therapies.

    Two Forms Of Marketing Will Make Sanofi The World's Largest Insulin Provider

    At that same Q2 Earnings Call, Adnan Butt asked the other question on every investor's mind. Would Sanofi make every effort to sell Afrezza? The thought behind this question is fairly straight forward. Why would a partner enthusiastically sell a drug at a 35% discount that would take away 100% of their own drug's profit?

    And of course, Mathew Pfeffer revealed only that this was top-secret information that Sanofi was unwilling to share with competitors through public disclosure. As a result, it becomes the perfect fodder for my speculative mind.

    To topple Novo Nordisk (NVO), Sanofi will need to steal away existing clients from other companies and bring in both treatment naive patients and those who've given up on needle based insulin therapies. To demonstrate how they will do this, I've constructed two conversations that exemplify this two-pronged approach to marketing success.

    Private And Professional Marketing

    Denise is a newly diagnosed diabetic and is talking with her doctor about receiving therapy.

    Doctor: It's time to put you on some form of insulin therapy.

    Denise: But doc, I don't like shots!

    Doctor: That's understandable. We have a new insulin that you inhale through this little whistle before meals.

    Denise: So, I don't need shots?

    Doctor: Well, yes and no. You need fewer of them though. This is called a Dreamboat inhaler that you'll use at mealtime. And before you go to sleep at night we'll prescribe a more traditional, injectable insulin.

    Denise: That doesn't sound so bad.

    Doctor: Well, I could write you two separate prescriptions - one for your inhalable insulin - Afrezza, and another for your bedtime insulin. But Sanofi has this nice little compact kit that you can place in your purse or pocket and it allows you to store and take a days supply of insulin out with you. It's very convenient and easy to use. And it pairs any of their fine insulin products - Toujeo, Lantus or Apidra in one easy to use and convenient package. There' even a larger travel case that keeps everything fresh for days.

    Denise: Ok. Thanks. I'll give it a try.

    Public And Social Marketing

    Denise is now at a restaurant with friends, breaks out her Dreamboat inhaler and toots her dose of mealtime therapy.

    Her Friend: What's that?

    Denise: Oh, it's my insulin. I have to take it before every meal.

    Friend: You're kidding, right? My mom's diabetic, but she gave up on all the shots.

    Denise: I totally get that. You should have her go see my doctor. He said for me to think of this as a romance between Toujeo and Afrezza. This [holding out the Dreamboat in the palm of her hand] is Afrezza. Toujeo protects me in the morning and before I go to bed. And Afrezza's with me all day long. Here's his number.

    Friend: Thanks you! And I'll be sure to let my mom know.

    So, from these two conversations we can see that once Sanofi has educated physicians on Afrezza's method of delivery, providing a pre-designed kit that bundles their existing insulin together with it would make the patient's experience more enjoyable. This convenience and ease of use will make Sanofi the worlds largest insulin provider in a very short period of time.

    Some Closing Thoughts

    Comparing Afrezza to Apple may seem a stretch to most of you, but I believe the similarities abound. When Apple entered the personal PC market, there were larger, established companies all around them. But the market was woefully underserved and Apple offered users something personal and profoundly more responsive to their input.

    The same is true in the diabetes market that Afrezza now enters. Established companies and therapies are ubiquitous, but Afrezza offers something deeply personal and extremely liberating. Something that will take insulin treatment and diabetic persons out from behind closed doors and into public places where they can begin to be proudly human again.

    And in no more than a decade's passing, I believe that those who now would rather die or go blind by not injecting their treatments will stand in the pharmacy waiting line to have their prescription filled. What Afrezza will look like at that point in time I'm not exactly sure, but I'm quite certain, Alfred Mann has a pretty good idea already.

    Always be well...

    Disclosure: The author is long MNKD. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute any suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing information, the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including me has imparted to you is foolish at best. I have no better access to resources or gift of opinion formulation than you do. I sometimes make mistakes. There are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion upwards or downwards. These events can be of a wide variety not limited to news-related occurrences, managerial decisions, trial failures, stock manipulations and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence, invest at your own considerable risk attaining the just reward your efforts have wrought.

    Tags: AAPL, ADBE, SNY, MNKD
    Aug 14 10:19 AM | Link | 2 Comments
  • 2013 Retrospective: My Inaugural Year Of Biotech Blogging

    I'm a novice in personal investment. I've always been an amateur at most everything I've done that's brought me pleasure in life. The word amateur is derived from the Italian "amator" meaning "lover", and "amare" meaning "to love." When one gets paid to do something they love it's both gratifying and a curse.

    Gratifying because there's public recognition and a small quarterly check. A curse because it's difficult enough for me to live up to my own expectations let alone yours. It's important however, for you to remember that I'm a blogger and not a financial advisor. I absolutely insist that you make this differentiation because you will be less inclined to express irrational disappointment as a result.

    My articles this past year were a joy to write. Some of the best, didn't make the publishing criteria of the editors or deadlines of relevance. That said, those that did make the grade scored equally well in the eyes of investors as the graphic below clearly indicates.

    (click to enlarge)

    These stocks on a buy and hold basis from the date of publication have returned investors a good bit of money. And it's important to note that none of my articles led investors down a blind alley to significant loss.

    In point of fact, I warned investors against binary disasters facing those holding long positions in Delcath (NASDAQ:DCTH), Aveo (NASDAQ:AVEO), GTX (NASDAQ:GTXI), Cytokinetics (NASDAQ:CYTK) and Amarin (NASDAQ:AMRN) weeks and sometimes days before the stocks plummeted 65 to 70%. There is however, no joy in doing this as investors always question your motives never thinking you might have their best interests at heart.

    I've put together a short video primer covering investment in the biotechnology sector. It deemphasizes catalysts because that's the first thing that every biotech investor acquaints themselves with and latches onto.

    This year begins with my largest personal holding in Cyclacel (NASDAQ:CYCC) and a growing but smaller position in Nektar (NASDAQ:NKTR). I plan to provide more video companions to each article that I author this year. You'll find them on YouTube at ScryingBiotech.

    It's my hope that together, we can expand our knowledge and consequently, our profits by learning from each other along the way.

    I thank you for your investment in my words and for your encouragements and criticisms over the past year. Hopefully, they'll serve to make me better in this year ahead.

    Michael Webb

    Disclosure: I am long CYCC, NKTR, .

    Tags: CYCC, NKTR
    Jan 09 8:48 PM | Link | 3 Comments
  • In The World Series Of Adcomms Amarin's Joe Z Had Better Be Mr. October

    The excitement of Major League Baseball's Championship Series is upon us. The sweet smell of freshly cut grass still wafts through crisp fall air. Beer vendors are less likely to call out than be called upon and the importance of every pitch is elevated to almost unbearable significance.

    The biotechnology sector of the stock market has its own fall classic. Last year's winners were the Amarin (NASDAQ:AMRN) Bulls who rode pure swinging EPA fish oil to a decisive victory in the Marine Stakes.

    While this year's challenger is considerably more aggressive, the Amarin Bulls nonetheless jumped out to an early lead in the Anchor Cup with newly minted cleanup hitting Vascepa blasting patent pitch after patent pitch into the upper deck. And anyone who dared to think the outcome was in doubt, no longer had the heart to say so.

    The Feuerstein Bears however, didn't get the message. And before the first pitch was thrown, they loudly proclaimed Bull managers had weakened fan enthusiasm by dumping loads of their shares on the open market late last season.

    This psychological ploy was followed up by the acquisition of several key players. First, came the deadly but silent NCE. [It should be noted that most players in biotech baseball are known by their three initials only and not by their names. I haven't figured out why but perhaps this makes them sound more intimidating.] And NCE was certainly that. No more than a rumor, this sinker ball pitching heart breaker had a debilitating effect on Amarin hitters.

    Still, the Bulls early lead remained in tact when patented, pure swinging EPA's somewhat dirty brother DHA joined the Bear team. In study after study, DHA was found to have a less than desirable effect on the outcome of most games and the Bears played him to perfection. Scratching and clawing away at the sensibilities of his younger more talented brother, DHA scored the go ahead run in the top of the ninth leaving Bull fans scratching their heads in befuddlement. But the worst was yet to come.

    Power pitching FDA was known to be interested in playing in this game and last Friday was seen warming up in the Bear bullpen with a larger than expected briefing document. Another in a series of Bull budget cuts, this free agent pitcher with an epic reputation for wreaking havoc was out of a job until last Friday [and once Thursday rolls around, might be off the payroll once again].

    But at this moment, the moment that counts, FDA's presence means there will be no uncontested sweep to victory, no four pitch walk to mineral oil placebo and no nod to the traditional understanding of championship SPA agreements.

    Amarin Bulls however, remain hopeful. They still have pure swinging EPA in their lineup and added a highly paid roster of professional advisers, at least according to team President John Thero who said as much at Canaccord Genuity on August 15th.

    So we've been going through multiple mock advisory board meetings. This has been done with our internal staff. This has been done with the help of a professional firm that does specialize in doing these things. And also we have lots of advisors and we've been pulling in other doctors who have a lot of experience at advisory board participation to try to challenge ourselves on questions that could be asked and haven't yet found a question that we don't believe we have very good answers to.

    But as Yankee fans have learned of late, the size of your player payroll guarantees only higher expectations and when those aren't met, fans get crazy in despair. And Amarin fans went nuts on Friday.

    We didn't even get a chance to wipe the dirt off home plate before the FDA threw a high hard one right underneath Amarin's chin. You see, one long held belief of Amarin Bulls drawn right from the SPA agreement was that the only requirement regarding (REDUCE-IT) was that it be underway when Anchor approval was considered.

    Better take a step back off that plate. Under the title, Draft Points to Consider, we have this labeled item number 2.

    Taking into account the described efficacy and safety data for Vascepa, do you believe that its effects on the described lipid/lipoprotein parameters are sufficient to grant approval for co-administration with statin therapy for the treatment of patients with mixed dyslipidemia and CHD or CHD risk equivalent prior to the completion of (REDUCE-IT)? Please provide the rationale underlying your recommendation.

    In baseball we call this the brush back pitch. The distilled version goes like this: Do you believe the effects of Vascepa "are sufficient to grant (ANCHOR) approval prior to the completion of (REDUCE-IT)?"

    [Bold emphasis is mine]

    And no matter how an Amarin Bull spins it, batter number one is down on strikes.

    But this document didn't merely contain heat. There were a number of nasty breaking balls but none more wicked than this slider on page 7.

    Notably, despite a lead-in period that is quite typical for trials with lipid parameter endpoints, within-group changes in lipid parameters and biomarkers of inflammation from baseline to 12 weeks were highly statistically significant in the mineral oil placebo group. Although it is recognized that the effect of an intervention (e.g., mineral oil capsules) cannot be isolated when one only considers within-group changes over time, these results at least suggest the possibility that mineral oil may not be biologically inert. If true, this complicates the interpretation of between-group differences.

    In other words, all of the presumed statistical benefits of Vascepa are now in a shadow of doubt caused by this complicating circumstance. The paragraph ending substantiates this.

    For example, LDL-C increased a median 9% in the placebo group, despite statin therapy, and only increased a median of 1.5% in the AMR101 4g group, but does this reflect an LDL-lowering effect of AMR101, an LDL-raising effect of mineral oil in statin-treated individuals, or some combination?

    By the time we get to page 57, the second batter is clearly is out on a lame infield grounder. That single paragraph page places the complicating effects of the now questionable placebo into startling relief.

    If true, the treatment effects observed with AMR101 may be overestimated.

    [Bold emphasis is mine]

    And that's precisely what's happened here. Amarin Bulls have overestimated their chances from the beginning and are now paying the price.

    How large a price? Take a look at the stock chart from Friday.

    (click to enlarge)

    Then on Monday, after the horrific damage FDA had wrought, wizened Bulls cheered their team from the sidelines. A feathery one cried foul. A wily one wrote a book on a banner. And an ever optimistic one shouted "blowout" as usual.

    This cacophony of craze resulted in a confused umpire shaking his head in disbelief which was interpreted as ball four and the tying run moved to first base.

    So now, in Amarin's darkest hour, we still have one last batter to come to the plate. Tomorrow, pure swinging EPA and home run smashing Vascepa are left to watch from the bench as this last hope for victory rises from the dugout.

    CEO and President Joe Zakrzewski, grab the pine tar and rub up your bat. Put your planned remarks away and step up to meet your destiny. Swing strong and true from the spontaneous center of your heart for your product, your company and most especially, your fans.

    For on October 16th mighty Joe Z will stand in the box with FDA breathing heat from on high. The crowd will fall silent in rapt attention. And Amarin Bulls who have held on for so long and through so much will cling to every pitch and breath taking word.

    Will this end with a two run homer reminiscent of Yankee great Reggie Jackson known forever as Mr. October or like this last paragraph of the great American ballad; Casey at the Bat?

    Oh, somewhere in this favored land the sun is shining bright;

    The band is playing somewhere, and somewhere hearts are light,

    And somewhere men are laughing, and somewhere children shout;

    But there is no joy in Mudville - mighty Casey has struck out.

    Always be well,

    Michael Webb

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

    Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute any suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing information the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including me has imparted to you is foolish at best. I have no better access to resources or gift of opinion formulation than you do. I sometimes make mistakes. There are a myriad of things which can happen in lieu of any forward looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences which can change its value in dramatic fashion upwards or downwards. These events can be of a wide variety not limited to news related occurances, managerial decisions, trial failures, stock manipulations and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence, invest at your own considerable risk attaining the just reward your efforts have wrought. And always be well.

    Tags: AMRN, short-ideas
    Oct 15 8:51 AM | Link | 4 Comments
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.