Jolly_Rancher's Instablog

Which way goeth the market? Answer: No way.

Thu, 03 Dec 2009 09:46:21 -0500

I usually don't comment on market direction because I'm a pretty lousy prognosticator. So heed my sooth with a grain salt. But I think the market today is at an interesting crossroads. On the one side, deflation, unemployment, weak economy, insider sells, shrinking credit, high energy prices, extremely high sovereign debt, soaring gold, hobbled consumer, looming retirement deficits, and questionable bank reserves would seem to be enough to make anyone expect a double dip recession. On the other hand, taking a look at the choices investors have made over the last year, note that indeed they are quite bearish. Pension funds, those solid staid institutions with very long term views are dumping their equities (www.bloomberg.com/apps/news?pid=20601087...
). Mutual fund investors dumped their equities and bonds in 2008, then in 2009 invested almost solely in bonds. Despite the fact that investment advisors have turned bullish recently, it appears that their clients aren't heeding their advice just yet. And while it is true that insiders are selling in larger numbers, they may be making up for the period from October 2008 to May 2009 when they refused to sell at extreme mark downs. Looking at the fundamentals, I'd say the market is in for a rough ride. Looking at the leading indicators, I'd say long investors will want to remain long. The sentiment numbers are too bullish, while the cash levels are way way too high and staying high. Corporate debt is at a very manageable level. Consumer debt is in not so good shape. Back and forth, back and forth. What's Goldilocks to do? I think it wise to stay long well-managed, low debt, growth stocks, buying more during the 15% drops and staying long the 15% bang-ups. It's not a V, an L, a U or a W or a reverse square root; it's a mess.

Mannkind -- Stars to Shambles

Mon, 19 Oct 2009 18:27:28 -0400

The last time I hawked Mannkind shares they were trading at $3.60. They are now trading at $5.50, but a funny thing happened on the way to the forum, so to speak. The shares traded all the way past $12 then the company filed an 8K stating that partnership discussion would be tabled until the company's lead product, Afresa, is approved in January 2009 -- which is four months away. That's a pretty severe drop in share price in response to a measly 4 month partnership postponement, and tells me the degree of skepticism among big investors in this company's product. The price today assigns roughly a 30% probability that Al Mann, the company's colorful billionaire Chairman and CEO, will actually be able to finalize a partnership. However, the fact of the matter is that nothing much has changed with this company's prospects. Afresa is on target for approval by its PDUFA date of January 16, 2010. The next generation inhaler, newly developed since my last blog, will probably only be required to undergo by the FDA a three month bioequivalency study before marketing. This new inhaler requires 30% less insulin than the Medtone inhaler, is smaller, and much more stylish. In other words, Afresa will reach blockbuster status not just because it is inhalable, and not just because it is a better insulin, but because the associated device is stylish. Patients will want it. The latest survey of physicians and endocrinologists by an independent marketing firm (paid for by Mannkind) indicated that 25% would prescribe Afresa to their patients making Afresa a blockbuster multi-billion revenue per year product. Don't believe me? Hey, who hawks stocks after a huge sell-off. Think about it. And who has the guts to buy and hold for huge returns?

Anavex Life Sciences - Update

Fri, 05 Jun 2009 18:25:01 -0400

Anavex Life Sciences Corp. (AVXL.OB) last appeared on Seekingalpha in a March 12, 2008 article by H.S. Ayuob entitled "Anavex Life Sciences Takes Cues from FDA in Combating Major Diseases" detailing how Anavex's then pre-clinical Sigmaceptor ^TM platform compounds work and their potential. Since then there have been several promising developments in the areas of Alzheimers, Cancer, Epilepsy, and Depression.

Central Nervous System: Epilepsy, Alzheimers and Depression - 2-73

Currently, 2-73 is the lead Alzheimers candidate and is entering phase 1 study. Preclinical study completed in September 2008. In mouse studies it was shown to protect neurons in the hippocampus from oxidative stress which Anavex believes is the cause of Alzheimers. There are two theories as to how to treat Alzheimers: 1) reduce oxidative stress; 2) reduce amyloid beta buildup. Anavex has discovered that by reducing oxidative stress, the plaque caused by amyloid beta is prevented, thus concluding that oxidative stress is a precursor to amyloid beta plaque. 2-73 reduced learning deficits and reversed both short and long term memory loss caused by injection of Alzheimers inducing peptides. Furthermore, with respect to epilepsy, 2-73 exhibited extremely significant anticonvulsive action by providing almost complete protection from tonic seizures. This was accomplished without causing any memory deficits (amnesic effect) or mood disturbances (depression). Memory deficits and depressive phenomena are usually observed with the anti-epileptic drugs available today. The company plans to officially begin phase 1 trial in the fourth quarter 2009, and has contracted with Syntagon for that purpose. Of course, other biotechs are developing Alzheimers drugs. Elan (ELN) with Wyeth is developing Bapineuzumab (AAB-001), a monoclonal antibody Amyloid inhibitor in phase 3 trial, which so far has yielded only tepid results and seems a reasonable shoe-in for FDA approval, ostensibly for use in conjunction with existing therapies. Medivation is developing Dimebon which probably isn't useful for anything except duping investors and prying $225 million from a star-struck Pfizer. Pfizer also has many drugs of its own (if you include Wyeth) one of which may become a blockbuster. Eli Lily has solanezumab, a Amyloid beta inhibitor, in phase III trial, which looks very promising. But presently, there isn't an approved drug which is very useful at fighting Alzheimers.

Cancer 7-1037

7-1037 is the lead cancer compound targeting clear cell carcinoma, a difficult to treat cancer for which there is no effective treatment. 7-1037 reduced tumor mass by 69%, clearly more than the 42% recommended as suggested threshold by the National Cancer Institute. The result is impressive, but the company has not released other results or given a timeline for further development.

Low cash burn, but low cash on hand

The structure of the company has allowed it to develop these compounds with a fairly low cash burn of roughly $3.5 million per year to date. The company anticipates that cash burn will increase to $5 million in 2009, so with only $78,000 in cash on hand, it is logical to assume that it will need to find a partner to continue development of this platform or continue to issue equity. Really, Anavex is a long shot that, if phase 1 results are stellar, may be acquired by a large pharmaceutical company looking to fill out its Alzheimers drug offering in order to remain competitive.

Disclosure: Author purchased AVXL.OB at $2.50 but does not own shares of any other stock mentioned.

Abraxis BioScience - Steady Growth

Wed, 29 Apr 2009 14:12:38 -0400

Abraxis BioScience (ABII) is a global biotech company headquartered in Los Angeles, California, formed on November 14, 2007, as a spin-off from APP Pharmaceuticals. The split gave APP the hospital and healthcare supply business, while Abraxis BioScience got the drug development business.

Abraxane

The company's primary drug is Abraxane which is built upon the nab platform wherein existing chemotherapy drugs, such as paclitaxel, are loaded into albumen, a natural protein that carries water-insoluble molecules such as various nutrients, vitamins, and hormones naturally found in humans. Abraxane has four advantages over traditional chemotherapy delivery methods. First, because many large tumor cells have albumen receptors, Abraxane finds its way more easily into the target tumor by attaching itself to albumen receptors. After attachment, the drug is allowed into the tumor cell where it binds to SPARC which is a tumor specific protein that recruits nutrients. Thus, instead of delivering nutrients to the tumor, SPARC delivers chemotherapy, killing cancer cells and halting tumor growth. Second, Abraxane does not contain chemical solvents, like Cremophor (en.wikipedia.org/wiki/...), which was the standard method of paclitaxel delivery. This eliminates the need for premedication with steroids or antihistamines that treat hypersensitivity reactions caused by these solvents. Third, Abraxane, due to its non-toxicity, is administered in just 30 minutes (compared to 3 hours for solvent-based paclitaxel). Lastly, and probably most importantly, because of its nontoxicity and ability to deliver paclitaxel into the target tumor more effectively, Abraxane delivers 50% more paclitaxel. Currently, Abraxane is approved in the U.S., U.K., China, Canada, Korea, Spain, Italy, Australia, Germany and India, and soon to be approved in Japan, for first and second line treatment of metastatic breast cancer, and has captured 34.5% of this market.

Pipeline

Abraxane phase 3 trials for the following cancers are either completed or near completion: advanced lung cancer (NSCLC), ovarian (advanced), melanoma (stage 4), prostate (hormone refractory), pancreatic (in combination with Gemcitabine), and head and neck. The pancreatic results are most promising

Sales

Abraxane revenue in 2005 was $133.7, 2006 $174.9, 2007 $324.7, 2008 $336 (millions). Most of those revenues are derived from the U.S. which was split with marketing partner, Astrazeneca. Abraxis BioScience ended the partnership by buying out Astrazeneca's 50% share for $268 million. So U.S. revenue should increase dramatically in 2009. Worldwide sales of Abraxis are just commencing, and by the second half of 2009, should increase dramatically, significantly impacting the bottom line.

Major Stock Holders

Of the 40 million shares outstanding, 83% is held by management and 15% is held by financial institions, including D. E. Shaw & Co., Inc., leaving roughly a 6 million share float. Furthermore, on 4/20/2009, the company announced a $100 million share open market repurchase program that, at the latest price ($46) will reduce the float by 2 million shares. Given this and revenue and cash flow projections for second half 2009, it is reasonable to assume that the stock price will appreciate from multi-year lows where it currently trades.

Caveat: Patent Issue

Elan Pharmaceutical sued Abraxis BioScience for patent infringement in its albumen attached particle technology and received a favorable lower court ruling to the tune of $55 million on previous sales of Abraxane. Abraxis intends to appeal.

Disclosure: Author bought ABII at $46.21. Author has no position in any other stock mentioned.

Mannkind - Latest Developments

Mon, 06 Apr 2009 16:01:38 -0400

The last time Mannkind was the subject of a Seekingalpha article was June 22, 2008, when Ahithophel Weissberger penned the final part of his exhaustively detailed six part series entitled "Mannkind: Overlooked Biotech With Excellent Prospects." His series generated numerous, sometimes heated, comment, so I thought Seekingalpha readers might appreciate a follow-up discussion of Mannkind's latest developments.

In June 2008, the stock traded around $2.77. Today it trades around $3.60 which is a 30% return in less than a year -- pretty impressive considering how much the overall market has tanked. But what has the company been up to since then? First, it successfully completed, within 95% confidence, all phase III trials for its lead product, Afresa (then known as Technosphere Insulin). Second, on March 16, 2009, Mannkind filed a new drug application (NDA) with request for priority review, and should receive a letter of acceptance from the FDA around June first. Should the FDA deem that Afresa meets "unmet medical need," priority review will be granted. From one perspective, Afresa, despite that it is insulin, meets "unmet medical need" for two reasons, first because of its effectiveness and second, because of the way it delivers insulin.

Effectiveness

Afresa is an ultra-rapid acting monomeric insulin whose peak biological availability is twelve to fourteen minutes following inhalation. Perhaps more importantly, Afresa leaves no persistent "tail." In other words, after a few hours, it is completely gone from the system, while injectable insulins typically persist. This leads to the hypothesis that Afresa may mimic the kinetic synchronization of the hepatic system, restoring more natural hepatic function by reducing the excess gluconeogenesis. The evidence supporting this hypothesis offered by the company is marked and very significant reduction in post-meal glucose excursions and significant improvements in overall glucose control, as measured by decreases in glycosylated hemoglobin, or A1C, levels, without the weight gain typically associated with insulin therapy. In short, it works fast and goes away fast, and that's how it is more effective than other diabetes therapies on the market.

Inhalable

Afresa, if approved, will be the only inhalable insulin on the market, and there is no other inhalable insulin currently in development by any drug company. Many diabetes patients for one reason or another cannot take injections. The fact that there is no other insuin therapy at present other than injectable insulin leaves these patients with little recourse. As a matter of fact, after Pfizer discontinued the sale of Exubera (Pfizer's inhalable insulin), the patients that needed Exubera due to problems with injection were allowed to switch to Afresa. If the FDA grants priority review, an approval decision can be expected around November 2009. Otherwise, the FDA's decision can be expected around March 2010.

Insulin Production

In late March 2009, the company purchased an insulin manufacturing facility in Germany from Pfizer. This purchase is subject to Sanofi-aventis' (SNY) right of refusal within sixty days notification. It is interesting that Sanofi-aventis has the right to refuse because it is the top contender for a partnership deal to market Afresa. Sanofi had partnered with Pfizer to bring Exubera to market and was paid by Pfizer $1.3 billion for its 50% share. It is well known that Sanofi did not want to sell its share, so it is logical to put some of that money behind Afresa. I suspect investors will hear one way or another about a Sanofi partnership by the end of the sixty day period, that is, by June 4.

Disclosure: Author bought MNKD at $2.71. Author has no position in any other stock mentioned.