Bionovo: Challenges Ahead, But Poised to Move Higher

Includes: BNVI, TEVA, WCRX
by: Chimera Research Group

The Women’s Health Initiative ('WHI'), a study that demonstrated several lethal side-effects of hormone replacement therapy ('HRT'), has left many pharmaceutical companies scrambling to advance alternative therapies to meet the unique market demand created by the drop in hormone sales. Although several therapies have advanced to late-stage clinical studies, few represent a truly novel approach.

Pristiq, Wyeth’s (WYE) new treatment for depression and potentially –post menopausal hot flashes, is merely a metabolite of the multi-billion dollar blockbuster, Effexor. Aprella, Wyeth’s investigational combination product for the treatment of menopausal symptoms, repackages two commonly used classes of drugs; estrogens and selective estrogen receptor modulators. Instead of improvements in side-effects or enhanced efficacy, the pharmaceutical industry has employed a model where minor chemical alterations coupled with a profound marketing engine compensates for declining sales from products with patent expiration. It’s very seldom to find a pharmaceutical company that is developing a truly novel approach to therapeutics.

Enter Bionovo (NASDAQ:BNVI), a small drug discovery and development company that has discovered a completely new approach to “women’s health”, with very ancient ingredients: plants. Bionovo’s flagship, plant-based product is called Menerba, and is slated to begin enrolling patients in its pivotal Phase III study in the first half of 2010. Besides Menerba, Bionovo is also developing compounds to treat breast cancer, pancreatic cancer, and vaginal atrophy: all using a plant-based model.

So far, the model has paid off for Bionovo. In its Phase 1 and 2 clinical trial, Menerba has effectively treated vasomotor symptoms with only one side effect, loose stool, while the incumbent therapy, HRT, has 7 black box warnings.

After Bionovo’s December meeting with the FDA, investors’ focus will shift to Menerba’s upcoming phase 3 trials. The first phase 3 trial will have three treatment arms; one arm will be using a 10 gram dose which was the lowest efficacious dose found in the Phase II, as well as a 20 gram dose and a 50 gram dose. Bionovo believes that Menerba’s dose-response curve tops out between the 20 gram and the 50 gram dose.

Menerba does have several challenges to face. Typically, clinical trials treating hot flashes tend to have a high placebo response. In fact, in a recent hot flash trial, the placebo reduced the frequency of hot flashes by 62%. In Menerba’s Phase II trial, the 10 gram dose reduced hot flash frequency by 62%.

Furthermore, recent research has demonstrated a predominance of beta estrogen receptors on platelets and the research community seems divided over whether beta estrogen receptor modulation is thrombolytic or thrombotic. To date, not one genomic, animal or human study with Menerba has demonstrated an increased rate of thrombosis.

Nonetheless, Menerba has the potential to become a best in class product and Bionovo has assembled an extensive scientific advisory board to address all of the challenges that it may face. Their management has recruited top statisticians to review recent trial results, in order to optimize Menerba’s trial design and minimize confounding factors like a high placebo response.

Management has indicated that the second phase 3 study for Menerba will have a 12 month safety endpoint which should be sufficient for FDA approval. Bionovo’s management has also indicated that the second phase 3 trial will be completed by a soon-to-be announced partner. In a recent conference call, Bionovo’s chief executive officer hinted that a partnership may come before trial enrollment, although it’s not clear if he was speaking generally or specifically about Bionovo. I guess we won’t find out until “late in the first quarter” which is when Bionovo’s chief medical officer hopes to begin Menerba’s phase 3 trial.

Potential partners for Menerba, include Teva Women’s Health (NASDAQ: TEVA) which is the manifestation of Teva’s purchase of Barr and Duramed, and Warner-Chilcott (NASDAQ:WCRX) who has a long track record in the women’s health space, as well as some other mid-size pharmaceutical companies.

The treatment of menopausal symptoms is a multi-billion dollar market, and I expect Bionovo to be quickly revalued to the upside, when they initiate their trial for Menerba, and announce a sizable partner. With a market capital of less than $50 million and a recent stock price of 50 cents, Bionovo’s share price is poised to move higher.

Disclosure: Author holds a long position in Bionovo.