Biotech Forum Daily Digest - FDA Blesses Amicus Therapeutics, Ocular Therapeutix Rebounds

Summary

• The main biotech indices traded down on Monday in a slightly positive overall market. Once again, there was no "Merger Monday" for the industry.
• The FDA issued a ruling that should be positive for rare disease concerns and Ocular Therapeutics rebounded early today on progress resolving a FDA action.
• All the other notable news, events and analyst ratings from across the industry are below. We also revisit Amicus Therapeutics after a key FDA decision in today's Spotlight feature.

“I am a great believer in luck, and I find the harder I work, the more I have of it” - Stephen Leacock

The biotech sector headed down in trading to open the trading week Monday while the overall market was slightly positive. The main biotech indices lost approximately three quarters of a percent Monday but are still about three percent above long-term resistance levels they went through in late June.

Once again, there was no significant acquisition activity to open the week or "Merger Monday". New leadership at the FDA is definitely making it a more friendly agency to the industry and that could help the rare disease concerns in trading this week (see Spotlight feature below).

Author's note: To get these Biotech Forum Daily Digests as soon as they are published, just click on my profile, hit the big, orange "Follow" button, and choose the real-time alerts option.

Nano cap Kitov Pharmaceuticals (KTOV) continues to be a day trader's dream over the past week. The thinly traded shares have had several huge moves, up and down, over the past five trading sessions. Today, the name is down big to start trading after announcing a secondary offering. This is why I never invest in the microcap part of the sector - just way too much volatility for me.

Ocular Therapeutix (OCUL) had a brutal sell-off late last week triggered by a couple of bearing articles on the name (I, II). While these pieces contain some hyperbole, management has been less than forthcoming about resolution to some manufacturing issues related to the production of DEXTENZA which had a PDUFA date of July 19^th. Today, the shares are rebounding more than 15% after the company announced that it had addressed all Form 483 observations that it received in May after an FDA inspection of its manufacturing operations supporting its DEXTENZA application. It has also requested a new PDUFA date, which, if granted, should fall three months after the previously scheduled July 19th date.

Interim results from an open-label 15-subject Phase 1/2 clinical trial assessing BioMarin Pharmaceutical's (BMRN) BMN 270 for the treatment of hemophilia A showed a sustained treatment benefit for over a year after one dose. Shire (SHPG) is selling off somewhat on increasing concerns it will face increasing competition in its hemophilia franchise from established players such as Roche (OTCQX:RHHBY) and new potential entrants such as BioMarin and uniQure (QURE).

Alnylam Pharmaceuticals (ALNY) had a significant drop on Monday after JPMorgan stated the shares were 'priced for perfection'. Other analyst firms maintain the faith, however, with Needham, Credit Suisse and BMO Capital all assigning or reiterating Buy ratings on what looks like it is becoming a 'battleground' stock among analysts. Price targets proffered by these analyst firms have been in the mid to high $90s.

Arena Pharmaceuticals (ARNA), whose stock soared yesterday after the small developmental concern announced positive results from a Phase 2 clinical trial assessing its primary drug compound ralinepag for the treatment of pulmonary arterial hypertension, gets an analyst 'shout out' today from Cantor Fitzerald. The analyst firm issued a Buy rating and $37 price target on ARNA. The highest previous analyst price target on Arena in 2017 was $6 from FBR Capital on March 15th to put in perspective.

Analyst opinion seems to be turning more positive on Tetraphase (TTPH). Needham issued a Hold rating on the stock in May and Stifel Nicolaus did the same in June. Today, the name is initiated as a Buy with a $15 price target at H.C. Wainwright. BMO Capital reiterated its own Buy rating on June 22nd.

Note: New analyst ratings are a great place to begin your due diligence, but nothing substitutes for deeper individual research in this very volatile sector of the market. Many of the small-cap names highlighted in "Analyst Insight" will eventually appear in the "Spotlight" section, where we do deeper dives on this type of promising but speculative small-cap concerns.

Amicus Therapeutics (FOLD) is a small rare disease concern that I have positively highlighted here on Seeking Alpha many times over the past year. It is also one of the rare holdings that is in both the model Biotech & Insiders Forum portfolios.

I also know that plenty of my Seeking Alpha followers are also in this name. The shares are up over 20% in early trading today, so we will revisit this name in today's Spotlight feature. The company seems to be one of the first beneficiaries of a more effective and streamlined FDA under new management.

After the bell Monday, it was announced that the company would no longer have to run expensive and probably unnecessary trials to get its compound 'galafold' approved for use in the treatment of Fabry Disease. This drug was approved in Europe for that indication in the second quarter of last year and is ramping up steadily throughout the continent. Approval from European authorities gave galafold access to approximately 70% of the globe's Fabry victims. Prior to galafold, there were three therapeutics utilized for the long-term management of Fabry which generate north of $1 billion in annual sales.

Unfortunately, soon thereafter, the FDA refused to grant galafold accelerated approval which crushed the stock in late November. The FDA's decision meant it would need to do a trial here to get approved for the ~30% of Fabry sufferers in North America. The stock had already started to recover from that ~50% haircut when I wrote an article on it in April stating at $7.00 a share, the stock still had considerable upside.

The FDA's decision means the company will not have to spend at least $100 million on a randomized, 12-month, placebo-controlled pivotal "cross-over" study in treatment naïve Fabry patients who have an amenable mutation and GI symptoms. The company will also be able to file a NDA for U.S. approval in the fourth quarter according to the CEO under accelerated approval guidelines.

This means galafold should get approval for U.S. some time in mid-2018 instead of approximately 2020 as it would if it had to conduct another trial. It also should probably get slightly better pricing for galafold in the United States than Europe. Given the small population of Fabry patients, a relatively small sales force will be necessary. Obviously, this is very positive news for Amicus. I would also look for other rare disease and Orphan Drug names like BioMarin Pharmacueticals which seems to be up in trading today on the impression that FDA is going to be more lenient in this space going forward.

For my real-time followers that have FOLD at much lower prices, this means you will be deep in 'Jensen Rules' territory to cull some profits early in trading today. While Amicus' future looks bright given the just announced FDA decision on galafold and good progress with its two other late stage compounds for other rare diseases, no one ever went broke taking some gains of the table.

You can do this in a straightforward way by selling some shares directly. Those comfortable and set up for options trading should consider selling the January $15 calls against the portion of their position they don't might culling. These should go for a nice premium enhancing your total return from what has been an outstanding investment to this point.

“I think we consider too much the luck of the early bird and not enough the bad luck of the early worm.” - Franklin Roosevelt

Thank you & Happy Hunting

Bret Jensen

Founder, Biotech Forum

Analyst’s Disclosure: I am/we are long FOLD, OCUL. 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.