Biotech Investing for 2012
by Pharmboy - January 18th, 2012 1:09 am
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Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on the vacillations of the market to reduce our cost basis. I believe our virtual biotech portfolio is well positioned with many companies that have upside potential.
I am starting to dive into the pipelines of a few companies that went IPO last year, and there is one sticks out at me, Endocyte.
Endocyte (ECYT) has six programs in various stages of clinical trials. The company was founded in 1996, has no marketed products, but boasts a pipeline of cancer/inflammatory disease candidates with companion diagnostics.
First, understanding what the company's drugs do is important, then diving into the pipeline will make some sense.
Folate (water soluble Vitamin B9) is needed for DNA synthesis, DNA repair, and DNA methylation as well as to act as a co-factor in biological reactions. In essence, it helps cells grow and multiply. Now, scientists (chemists) are good at manipulating and mimicking biological systems, and Endocyte has drugs that incorporate folate with vinca akloids attached to them (called a 'Trojan Horse' process). The folate-drug complex binds to the folate receptor (FR) that is over-expressed on the cell surface of many cancers and is subsequently taken into the cell (endocytosis). Molecules as diverse as small radiodiagnostic imaging agents to large DNA plasmid formulations have successfully been delivered inside FR-positive cells and tissues. Endocyte has one type of folate-drug delivery system for different cancer types.
Endocyte's lead drug is EC145 which targets the…
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DiggThe Skinny on the Hepatitis C Market
by Pharmboy - December 19th, 2011 3:33 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
For the past few years at Phil’s Stock World, many of my articles have focused on cancer therapies or the robust (or not so robust) big pharma pipelines. I have not delved into many specific diseases, their mechanisms, and potential treatments. Two of the hottest areas in the industry right now are fibrosis and hepatitis C. In the fibrosis area, large deals are being made for early stage compounds in scientifically plausible, but unproven mechanisms (Gilead’s purchase of Arresto Biosciences for $225M, Bristol-Myers buying Amira Pharmaceuticals for $325M). Fibrosis will be a topic for another write-up. The area where there is a flurry of activity is in the treatment of hepatitis C. Vertex and Merck received approval for their new drugs in May 2011, Incivek and Victrelis, respectively, where Roche bought Anadys Pharmaceuticals for $230M, and Gilead is purchasing Pharmassett for $11B!
Hepatitis C (HCV) is a viral disease that is spread by blood to blood contact, and it primarily affects the liver. The infection is often asymptomatic, but chronic infection can lead to scarring of the liver and ultimately to liver cirrhosis. Liver cirrhosis can lead to liver failure and/or other complications, including liver cancer or life-threatening esophageal and gastric varices.1 There is no known cure or vaccine for HCV, and an estimated 180M people are infected . The shear number of infections makes it an attractive market for pharmaceutical companies, and thus there are many drugs being clinically tested.
Figure 2. HCV Infections
After an HCV infection, the disease enters an acute phase and subsequently, a chronic phase. During the acute phase, people often have flu-like symptoms, decreased appetite, fatigue,abdominal pain, jaundice, and itching. The acute phase is considered less than 6-months. The chronic phase (50-80% of those infected) of the disease is noted by higher liver enzymes (ALT/AST), and is often discovered when people are going through a routine checkup. The liver is often inflamed, and cirrhosis and fibrosis could also begin to set in. Of those that are in the chronic phase of the disease, approximately 20–50% do not respond to treatment. There is a very small chance of clearing the virus spontaneously in chronic HCV carriers (0.5% to 0.74% per year).
Figure 3. Common Genotypes
Like many viruses, hepatitis C has…
YM Biosciences – Friend or Foe
by Pharmboy - November 29th, 2011 12:55 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
YM BioSciences Inc. (AMEX: YMI) develops, markets, and commercializes hematology and cancer-related products in the drug development arena. Below is the 1 year chart showing their ascension into the $3.7 range, then precipitous drop off to almost $1.
On the financial side, as of September 2011, the company had about $76M in cash, and was burning about $25M/yr. The thing that we need to be aware of is that the company has filed a preliminary short form base shelf prospectus and a registration statement on Form F-10 (July 2011) for another $125M over the next 2 years, with the Canadian securities regulatory authorities and the US Securities and Exchange commission, respectively.
Over the past few years, the company has placed stock and warrant offerings for shares in the $1.20 to $1.60 range, so there is more to come – hence my not wanting to overpay.
A bit of history, in October 2009, YM BioSciences agreed to acquire all of the issued shares and options in Cytopia by scheme of arrangement. YM would exchange 1 common share for every 11.737 Cytopia shares, which would lead to the issue of 7.2 million new YM shares. This represented a share price of $0.1659, a premium of 58% over the trading price of Cytopia shares on the ASX at that time. Following the acquisition Cytopia shareholders would own 11% of YM. This is where CYT387 came from (see below).
On the scientific side of things, the company has many drugs in the pipeline that, if they come to fruition, could give the stock and company a bit of up side. First, it has one drug on the market, nimotuzumab, which is an EGF receptor-targeting humanized IgG1 mAb, for the iv infusion treatment of cancers of epithelial origin. Many of the cancers are still in trial, including breast, lung, prostate, esophageal, head and neck and pancreatic cancers. The drug is co-marketed with several other companies and brings in about $1M in revenue for the company.
The Company’s flagship product is CYT-387 (in Phase 2), a small-molecule JAK1/JAK2 tyrosine kinase inhibitor, for the potential oral treatment of myeloproliferative disorders (MPD), including myelofibrosis (MF), polycythemia vera (PV) and essential thrombocythemia (ET). JAK stands for Janus Kinase, and is a receptor that is activated by a signal from interferon,…
Welcome to the World (Of Biotech)
by Pharmboy - October 28th, 2011 1:09 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
What a show we have been having in the markets. From 10% down one month, to 20% up the next, it is truly a spectacle to behold.
In my small world, biotechs are a fantastic investment, but the area is saturated with complex targets (aka any kinase inhibitor – see below), unknown mechanisms of action (cough! cough! ITMN), and mismanagement (DCTH anyone?), but there are always diamonds in the rough that catch the eye of a scientist (me). We are heavily invested in big pharma (i.e., MRK, BMY, GSK) for their dividend yields and pipelines, and we have our speculative plays for growth (CRIS, SGEN, IMGN, PLX, DEPO, MITI, YMI, etc). At this point I think it is prudent to trim some winners and losers, so that we can focus on a few more that may warrant our attention in the coming year.
I have begun to reduce OPK (winner) and DCTH (loser). The paired loss is a bit more than I would like, as DCTH has not shown us any love due to mismanagement and setbacks. I find the technology very sound, but the way things have been handled, I would rather move to something that may have more upside, keeping 1/2 of my position in DCTH to recover any future upside. OPK is supported by the CEO (he owns a lot of stock), but there is nothing in the immediate future that excites me at this time, so why not take some off the table and let the rest run to see how/where the stock goes.
Immunogen (IMGN) is on a tear, and we have been in and out of them since ~$5. SGEN is the comparator here for stock price, and Seattle Genetics (SGEN) trades at a premium due to: 1. no partner (takeout candidate?), and 2. their drug is approved. That is where I believe IMGN can go….time will tell. I am adding to IMGN slowly, selling calls and puts along the way.
Ariad (ARIA) is also on a roll. The company has the best in class mTOR inhibitor (Ridaforolimus for bone sarcomas), and MRK has taken over all clinical development. ARIA have a few new drugs in the pipeline, and they have a Phase 3 candidate unlicensed (Ponatinib), and this one is another drug that could…
PSW Does Las Vegas
by Pharmboy - October 17th, 2011 4:45 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Here’s an excerpt from the Week Ahead section of Stock World Weekly ~ the part about the trip to Las Vegas, as reported on by Pharmboy. ~ Ilene
Tips for Investing in a Wild Market
Phil’s Stock World had its first annual members’ meeting in Las Vegas over the Columbus Day weekend. Pharmboy submitted his notes on the adventure, so if you missed all the fun, you can still read about some of the more educational topics, in “PSW Does Vegas” below:
“First a very special thanks to PSW members Savi and LVModa for their time and efforts in making this happen.
“Twenty-four members gathered in Las Vegas to talk about trading strategies, eating, and a bit of poker. We met at Nobu for dinner, and then gathered at the Stratosphere for two friendly tables of Texas Hold ‘em.
“Sunday started off with the first thing that Phil has preached from the beginning, start small and plant your trees to get the fruit in the future. Phil typically notes the video, ‘The Man Who Planted Trees.’
Here are six points to consider when investing in an unpredictable and volatile market.
Point 1: The best way to make money is to save… If you can save $10/day, every day, and earn 5% per year for 20 years, you will have $170K saved up. As you increase this amount throughout your days, that savings will grow. Plant the trees early, and the fruit will come. Remember, this is a long-term strategy.
Point 2: One needs to have a plan – when you go to the store, you have a plan on what to buy. When you trade, have a plan. We always plan the next move in the stocks or options we own. Study the chart, if it moves to a certain level, have a plan on what you will do next. And if you are called away, and make a profit, be happy. There is nothing wrong with making 5% in a month. That is 60% per year! That blows away the market.
Point 3: Invest in what you know. Pharmboy is a scientist, and hence he invests in what he knows – biotechs and pharmaceutical companies. Follow a few companies that you know or want to know, and do your…
Biotech Trading Verses Investing 101
by Pharmboy - October 10th, 2011 11:40 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Courtesy of Pharmboy of Phil’s Stock World
Biotechs are the life-blood of the pharmaceutical industry. These small companies take risks that many larger pharmaceutical organizations would not usually make (scientists call it bureaucracy). Those risks come with a high failure rate, and therefore investing in biotechs is not for the faint of heart.
There are many investment house boutiques that offer input on biotech investing. I recently noticed that several writers at SeekingAlpha have combined their writing powers and started a biotech investing page (and even Adam Feuerstein gave them a plug). It’s not that I find other authors wrong in their analysis, as many are quite good. What I find hard to swallow is the amount of money one can spend on buying a single service (as an example) for just investing in biotechs. At Phil’s Stock World, not only is there a biotech component, but many other trading strategies are present for a longer term portfolio that uses options and hedging strategies. Also, at PSW, Phil, Optrader and many others are here almost every day to answer questions. I am tooting a horn here at PSW, as it’s a very good investing community, where many people in different walks of life come together and share their experiences, but I digress.
We are coming to the end of the year, with three months left, and lots of holidays to make our way through. Many of our biotechs have done little to nothing the past few months. In Las Vegas over the past few days, our discussions were centered around investing and some trading (it is really called gambling, no?). Some biotechs are investments, some are trades on binary events. We have been selling calls and puts on some, reducing our exposure to others, and otherwise just waiting for data.
Let’s revisit a few of our old picks, as well as look at upcoming events that will move some stocks for better or worse.
Investments
Seattle Genetics (SGEN) – we played them for the approval, and we did not get the huge pop we expected, but the buywrite strategy worked just fine. This is one I would hold on to, as I believe they will not be around forever. Buying the stock in here and selling the December $20…
Protalix Biotherapeutics – Using Plants to Treat Human Disease
by Pharmboy - August 17th, 2011 8:35 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Protalix (AMEX: PLX) is revolutionizing the development and manufacturing of recombinant therapeutic proteins through its ProCellEx™ plant cell-based protein expression system. The company is focused on the development and commercialization of a proprietary pipeline (Figure 1) of novel and biosimilar proteins that target large, established pharmaceutical markets and that rely upon known biological mechanisms of action. Protalix’s initial commercial focus is on complex therapeutic proteins for the treatment of genetic disorders, such as Gaucher disease and Fabry disease.
Protalix is also advancing other recombinant biopharmaceutical drug development programs, including a Tumor Necrosis Factor (TNF) inhibitor for inflammatory diseases. TNF inhibitors work by blocking the action of TNF, a cytokine – a small cell-signaling protein molecule – in the body that causes inflammation. (Pubmed Health)
Tumor necrosis factors (or the TNF-family) refers to a group of cytokines family that can cause cell death (apoptosis). TNF blockers include infliximab (Remicade), etancercept (Enbrel), adalimumab (Humira), certolizumab pegol (Cimzia) and golimumab (Simponi). (Wikipedia)
Protalix’s lead product is Uplyso (taliglucerase alfa) for the treatment of Gaucher’s disease. The treatment has orphan drug status in both the EU and US. The product is partnered with Pfizer. Gaucher’s disease is a genetic disease in which a fatty (lipid) substance accumulates in cells and certain organs. Patients (males and females) have a hereditary deficiency of the enzyme glucocerebrosidase (also known as acid β-glucosidase). This deficiency causes lipids to accumulate in cells, especially those of the immune system. Uplyso is a plant-cell expressed recombinant form of glucocerebrosidase which Protalix is developing for the treatment of Gaucher disease." (Drugs.com)
About 1 in 100 people in the United States are carriers of the most common type of Gaucher disease. The carrier rate among Ashkenazi Jews is 8.9% while the birth incidence is 1 in 450 (remember this!).
In clinical trials, data from Uplyso showed that it is as efficacious as Genzyme’s Cerezyme and Shire’s Vpriv. (See comparison table at Gekkowire’s terrific site.) During Genzyme’s manufacturing issues in 2009, patients were switched over to Uplyso under a Life Savings Use Program from the Department of Health. As of November 2010, PLX submitted a Marketing Authorization Application (MAA) in the EU for Uplyso and the company is awaiting a ruling.
In February 2011, PLX…
Theravance – A GSK Love Affair
by Pharmboy - July 21st, 2011 9:30 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
(This post has been updated)
(THRX) is a biopharmaceutical company that is involved in discovering, developing and commercializing small molecule medicines for respiratory diseases, bacterial infections, and central nervous system (CNS) pain.
Figure 1. Theravance Stock Price the last year.
While THRX has a mixed product pipeline, a majority of its pipeline (and future) is tied up with GSK in the treatment of asthma/COPD.
Asthma comes from a Greek word meaning "panting." It is a common chronic inflammatory disease of the airways characterized by variable and recurring symptoms including wheezing, coughing, chest tightness, and shortness of breath. Doctors clinically classify asthma according to the frequency of symptoms, forced expiratory volume in 1 second (FEV1), and peak expiratory flow rate. Asthma can also be classified as atopic (extrinsic) or non-atopic (intrinsic).
Figure 2. Normal vs. asthmatic lungs/bronchi.
The causes of asthma are thought to be a combination of genetic and environmental factors (e.g., allergens). Treatment of acute symptoms is usually with an inhaled short-acting beta-2 agonist (such as salbutamol). Recent global data estimate the asthma market to be valued at $12.4 billion in 2009. It is expected to grow with a compound annual growth rate (CAGR) of approximately 1.5% from $12.4 billion to $14 billion by 2017.
Figure 3. Overlap of Obstructive Pulmonary Disease: Asthma, COPD, Bronchitis, Emphysema.
A brief description of the players in the asthma/COPD field are noted below, with GSK’s Advair and MRK’s Singulair owning a lion’s share of the market.
GlaxoSmithKline (GSK) – I wrote about GSK here. GSK owes its market-leading position in the global respiratory market to Ventolin for the treatment of asthma over 30 years ago. In 1990, the company developed and launched Serevent and Flixotide. A combination of these two compounds is sold under the brand name Seretide (Advair). The Advair combination drug consists of a corticosteroid (fluticasone) and a long-acting beta antagonist (salmeterol). It is the dominant drug in the market, with 2010 sales of $7.94B billion. It will likely remain the market leader in the current generation of asthma medication.
AstraZeneca (AZN) – Symbicort (budesonide/formoterol) is a new asthma drug that was launched in the US in mid-2007. The sales in 2010…
Accumulation – Time to Consider A Few Biotech Picks
by Pharmboy - July 4th, 2011 5:56 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Seasonality stock rotation is nothing new to investors, and we at PSW have mainly stayed on the sideline in many biotech stocks for the past few months, knowing that late spring and early summer is not a time to start buying. Come July and August, though, it is time to consider accumulating scientifically sound companies for potential rewards later.
Figure 1. IBB 5 year weekly chart.
A few weeks ago, INCY and YMI were in a write-up and we jumped on the pullback in YMI’s stock price in member chat. While it is early for YMI, I still like their chances and one can buy in on the stock and selling the Jan12 $2.5 calls and puts for $1.40. INCY has a similar product that is further along, and the stock has had an impressive run up. Many think they could be a takeover by LLY, and it is not out of the realm of possibility. LLY has a horrible pipeline, and they need revenue…badly. Time will tell if a deal is done.
One of LLY’s biggest revenue generators is in the treatment of diabetes. The next pick is more of a speculative bet on a new mechanism of action for this very large medical need, and one that LLY could also take advantage of in the future.
Diabetes is a group of metabolic diseases in which a person has high blood sugar, either because the body does not produce enough insulin, or because cells do not respond to the insulin that is produced. This high blood sugar produces the classical symptoms of polyuria (frequent urination), polydipsia (increased thirst) and polyphagia (increased hunger).
There are three main types of diabetes:
- Type 1 diabetes: results from the body’s failure to produce insulin, and presently requires the person to inject insulin. (Also referred to as insulin-dependent diabetes mellitus, IDDM for short, and juvenile diabetes.)
- Type 2 diabetes: results from insulin resistance, a condition in which cells fail to use insulin properly, sometimes combined with an absolute insulin deficiency. (Formerly referred to as non-insulin-dependent diabetes mellitus, NIDDM for short, and adult-onset diabetes.)
- Gestational diabetes: is when pregnant women, who have never had diabetes before, have a high blood glucose level during pregnancy. It may precede development of type 2 DM.
Treatment…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(