CareDx price target raised to $17 from $14 at Piper Jaffray. Piper Jaffray analyst William Quirk raised his price target for CareDx to $17 after the company hosted sessions at the American Transplant Congress on Tuesday. User experiences hinted at the longer-term potential of AlloSure, Quirk tells investors in a research note. The analyst continue to believes that CareDx has one of the most attractive opportunities in diagnostics and he’s now incrementally more confident in the early launch. He reiterates an Overweight rating on the shares.
Wednesday, June 6, 2018
Medtronic a buy on pullback: Piper
Piper likes setup for Medtronic shares after yesterday’s pullback. Piper Jaffray analyst Matt O’Brien attributes yesterday’s pullback in shares of Medtronic to management offering conservative guidance at the investor meeting and delaying the timing for the company’s much anticipated surgical robotic system to fiscal 2020. Medtronic has a “ton of needle-moving new technologies in development,” O’Brien tells investors in a research note. The analyst is confident in a “strong top-line in the coming years” and likes the setup for Medtronic shares after yesterday’s selloff. He keeps an Overweight rating on the stock with a $96 price target.
Axovant names Spark cofounder as CTO
Fraser Wright, PhD, will join Axovant (AXON) as Chief Technology Officer overseeing the company’s gene therapy initiatives. Dr. Wright is the Co-Founder and former Chief Technology Officer of Spark Therapeutics (ONCE) and has over 20 years of leadership experience in the development of novel vector-based biologic products.
Tuesday, June 5, 2018
Volatility may hit Wall Street as Alphabet, Facebook leave tech sector group
Volatility could well be in the cards for Wall Street again early this fall, but not for the same reason stocks got rattled in February.
This time the culprit would be the largest-ever shakeup of the stock market’s broad business sectors, which will mean some of the hottest stocks, like Facebook and Google parent Alphabet, will shift from their traditional homes in the top-performing technology sector and into a deepened pool of telecommunications and media stocks.
The sweeping reorganization of the Global Industry Classification Standard, or GICS, means that funds tracking the telecom, tech and consumer discretionary sectors will be forced to trade billions of dollars of stock to realign their holdings by a Sept. 28 effective date.
While the choppiness many investors expect to see is unlikely to hit stocks in quite the same way that wave of the global uncertainty did in early 2018, the fact that so much money must be shifted among index funds in a short time will cause a stir.
In a bid to ensure a smooth transition, leading fund provider Vanguard Group has have already started adjusting its sector exchange-traded funds, or ETFs, while State Street Global Advisors is launching an entirely new fund.
Other investors predict price swings and commotion on trading desks if last-minute sales of Alphabet and Facebook shares by heavyweight technology index funds dwarf demand from a handful of telecom funds buying those stocks.
“There’s probably going to be net selling,” said Andrew Bodner, president of Double Diamond Investment Group in Parsippany, New Jersey. “That will be a temporary scenario, and it could be a good buying opportunity for a lot of those stocks.”
Maintained by S&P Dow Jones Indices and MSCI since 1999 and widely used by portfolio managers, the GICS classifies companies across 11 sectors. The newest, real estate, was split off from financials in 2016. The upcoming changes, which have yet to be finalized, are meant to reflect evolving industries.
Facebook and Alphabet will move from information technology and sit alongside AT&T Inc and Verizon Communications in a broadened telecommunication services sector that will be renamed communications services.
Consumer Discretionary heavyweights Walt Disney, Comcast, Netflix and others will also join the newly defined sector – major changes that will affect investors in sector-focused funds.
Communications services companies will account for one-tenth of the S&P 500, up from under 2 percent for the telecom sector.
U.S. science and technology ETFs have $78 billion in assets, and many will have to sell their shares of Alphabet and Facebook as the changes kick in, according to Thomson Reuters Lipper data. Telecom ETFs, with around $4 billion in assets, will have to buy shares of those companies, while selling some of their investments in AT&T, Verizon and other current constituents to make room for the entrants – trades that will certainly create a surge in volume as well as volatility if not choreographed.
“Stocks will be trading differently than the fundamentals just because of the buying and selling pressure that is going to take place,” said Todd Rosenbluth, director of ETF and Mutual Fund Research at CFRA in New York.
The reorganization may also make it difficult to analyze investments as statistics for each sector, like earnings growth and valuation multiples, will change drastically. The telecom sector’s dividend yield of over 5 percent will shrink to 1 percent.
“These changes have really upended the apple cart, and investors need to ensure they know all of the changes before they take effect,” said Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors, of the upcoming restructure.
Wealth management firm Exchange Capital Management is reviewing client accounts that include sector ETFs to identify which will be most affected by the changes, said portfolio manager Andrew Stewart. The Ann Arbor, Michigan firm will weigh the benefits of rebalancing clients’ ETFs against the taxes that would have to be paid on capital gains resulting from their sale.
“The powers at GICS have made a very rational, academic decision to reclassify these sectors,” Stewart said. “But I don’t think their systems are built to pay attention to the needs of Jane Doe’s retirement plan.”
To avoid having to make large trades when the changes go into effect, Vanguard has pegged its technology, telecommunications and consumer discretionary sector ETFs to temporary benchmarks adjusting gradually over four months. Its recently relabeled Communications Services fund already includes tiny investments in Alphabet and Facebook.
Bank of America warned in a recent report that the changes will leave the new communications services sector more overbought than any other due to its high concentration of popular stocks Alphabet, Netflix, Facebook.
Ivan Cajic, head of index research at ITG in New York, said he expects most passively managed funds to wait until the changes go into effect to realign their portfolios in order to remain true to the indexes they track.
Cancer patients want immunotherapy even when evidence is lacking
Immunotherapy is a source of great hope in cancer care. It has rescuedsome patients from the brink, while giving others a reason to believe that they, too, could beat the long odds.
But these therapies are also creating a vexing dilemma for doctors: Their patients, citing television ads and media accounts of miraculous recoveries, are pushing hard to try them, even when there is little to no evidence the drugs will work for their particular cancer.
Doctors want to give their patients every shot at survival, but can they justify prescribing a drug when it hasn’t been tested for that patient’s type of cancer? Many of these treatments bring risks of painful — even life-threatening— side effects and carry total price tags pushing $1 million. In some cases, insurers won’t pay.
“Whether it works or not, the burden both financially and emotionally on families and patients is massive,” said Dr. Vicki Jackson, chief of Massachusetts General Hospital’s palliative care unit, which helps patients with their decision-making process. “If you try it and it doesn’t work, then you’ve used up all your life savings.”
There are few objective guideposts to determine which patients should get which treatments, or even undergo genetic testing to determine whether they are among the minority of patients who might benefit substantially from immuno-oncology medicines. The dividing line is often drawn by variations in age, tumor stage, and underlying health status — and the weight given to those measures still relies on physician discretion.
“Is it ethically and morally appropriate to not offer these potentially curative options on the basis of a very slight difference in kidney or liver function?” asked Dr. Ephraim Hochberg, a Mass. General oncologist who specializes in lymphoma.
Precision medicine, and the use of genetic markers to predict the success of treatments, promises to help answer these questions. Scientists at Stanford, for example, engineered a radioactive molecule, detectable by PET imaging, to track whether a patient’s T cells are activated and thus capable of fighting cancer if the patient is given immunotherapy.
The technique worked in lab mice but has not yet been tried in human patients, and other such approaches are further off. Meanwhile, patients and doctors are left to make life and death treatment decisions on uncertain terrain.
This struggle plays out on a near-daily basis at Mass. General, a Harvard-affiliated academic medical center with a deep well of resources and expertise. STAT interviews with specialists at the hospital reveal both the complexity of the variables at play, and the difficulty of establishing clear treatment protocols when data on real-world outcomes is still lacking.
The extent of these difficulties is only magnified for oncologists working with fewer resources in smaller community hospitals, where the vast majority of the nation’s cancer patients receive their care.
The uncertainty over treatment eligibility primarily pertains to a new class of treatments that harness the power of a patient’s immune system to attack cancer cells. These drugs have reached the market fairly recently, and have been tested in patients with a limited number of cancer types. And even in those types, the drugs work only some of the time.
These treatments include the checkpoint inhibitors Keytruda and Opdivo, CAR-T drugs such as Yescarta and Kymriah, and neo-antigen vaccines.
Hochberg often deals with patients who want to try CAR-T therapy, which re-engineers a patient’s T cells to recognize molecules on cancer cells and attack them. CAR-T drugs cost between $375,000 and $475,000, and the administration of treatment and follow-up care adds hundreds of thousands of thousands of dollars to the total bill.
In theory, CAR-T therapies can be tried on older patients whose bodies cannot withstand chemotherapy and radiation, but the National Comprehensive Cancer Network, which publishes treatment guidelines, has not established detailed eligibility criteria.
A similar struggle is playing out over the use of checkpoint inhibitors. It is not always clear which patients should get tested for a rare genetic condition, known as mismatch repair syndrome, that indicates receptivity to these drugs. While the testing is routinely conducted in treatment for patients with uterine and colon cancers, it is not always done for patients with other types of cancer.
“The fundamental problem is that it’s a costly test, so people are reluctant to make it automatic,” said Dr. David Ryan, clinical director of Mass. General’s Cancer Center. “Right now we’re relying on the oncologist to pick up those patients where there’s a reasonable chance of having mismatch repair deficiency, and ordering that test from pathology. Everybody’s having a hard time figuring out how to do this.”
Insurers play a key role in making sure that sky-high spending for these drugs is based on evidence of efficacy. But their involvement cuts both ways. In some cases, they deny coverage for treatments even when they are recommended by oncologists who believe there is a strong scientific basis to back up their decisions.
That scenario arose recently for Dr. Zosia Piotrowska, a medical oncologist at Mass. General who specializes in treating lung cancer. She recommended a combination of targeted therapies for a 50-year-old mother of four who has struggled with metastatic lung cancer for five years.
The patient’s cancer is exceedingly rare and marked by a gene mutation that indicates greater receptivity to targeted therapies. Piotrowska said various combinations of treatments had allowed the patient to live a normal life for several years, but her insurer recently denied coverage for the new round of treatment, which comes with a price of $16,000 a month.
Piotrowska appealed the decision, but the insurer still denied coverage, citing a lack of support for the treatment option in National Comprehensive Cancer Network guidelines. Though such guidelines set forth detailed protocols, they do not address the myriad nuances of each type of cancer and rapid changes in treatment options.
“The guidelines can’t keep up with the pace of research,” Piotrowska said. “As we learn more and more and develop better treatments, certain patients fall into these loopholes where we understand the biology of what’s going on, we have a treatment, but you can’t explain it to the insurer.”
That denial of coverage means the patient must decide whether to pay out of pocket and drain family savings for an uncertain benefit. Piotrowska said this patient has enough resources to continue with treatment, but for the vast majority of patients, the price would mean certain financial ruin.
The advent of immune-based therapies is only making the decisions harder. For a small percentage of patients, the treatments can be a savior, but without comprehensive insurance coverage, they are guaranteed to lead to financial distress. And because there is not yet much data on how the patients who initially benefit are faring in the long run, it is nearly impossible for new patients and their families to assess costs and benefits.
Doctors said the confusion over who should get immune-based treatments is bound to be exacerbated by the passage last month of the controversial “right-to-try” legislation, which aims to give patients with terminal illness a different pathway to try experimental medicines that haven’t yet been approved by the Food and Drug Administration. It will not be clear how the law will affect patients until regulations are clarified in the coming months.
In some ways, the pressures and uncertainties posed by new cancer treatments are good problems to have. Julie Guillot said she wishes she’d had the luxury of such challenges when her son was sick.
Zach was diagnosed with acute myeloid leukemia when he was 5. For a boy of that age, concerns about unclear clinical benefits of treatments and sky high costs do not apply in the same way they might for an older patient. All the calculations point to the same answer: Try everything you can.
Zach received heavy doses of chemotherapy and three bone marrow transplants during years of expensive treatment that left him suffering from uncontrollable fevers, nausea, and infections. He died in 2014.
Guillot now works as an advocate to help other patients get access to the best treatments and to ensure that experimentation in cancer care can continue to proceed on its inevitably hard and messy course toward cures.
“If we are avoidant of new therapies because of the risk, the lack of data, or the cost, breakthrough therapies like CAR-T and bone marrow transplant would never be developed,” she said. “When you are faced with this, people are willing to take risks for a chance to live.”
#BIO18: Oncology surplus could drive down values
- 2018 is shaping up to be the second strongest dealmaking year in the last decade based on M&A activity during the first quarter, reports Syneos Health in its Dealmakers’ Intentions Survey. Total deal values could reach between $200 billion to $250 billion this year, second to 2015’s mark of $425 billion.
- The share of large-cap pharmas participating in M&A deals is actually decreasing, from a high of 82% in 2009 to just about 57% in 2017. Deals are being driven by alternative sources now, like mid-sized and regional buyers, as well as an increase in financial alternatives.
- The report presented at the BIO International Convention surveyed 66 members of the biopharma community who participate on either or both sides of deals and who are involved in decision making to gauge expectations for deal activity over the next year.
Unless you’ve been living in a cave, you know that oncology is the hottest therapeutic area in the industry. But what you might not realize is that market forces suggest the market is overheating, says report author and Syneos Health Managing Director of Commercial Strategy & Planning Neel Patel.
“Supply of oncology assets has eclipsed demand; an early sign of an area, as an industry, that we may have over-invested in,” he said in an interview.
He noted the increase in supply is in part due to the number of “fast follow-ons” currently in development, like the checkpoint inhibitors that seem to be in every drug developer’s pipeline. The high valuations in the space and the rise of immuno-oncology has led many drug developers that weren’t traditionally oncology players pivoting to the space.
“This suggests that premiums in the oncology space could start seeing a potential decline in the coming year for products that are not highly differentiated,” said the report, which notes the spread between supply and demand has increased from 2% in 2017 to 15% in 2018.
Other areas seeing a supply surplus are central nervous system drugs and infectious disease drugs.
Meanwhile, there is a demand surplus for hematology, respiratory/pulmonology and renal drugs.
But the report points out that no clear preference for a development stage emerged this year, indicating buyers and sellers are concentrating most on how assets fit into their current portfolios.
Arkay Trial to Evaluate Superiority of RK-01 Over Metformin in Type 2 Diabetes
ARKAY Therapeutics, LLC, a privately held biopharmaceutical company focused on developing innovative, orally-active combination products for the treatment of type 2 diabetes and related disorders, announced today that the U.S. FDA has approved its IND application and the clinical study “may proceed.” ARKAY Therapeutics plans to evaluate the safety, tolerability, and superiority of RK-01 over metformin in newly diagnosed drug-naïve as well as obese type 2 diabetes patients with inadequate glycemic control with metformin monotherapy. RK-01 is a proprietary formulation of valsartan plus celecoxib dual add-on to metformin-HCl XR. Metformin is the current first-line of therapy. “The approval of the IND application is an important milestone for the company. We expect RK-01 to prevent metformin failure by maintaining a state of insulin sufficiency and reduce the risk of insulin dependence in type 2 diabetes patients” said Ravi Kumar, Ph.D., founder and CEO of ARKAY Therapeutics. “On behalf of the company, I would like to thank our scientific advisors for contributing to ARKAY’s responses to the FDA’s requests for additional information during the 30-day safety period. We are excited that this novel approach — which represents a new paradigm of treating type 2 diabetes in the context of comorbidities and coexisting conditions — has the potential to prevent or delay initiation of insulin therapy,” Dr. Kumar added. ARKAY’s patent, 9,839,644, that protects the formulations and the method used for RK-01 was issued by the U.S. Patent and Trademark Office in December 2017. A continuation patent application, publication number US-2018-0042945-A1, that protects additional formulations and methods has also been filed.
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