: Jefferies analyst Raj Denhoy
Friday, February 1, 2019
Amgen Takeover of Alexion Pharma ‘Could Make Sense’ – Piper Jaffray
Piper Jaffray biotech analyst Christopher Raymond thinks an Amgen (NASDAQ: AMGN) takeover of Alexion Pharma (NASDAQ: ALXN) “could make sense.”
Amarin (AMRN): New Survey Offers Insight Into Vascepa Market Opportunity
Amarin’s (AMRN) Vascepa is currently approved to treat around 3.8 million Americans with high triglycerides, as an adjunct to diet. In the first quarter, the company will submit an application to the FDA that could expand Vascepa’s sales many times over, by including cardiac-event reductions for the enormous population of patients on statin therapy with high triglyceride levels. In other words, Amarin can make it rain for investors if the FDA expands Vascepa’s label and opens the door for millions of new potential patients to this therapy.
Indeed, after surveying 50 physicians (36% PCPs, 32% endocrinologists and 32% cardiologists) regarding Vascepa, Cantor analyst Louise Chen says the results underscore his belief that the market opportunity is underappreciated.
Ahead of what she expects to be an acceleration in the uptake of Vascepa in 2019+, Chen reiterates an Overweight rating on Amarin stock with a price target of $35, which represents a potential upside of 104% from where the stock is currently trading.
“~52% of physicians noted the high triglyceride patients they see have CV risk factors beyond what can be mitigated by cholesterol management. The REDUCE-IT study positions Vascepa to be the first drug to cost-effectively help address CV risk beyond cholesterol management. Results were presented at AHA and published in NEJM. AMRN is pursuing label expansion and additional patents for Vascepa,” Chen stated. “Most doctors ready to use more Vascepa now. The doctors in our survey said they would increase their usage of Vascepa by ~100% YOY. The data from the REDUCE-IT trial is the key driver. The NEJM publication was also noted as a highly impactful. Finally, the majority of doctors said the VITAL and ASCEND studies also helped drive increased usage of Vascepa. Only 23% said they would wait for label expansion. If this is accurate, AMRN’s forecast sales forecast for 2019 could prove conservative. AMRN expects net revenue to increase by >50% in 2019 to ~$350MM. This assumes no benefit from label expansion.”
Bottom line: “We think the REDUCE-IT data are just the beginning of a new paradigm to treat CV disease. The market is a lot bigger than anticipated, in our view. Before going generic, statins sold $34B+/year. Even the highest estimates do not assume anything close to this for Vascepa and omega-3s.”
Orthofix acquires Options Medical, terms not disclosed
Orthofix Medical announced that it has acquired the business of Options Medical, a medical device distributor based in Florida. Under the terms of the agreement, employees of Options Medical became employees of Orthofix effective February 1.
Cutting Edge Neuro-Technology Helps Fine Tune Ads For This Year’s Super Bowl
Super Bowl Sunday is the best day of the year for both die-hard football fans and companies looking to capitalize on the largest television audience of the year.
With millions of dollars at stake, CBS2’s Scott Rapoport took a look at some of the new technology being used to measure which commercial will win the advertising game.
For many viewers the commercials are the real draw during the big game and this year, major brands are spending more than ever to grab our attention.
“Every 30 seconds of air time is five and a half million dollars,” Spencer Gerrol, founder and CEO of SPARK Neuro, said, “You don’t have time to waste a single second.”
It’s not easy for every brand to hit it out of the park, so more and more marketers are employing the help of an Electroencephalogram (EEG), which gauges just what will strike the fancy of the some 100 million people expected to tune in on Sunday.
“We work with the biggest brands,” Gerrol said. “(We) optimize the engagement of their content before it even airs.”
SPARK Neuro is a neuroanalytics company at the forefront of this technology.
“Your brain is constantly releasing electrical impulses and we’re reading all of those electrical impulses,” Gerrol said. “So when we look at the ad, we look for where are the peaks, where are the times that you were incredibly excited, incredibly attentive and where are the times when we may have lost you?”
Based on the information gathered, the ad is then refined.
“By the time you see it, you enjoy it,” Gerrol said.
The process is much more accurate, he says, than asking people for their opinion.
“If we had a focus group, we would have a lot of people piling on with whatever somebody in the room who seemed popular said,” Gerrol said.
Scott Rapoport gave it a spin, and Gerrol says his biggest reaction was a shot of actress Rebel Wilson playing the part of Amazon Alexa.
“I’m saying you found this to be enjoyable for whatever reason,” Gerrol quipped.
Protein Degradation: Finally, A Way To Treat ‘Undruggable’ Diseases?
A maddening syndrome has frustrated pharmaceutical companies for decades: the notion that most proteins in the human body are “undruggable.” But companies are challenging that idea now with a process called protein degradation.
Up to now, some diseases related to malfunctioning proteins — Alzheimer’s disease and several types of cancer, to name a few — can’t be treated with most pharmaceutical products.
Drug development in the works at a small biotech stock, plus a few Big Pharma companies such as Pfizer (PFE) and Merck(MRK), aims to change that. With protein degradation, drugs could hijack the body’s natural garbage disposal to rid patients of troublesome proteins.
One analyst calls protein degradation a multibillion-dollar opportunity that could even approach the $1 trillion mark. It could provide hope to countless patients with devastating diseases.
A small biotech company, Arvinas, went public in September on the premise that it could make protein degradation work. And pharmaceutical companies back a number of protein degradation firms, including Arvinas.
Arvinas (ARVN) has deals worth nearly $2 billion with Pfizer, Merck and Roche(RHHBY). Celgene (CELG), Novartis (NVS), GlaxoSmithKline (GSK) and Biogen (BIIB) have partnered with other companies.
The fact that big pharmaceutical companies have flocked to biotechs working in protein degradation says a lot, Aprilakis says.
“It’s incredibly telling for the promise of the technology and for just how exciting it is,” he said.
Pharmaceutical Companies Eye Protein Degradation
For decades, pharmaceutical companies have used drugs to inhibit problematic proteins.
A number of traditional drugs block excessive proteins. Researchers believe the buildup of amyloid or tau proteins could cause Alzheimer’s disease. Another rare disease, amyloidosis, is a result of abnormal protein that builds up in the heart or nerves.
In traditional drug development, pharmaceutical companies and biotech stocks look for proteins that, when mutated or in excess, cause disease. Researchers then create drugs that bind to specific proteins, thus blocking them and preventing further damage. (Looking for growth? Take a look at these top biotech stocks.)
But the method only works when the protein has a “groove” for the drug to grab onto, JMP’s Aprilakis says. And that’s an ongoing frustration in drug development. Estimates vary, but some researchers say only 20%-25% of proteins have the necessary groove to be inhibited.
Enter protein degradation. It’s a natural process in the body. When a protein mutates or nears the end of its life cycle, the cell tags it with another protein called ubiquitin. Ubiquitin signals to the proteasome — the cell’s trash compactor — that the protein is ready for degradation.
The degraded protein is “chewed up” into its amino acid and peptide components, Andrew Benowitz, senior director for Glaxo’s protein degradation unit, told IBD in an interview. The cell can then reuse those components.
Benowitz calls the proteasome “the garbage disposal” of the cell.
Sending Proteins To The Garbage Disposal
In terms of drug development, protein-degrading drugs wouldn’t need to have a secure binding to a protein. These drugs only need to circulate near a bad actor protein. Then, the drug recruits ubiquitin to ensure the problematic protein heads to the cell’s trash compactor.
“This is a very transient interaction,” Arvinas Chief Executive John Houston told IBD. The protein degradation process allows the medicine to do its job multiple times in one dose. Eventually, the drug leaves the body. This is key to staving off permanent side effects, he says.
JMP’s Aprilakis says the technology has the potential to be “totally disruptive.” If viable in human tests, protein degradation could treat any disease caused by a faulty protein, he says. Due to the potential for side effects, he acknowledges researchers will need to be picky when selecting proteins to degrade.
Arvinas is targeting androgen receptors in metastatic castration-resistant prostate cancer and estrogen receptors in metastatic breast cancer. The biotech company plans to begin clinical studies in prostate cancer early this year. Breast cancer tests will follow in mid-2019.
Houston expects Arvinas to have early data from its prostate cancer test in the second half of 2019. That could include PSA levels after treatment with a protein degrader. High levels of PSA, or prostate-specific antigens, are associated with prostate cancer. He expects to have breast-cancer data in mid-2020.
Piper Jaffray analyst Edward Tenthoff applauded Arvinas’ strategy in a recent research note. Scientists understand well the biology of prostate and breast cancers. He expects Arvinas to compare its breast-cancer drug against AstraZeneca‘s (AZN) rival drug Faslodex. (Learn more about biotech companies’ plans to attack cancer and other diseases in 2019.)
Partnerships Abound In Protein Degradation
Arvinas will likely be the first company to test protein degradation in human studies. But others are likely to follow suit. The technology has pharmaceutical companies putting up big investments.
Celgene is partnered with Evotec. Roche and Biogen are partnered with C4 Therapeutics. Glaxo and Kymera Therapeutics have a deal. Amgen‘s (AMGN) and Eli Lilly‘s (LLY) venture capital arms also funded Kymera. Evotec, C4 and Kymera are all private firms.
Others have academic partnerships. Novartis partners with researchers at the University of California, Berkeley, and privately owned Boehringer Ingelheim has a deal with the University of Dundee.
JMP’s Aprilakis notes the moves by large pharmaceutical companies are particularly interesting.
“I’ve noted Amgen, AstraZeneca, Glaxo, Novartis and Roche each have their own internal programs,” he said, “or are collaborating with other companies.”
Most pharmaceutical companies are mum on their specific targets. AstraZeneca is exploring protein degradation in oncology, cardiovascular, renal and metabolic and respiratory disease, a representative told IBD via email. But he wouldn’t say how far along the research is.
Glaxo’s Benowitz says the company doesn’t have a protein degrader in clinical studies yet. He wouldn’t comment on when Glaxo expects to enter clinical testing.
Areas Of Drug Development
Protein degradation is exciting because it’s “therapy-area agnostic,” Glaxo’s Benowitz said. The technology could work across multiple areas of drug development including oncology, cardiovascular, lung diseases, central nervous system disorders and more.
“I think what you would be looking for is diseases where the presence of a protein is what is causing disease,” he said. “You can ameliorate that by getting rid of the protein. In some diseases, you want more of the protein or to modify the function of the protein.”
JMP’s Aprilakis sees hope for protein degradation in oncology. For example, researchers agree a gene sequence known as KRAS provides codes for a protein with ties to pancreatic cancer. But there’s a “graveyard” of failed experiments in drug development trying to inhibit KRAS.
“We can’t drug KRAS,” he said. “But if you can knock out KRAS, you could be looking at your first drug for pancreatic cancer. It’s difficult to drug, but we may crack it with protein degradation.”
If successful, these proteins would no longer be “undruggable.”
“Difficult to drug is a better term,” he said.
Novartis Under The Microscope With Novel Gene Therapy
The biotech world is feverishly awaiting the Food and Drug Administration’s potential approval of a gene therapy from Novartis (NVS), due in May.
Spark Therapeutics (ONCE) was the first biotech to grab approval in the U.S. for a gene therapy. Its drug, Luxturna, treats a rare blindness-causing disorder. But Novartis’ Zolgensma is targeting a much larger population of patients who suffer from spinal muscular atrophy. And that’s why it’s important.
Brad Loncar, a portfolio manager, calls 2019 a pivotal year for the gene therapy. Novartis has the potential to set an important precedent in gene therapy pricing. Other biotechs are also watching to see how Novartis builds up its manufacturing — a key challenge in the space.
“That’s an amazing therapy for a terrible disease,” Loncar told Investor’s Business Daily. “But, if after that gets approved, they have a hard time getting payers to buy into that and it has a poor launch, that’s going to have a bad effect on the entire gene therapy field.”
Why Gene Therapies Could Be Expensive
Spinal muscular atrophy results in muscle atrophy and weakness. The Spinal Muscular Atrophy Foundation estimates 10,000 to 25,000 children and adults in the U.S. are afflicted with it.
Spark’s Luxturna, on the other hand, targets an inherited retinal disease. An estimated 1,000-2,000 patients in the U.S. have vision loss due to the genetic mutations Luxturna targets, Spark says. Luxturna costs $425,000 per eye.
Novartis maintains its gene therapy would be cost effective at a price tag of $4 million to $5 million.
The reason is gene therapy could be a one-time treatment. So far, the data are promising but short-lived. Biotechs working in the space say the one-time payout could be less expensive than the lifetime cost of living with the disease — including chronic medicines and hospital visits.
Novartis also could take a clue from Biogen (BIIB) which sells Spinraza, the first approved treatment for spinal muscular atrophy. The drug, developed in a partnership with Ionis Pharmaceuticals (IONS), goes for $750,000 in the first year.
Will Insurers Pony Up For Gene Therapy?
But will insurance cover that cost? Audentes Therapeutics (BOLD) Chief Executive Matthew Paulson says biotechs will have to innovate on the commercial side. For Novartis, that could potentially mean value-based pricing where the drug’s price declines if the effect wears off over time.
“We’ve solved the scientific and development challenges,” he said during a recent talk at an industry conference. “But what if patients can’t get access because of challenges in the medical system?”
Bluebird Bio (BLUE) Chief Financial Officer Jeffrey Walsh says pricing, manufacturing and distribution will all get a face-lift as gene therapies become more popular. Bluebird is at a unique junction. The biotech works in gene therapy, gene editing and cell therapy.
“Novel therapies are coming in and they are going to change all of that,” he said during the conference. “I can’t see how the infrastructure looks the same — not just around pricing and distribution, but also how it’s going to get delivered.”
Cell Therapy Challenges Offer Some Clues
Manufacturing remains a key challenge for both cell and gene therapies.
It’s important to remember these are two different modalities. Gene therapy involves the transfer of genetic material — oftentimes within an emptied-out virus — and the uptake of appropriate cells in the body. Cell therapy involves the transfer of cells with key functions into a patient.
In medicine generally, it’s easiest to manufacture in batches. That’s not possible in current cell therapy which is tailored to individual patients.
Some companies, though, are working on the possibility of using donor cells. In this method, known as allogeneic cell therapy, the treatment could become an “off-the-shelf” drug.
Quick Manufacturing Moves
Meanwhile, Novartis’ gene therapy will go after a bigger group of patients than Spark’s Luxturna, so its manufacturing efforts will be of interest to rivals.
Gene therapy ramped up much quicker than most expected, Bluebird’s Walsh said.
“I think as an industry we weren’t quite expecting the number of bold moves we needed to take to implement this unique care paradigm,” he said during the conference. “Now we’re getting out in the open all of the challenges of how to commercialize a therapy like this.”
He added: “We knew we were going to stumble because you’re trying to create something that doesn’t exist.”
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