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Monday, March 4, 2019

Healthcare Services Group hit on 10-K delay

Healthcare Services Group (HCSG -8.6%) is down on 25% higher volume in reaction to its disclosure that it will be late filing its 2018 10-K due to an SEC inquiry into its EPS calculation practices. It received a subpoena from the agency a year ago requesting information and documents related to the matter.
The company says it launched an internal investigation last quarter to ferret out the issue.

Acupuncture a ‘Realistic Option’ vs Hormone Replacement for Hot Flashes

Receiving a 15-minute, standardized acupuncture treatment once a week for 5 weeks eased bothersome menopausal symptoms, notably, hot flashes, in a small pragmatic trial.
Researchers randomly assigned 70 women in Denmark who were experiencing “quite a bit” to “a lot” of menopausal hot flashes either to undergo acupuncture from experienced primary care physicians or not to undergo acupuncture.
Those who underwent acupuncture reported a significant decrease in hot flashes, excess sweating, mood swings, sleep disturbances, and skin and hair problems. In addition, it was well tolerated, and those who received acupuncture experienced only very rare, minor side effects, compared with those who didn’t receive it.
These findings from the Efficacy of Aupuncture on Menopausal Symptoms (ACOM) study were published online February 19 in BMJ Open.
“The present study demonstrates that acupuncture is significantly superior to no treatment…for menopausal symptoms [and] is a realistic option for women who cannot or do not wish to use [hormone replacement therapy (HRT)],” Kamma Sundgaard Lund, MD, University of Copenhagen, Denmark, and colleagues conclude.
Study strengths included the use of Western-medicine acupuncture, rather than Chinese-medicine acupuncture (which involves yin/yang and the circulation of qi) and the fact that the symptoms were assessed on the basis of the women’s replies to a validated MenoScores Questionnaire.
A limitation is that it did not include a sham procedure, although there is no sham procedure could be considered completely inactive.
“Women seeking acupuncture treatment for menopausal symptoms should be informed of the current evidence, and its limitations,” the researchers advise, “so they can integrate this with personal preferences and values in their decision making.”
Because the intervention was “pragmatic, standardized, and brief,” they note, it “could lead to new treatment options for menopausal women.”

4 to 5 Years of Symptoms

Most women experience menopause in their early 50s and have menopausal symptoms for 4 to 5 years. Notably, hot flashes affect 75% of women and are “very distressing” for 10% to 20% of women, Lund and colleagues write.
HRT reduces symptoms but carries some risks. Certain antidepressants, gabapentin (multiple brands), or clonidine (multiple brands) may reduce symptoms, but their use is associated with frequent adverse effects. Moreover, evidence for symptom reduction through exercise, use of phytoestrogens in the diet, and herbal remedies is not very convincing.
Acupuncture has shown promise in some research, but the studies had design flaws or were of poor quality.
To investigate its effectiveness, ACOM enrolled healthy women aged 40 to 65 years who were without previous cancer or other exclusion criteria, who had very bothersome menopausal symptoms, and who lived close to any of nine primary care practices in Denmark that offered acupuncture.
The nine participating general practitioners had many hours of acupuncture education and had practiced it for an average of 14 years (range, 4 to 38 years).
The mean age of the participants was 54 years. They had had hot flashes for an average of 3.4 to 4.6 years.
The women in the intervention group received five acupuncture treatments 1 week apart. During these treatments, needles were inserted at eight specific points (CV-3, CV-4, and bilateral LR-8, SP-6, and SP-9) and were left in place for 10 minutes.
The women in the control group were offered this treatment after 6 weeks.
The women replied to the MenoScores Questionnaire at baseline and at 3, 6, 8, 11, and 26 weeks.
The questionnaire has scales for assessing hot flashes, day and night sweats, general sweating, sleep problems, emotional symptoms, memory changes, skin and hair symptoms, physical symptoms, abdominal symptoms, urinary and vaginal symptoms, and sex symptoms, as well as a yes/no item for tiredness.
The acupuncture was well tolerated. Only one woman in the intervention group dropped out of the study because she found the treatment unpleasant.
Four women in the intervention group reported mild side effects of tiredness and headache, stress-related hot flashes, more frequent urination, and leg tingling at an acupuncture needle site. There were no serious adverse events.

Rapid Effects of Acupuncture on Hot Flashes, Some Other Symptoms

Compared to the other women, after 5 weekly acupuncture treatments, the women in the intervention group reported significantly less bother from hot flashes, day and night sweats, general sweating, menopause-specific sleeping problems, emotional symptoms, physical symptoms, and skin and hair problems.
The decrease in hot flashes, emotional symptoms, and skin and hair symptoms was rapid and was apparent after two acupuncture treatments.
Eighty percent of participants in the intervention group said they felt the acupuncture sessions had helped them.
“If we ignore these findings, due to a lack of knowledge about possible specific effects of acupuncture,” the researchers write, “women with moderate-to-severe menopausal symptoms could miss out on a low cost and effective treatment with only minor potential adverse effects.”
The study was funded by the Idella Foundation, the University of Copenhagen, and the Research Foundation of General Practice, including the Foundation of Multipractice Studies. The authors have disclosed no relevant financial relationships.
BMJ Open. Published online February 19, 2019. Full text

Lonza Provides Adjusted Mid-Term Guidance

Lonza announced today the adjustment of its Mid-Term Guidance 2022 to reflect the divestment of its former Water Care business unit and to emphasize Lonza’s focus on growth along the Healthcare Continuum®. The adjustment consists of excluding the Water Care Mid-Term Guidance from the Lonza Group financial projections prepared in 2017. The Water Care Mid-Term Guidance was disclosed at Lonza’s Capital Markets Day 2018.
In addition, Lonza is now taking the opportunity to reflect not only the Water Care divestment but also the latest strategy development. The Mid-Term Guidance 2022 was first issued in 2017. Lonza is now factoring in growth investments in its newly formed Pharma Biotech & Nutrition segment in order to participate in the anticipated market growth.
The adjusted Mid-Term Guidance for Lonza’s continuing operations (excluding the Water Care business unit) is the following:
  • Sales of CHF 7.1 billion
  • CORE EBITDA margin of 30.5%
  • CORE RONOA 35%
  • Double-digit ROIC
‘This adjusted Mid-Term Guidance clearly demonstrates our focus on growing our businesses along the Healthcare Continuum® while continuing to aim for operational excellence, productivity improvements and attractive margins,’ said Marc Funk, CEO Lonza.
Lonza’s Mid-Term Guidance is based on the present business composition, the present macro-economic environment, current visibility and constant exchange rates.
Lonza already announced the acceleration of its portfolio review to further strengthen the company’s position along the Healthcare Continuum®. This process is ongoing; an update on the portfolio review is currently expected to be provided in H2 2019.

Nightstar parent’s uncompromising message to the European markets

When Syncona, the UK Wellcome Trust’s evergreen fund, wanted to float its gene therapy company Nightstar Therapeutics a protracted period of soul-searching ensued; should the biotech startup be listed in Europe or the US?
Ultimately the winner of the $75m IPO was Nasdaq. “You need to convince investors that you’re building global leading companies, not European leading companies,” Chris Hollowood, chief investment officer for Syncona’s life science portfolio, tells EP Vantage. And he does not mince his words when it comes to the failures of his company’s home market.
“If you want your company to win you have to make sure its cost of capital is comparative to the cost of capital of its competitors,” he states. “Unfortunately a stock exchange in Europe that allows that in my view doesn’t exist. Nasdaq is the natural place to go. Nasdaq is open to global companies.”
This will sound familiar to many in Europe who have seen local markets beset with poor liquidity, low appetite for biotech risks, and ultimately an inability to raise sufficient cash for drug development. It also raises the question as to why some US groups – Puretech Health and Maxcyte are two recent examples – choose London for their floats.
Still, Mr Hollowood is keen to stress that Nightstar basically remains a UK company, with a UK tax base and with most of its staff based in the UK. It could hardly be otherwise: Syncona is funded by Wellcome to the tune of £250m ($330m), which is essentially UK cash invested by a UK charity.
All the way
When Syncona was put together five years ago its mission was to fund products all the way to approval. The reason? Another local failing, according to Mr Hollowood.
“Wellcome recognised that basic science and clinical translation in the UK and more broadly in Europe was as good as anywhere else in the world, but that there had almost been a dereliction of duty to take that forward into real products that are FDA and EMA approved”.
This led to the current situation where Syncona’s life science portfolio comprises seven investments: three AAV-delivered gene therapy plays, the CAR-T specialist Autolus, a genome sequencer, the tumour neoantigen company Achilles Therapeutics, and the PET imaging group Blue Earth.
SYNCONA’S LIFE SCIENCES ASSETS
CompanyFocusSyncona stakeValue (£m)Valuation basis
Nightstar TherapeuticsRetinal dystrophy gene therapy44%175.1Market cap
Blue Earth DiagnosticsProstate cancer PET imaging90%115.5DCF
AutolusAutologous CAR-T therapy38%88.6PRI
Freeline TherapeuticsSystemic monogenic disease gene therapy74%31.0Cost
Achilles TherapeuticsSolid tumour neoantigens66%2.8Cost
Gyroscope TherapeuticsRetinal inflammatory disease gene therapy72%5.0Cost
CEGXGenome sequencing tools12%5.2PRI
Source: company website; DCF=discounted cash flow; PRI=price of recent investment.
This portfolio will grow to 15-20 companies, with Syncona still able to invest new capital while remaining “a substantial shareholder at the point of product approval”, says Mr Hollowood, referring to one of Syncona’s golden rules; thus even after IPO Nightstar is still 44% owned by the fund.
Another rule is to be very focused on valuation – an unusual criterion for a very early-stage investor. “Every company is typically set up around one cornerstone asset, and we will do an NPV around that cornerstone asset, and make sure it in and of itself delivers a financial return,” says Mr Hollowood; beyond that any pipeline represents the icing on the cake.
An example is Blue Earth, a company that managed to get its key asset to market on an investment of £30m. The exception is Autolus, which has a pipeline of three assets at a roughly similar development stage (Interview – Next from Autolus, cracking tolerance and solid tumours, September 27, 2017).
Bacit hedge
The success story also relied on another piece of the puzzle: Syncona’s merger into Bacit, a listed investment entity with £500m of assets under management.
The 8-10% return these assets yield serves as a hedge, and means that investors are comfortable with cash being put into a naturally longer success horizon of life sciences. “A traditional VC, [with] a six to eight-year investment horizon, is not a vehicle that allows you properly to develop these therapies,” Mr Hollowood reckons.
But what about ballooning US biotech valuations – do these make it hard to invest because of the perceived subsequent huge step-up required to generate a return? “We’ve found it to be fine,” he insists. “We’re accessing global markets, so the investors coming into Nightstar and Autolus are US investors.”
“I think the IPO markets are relatively hot right now. I’ve heard some investment banks on Wall Street talk about companies IPO’ing before clinical data, and I think that’s the first time we’ve seen that since 2015/16. That’s not something we’d ever do, but it’s testament to how hot the markets are.”

Baird investigation finds Ohio, like many buyers, paying too much for drugs

In a research note titled “Major Confusion: Does This Pass Your Sniff Test?,” Baird analyst Eric Coldwell details the interplay between Cardinal Health’s (CAH) generic marketing company Major Pharmaceuticals and CVS Health (CVS) in Ohio. In Major’s catalog is Omeprazole, a generic version of Prilosec, which is available without a subscription. CVS Caremark, which had majority share of pharmacy benefit management services in Ohio, didn’t use Maximum Allowable Cost for the product, which led to the state of Ohio paying $6.74 per tablet, or 19 times the amount somebody without a subscription can buy it, Coldwell tells investors in a research note, citing his own investigation. Meanwhile, over the course of five quarters in Ohio, Major’s volume market share went from less than 2% to nearly 60% while dollar market share went from 12% to 95%, adds the analyst. He asks, “How does this happen?” The state of Ohio, “like so many other buyers, feels like it is paying too much for drugs,” concludes Coldwell.

Piper Jaffray expects positive results from BioCryst’s Phase III APeX-2 trial

Piper Jaffray analyst Tyler Van Buren “fully” expects positive results from BioCryst’s Phase III APeX-2 trial next quarter and notes that the increased enrollment and improved powering is an encouraging development. Additionally, the analyst says that recent full presentation of the Phase II ZENITH-1 results for the 7353 oral liquid program continue to give him a high level of confidence in the future outcome of the Phase III trial. In addition to these two late stage programs, the company’s pipeline is expanding rapidly with IV antiviral galidesivir, BCX9250 for FOP, and BCX9930 for complement-mediated diseases all entering the clinic this year, he adds. Van Buren reiterates an Overweight rating and $15 price target on the shares as he continues to have a high level of confidence in the $500M-plus potential of each the 7353 oral capsule and oral liquid assets and believes that the early-stage pipeline could generate significant additional value.
https://thefly.com/landingPageNews.php?id=2873845

OxyContin maker Purdue Pharma said exploring bankruptcy

OxyContin maker Purdue Pharma LP is exploring filing for bankruptcy to address potentially significant liabilities from thousands of lawsuits alleging the drug manufacturer contributed to the deadly opioid crisis sweeping the United States, people familiar with the matter said on Monday.
The deliberations show how Purdue and its wealthy owners, the Sackler family, are under pressure to respond to mounting litigation accusing the pharmaceutical company of misleading doctors and patients about risks associated with prolonged use of its prescription opioids.
Purdue denies the allegations, arguing that the U.S. Food and Drug Administration-approved labels for its opioids carried warnings about the risk of abuse and misuse associated with the drugs.
Filing for Chapter 11 protection would halt the lawsuits and allow the drug maker to negotiate legal claims with plaintiffs under the supervision of a U.S. bankruptcy judge, the sources said.
More than 1,000 lawsuits accusing Purdue and other opioid manufacturers of using deceptive practices to push addictive drugs that led to fatal overdoses are consolidated in an Ohio federal court. Purdue has held discussions to resolve the litigation with plaintiffs’ lawyers who have often compared the cases to widespread lawsuits against the tobacco industry that resulted in a $246 billion settlement in 1998.
A Purdue bankruptcy filing is not certain, the sources said. The Stamford, Connecticut, drug maker has not made any final decisions and could instead continue fighting the lawsuits, they said.
“As a privately-held company, it has been Purdue Pharma’s longstanding policy not to comment on our financial or legal strategy,” Purdue said in a statement.
“We are, however, committed to ensuring that our business remains strong and sustainable. We have ample liquidity and remain committed to meeting our obligations to the patients who benefit from our medicines, our suppliers and other business partners.”
Purdue faces a May trial in a case brought by Oklahoma’s attorney general that, like others, accuses the company of contributing to a wave of fatal overdoses by flooding the market with highly addictive opioids while falsely claiming the drugs were safe. The court proceedings will be televised.
Purdue tapped law firm Davis Polk & Wardwell LLP for restructuring advice, Reuters reported in August, fueling concerns among litigants including Oklahoma Attorney General Mike Hunter that the company might seek bankruptcy protection before the trial.