Biotech Roundup: Dendreon, BioMarin...
Overall, survival is the current gold standard for approval of oncology drugs.
It has been a darn busy month thus far so I hardly know where to start. I'll try to wade through as much as I can and lay a landscape of what's concerning biotech investors as the old year rolls into the new.
My firm broke the news to our subscribers and Buzz subscribers that three Congressmen asked for a Congressional hearing into conflicts of interest surrounding the FDA's decision to reject Dendreon's (DNDN) prostate cancer drug Provenge. Proving time is money on Wall Street, we jumped the TV and news service headlines by about 15 minutes. The subsequent $2 rise was a nice year-end trading bonus for many of you. Y'all are welcome and thanks for the nice notes.
The Dendreon story promised to be dull heading into the long wait until the end of next year for results from an ongoing trial of Provenge in prostate cancer patients. Now investors are likely to focus on whether Congressional hearings will happen. Requests are nice, but not as nice as actual hearings.
The hearing will not directly result in the approval of Provenge. In fact, the hearings might not even cover issues surrounding why the FDA turned down Provenge in opposition to the advisory panel vote. This first request for a hearing was specific to conflicts of interest, despite the fact some Dendreon bulls have convinced themselves the two separate issues are the same thing.
Regardless of what the hearing subject is, the only way the FDA will act on the citizen's petition to reconsider the decision to reject Provenge is by Congressional pressure. That petition is the only way Dendreon sees Provenge approved ahead of a 2009 approval based upon interim data from the ongoing trial or 2011 based on full results from the trial.
For the sake of prostate cancer patients, of whom we lose some 30,000 each year, here's to hoping the decision to approve comes earlier rather than later. Provenge is safe and effective even if the biostatistics are not as perfect as some FDA bureaucrats and their enablers in the ivory towers of academia would like. Last I checked, our society ranks saving lives well ahead of bureaucratic perfection on our list of priorities. With some luck, Congressional hearings might remind the FDA of this fact.
The approval of BioMarin's (BMRN) Kuvan was broadly expected, so the initial pop in the company's share price was not that large. Readers of the Buzz got the word on approval just shy of 1pm ET.
The big pop in the stock came after the close when the company disclosed the cost of Kuvan was going to be $54,000/year – about twice what most analysts projected. The drug, to help patients with the orphan disease hyperphenylalaninemia, is the latest in a string of orphan drugs developed by BioMarin. There are about 50,000 hyperphenylalaninacs worldwide with about 12,000-15,000 matching the drug's label in the US. BioMarin has all North American rights and partners with Merck Serono in Europe. European approval should arrive next year.
The company guided for 2008 revenue in a range from $35-70M, but I think they are sandbagging. Most analyst notes we've seen so far today pick a higher number.
As I mentioned in yesterday's Buzz, BioMarin has been the top pick in my firm's annual ranking in each of the last two years. Our firm initiated coverage on the company in October 2004 when it was under $10, so it's been a nice one for our Subscribers. If the stock can hold $30, I think the path of least resistance (macro market issues being equal) is the $40s.
My trip to Atlanta for the hematology meeting was a good chance to talk to the biotech gang about Genentech's (DNA) Avastin ODAC panel outcome. None of us were particularly surprised at the outcome of the panel vote. What was a surprise was the number of patient advocates who spoke out against approval of this drug.
There are a number of theories why this particular patient lobby was so vocal against Avastin. The best one I heard, backed by some interesting anecdotal data, is cost. It is no secret Genentech is not making friends with its pricing decisions. Cancer drugs that we projected to cost in the $30,000 range four years ago are likely going to fetch over $60,000 given Genentech's example of aggressive pricing. The lack of patient group support on this decision may well be fallout from the company's pricing decisions.
Genentech is one of the few large biopharma/pharma companies I'd own in a fundamentally-driven portfolio. (Amgen (AMGN) continues to be a walking disaster area with yet another ODAC panel scheduled next year to take more shots at their lead drug franchise.) I think investors in Genentech have to be careful here, though, because the market seems to be fleeing from these larger cap names.
Incidentally, I do not believe the FDA will overrule the advisory panel. Oncology Division head Richard Pazdur is too politically strong in the FDA to let it happen. He constructed the panel to elicit a 'no' vote and the convenient "wait and see more data" excuse is easily applicable here. Patient groups are apparently unlikely to raise a political fuss, either. I've seen odds of 50-50 for FDA approval despite the panel vote. Smarter odds, in my considered opinion, are for a 10% chance the FDA goes against this panel vote and approves the drug.
Where'd all the biotech funds go?
The other macro discussion I've been having lately concerns the rising tide of biotech hedge funds who've been blown out in 2007. This strikes me as a little odd because the year was not a terrible one in the sector. It sounds like too many people made stupidly large bets on too few companies.
Perhaps they should hand out the Six Rules of Biotech Investing when they hand biotech hedge funds their operating papers.
One thing is for sure, the carnage has been frustrating for those of us still in the game. Liquidating even a moderately-sized $200M hedge fund is a big deal in our little space. There is nothing more frustrating than being right on the fundamentals of some company only to see the price not respond due to someone liquidating a position to meet redemptions.
Fallout from the Avastin decision
Overall, survival is the gold standard for approval of oncology drugs. It doesn't need to be, but it is. If you don't demonstrate a survival benefit, your drug is not going to be on the market under the current FDA regime.
Progression-free survival (PFS), a measure of how long a tumor takes before it starts growing again, has been a very common approvable surrogate endpoint. A couple of recent decisions – satraplatin and Avastin – have some folks calling into question whether PFS remains an approvable endpoint.
I believe it is, but only as a surrogate for survival in the current Pazdur-dominated oncology drug approval environment. That means PFS cannot stand alone, it can only stand in for survival. If you have good PFS and survival data not available for a couple of years, you are probably OK. If you have good PFS and bad survival data, then you are sunk.
Such is the life of a surrogate endpoint.
This isn't new news, but the Avastin decision has required some head-in-the-sand industry pundits to abandon their view that what's been awry in oncology drug approvals cannot be explained exclusively by the tired "they should have run a better trial" mantra. More and more people are recognizing that Richard Pazdur, head of the FDA's division in charge of oncology drug approvals, has changed the game dramatically. What I'm seeing now is people casting around for larger drug company oncology programs to see who might get Pazdurized next.
One company commonly at the top of the list is ImClone (IMCL). The company and partner Bristol-Myers (BMY) are looking to move Erbitux into first-line colorectal cancer. Their CRYSTAL study is the pivotal trial for this effort and it happens to have a primary endpoint of PFS. The first peek of data on this trial was positive.
However, the companion EPIC Phase III trial failed to meet its primary endpoint of overall survival. That sets up a similar situation to the Avastin ODAC panel where PFS ended up not accurately predicting survival.
I can make the argument that the Avastin decision was not really about the discordance between the surrogate PFS endpoint and survival. It was more about how the PFS endpoint was not clinically important enough to outweigh the side effects of the drug. Nevertheless, Pazdur's behavior over the last three years since stealing control over oncology drug approvals from more reasonable people has made it tougher to get drugs to patients without unreasonable delays. This has made oncology drug investing even more perilous than normal – something worth factoring into your portfolio decisions in the coming year.
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