What I’m up to this week–Took a call from Dr. Peter Maag, CEO of CareDx, and…

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Just spoke with Peter Maag, CEO of CareDx (yeah, the top dogs call me once in a while). They’re usually interesting, so I take these calls.

Here’s the gist. Peter has an interesting new sequencing/diagnostic test company in Brisbane, Care Dx. They did their IPO back in 2014. (Hot back then, but struggling on the market since. High 10.12 on Sept. 2014, Low: 4.18 May 20, 2016.) Their focus in the transplant market–heart, kidney–and their product(s) sound terrific. Reimbursement is an issue, but at least we’re not talking the usual zero revenue early stage biotech.

Their cash burn is high–that’s the big gotcha. Not spending any more time on evaluating them right now, but I’ll be tuning in on their upcoming earnings, and keeping an eye on them.

 

JAZZ PHARMACEUTICALS: NO LONGER SINGING THE BLUES WITH MULTIPLE 2016 CATALYSTS

Published in Seeking Alpha PRO

Summary

  • Three near-term or on-the-market drugs will diversify Jazz’s revenue, currently overwhelmingly dependent on narcolepsy drug Xyrem.
  • Cancer drug Vyxeos (from Celator acquisition) could be the biggest advance in AML in a generation; NDA should be filed in 2016.
  • Orphan drug Defitelio is rolling out in the U.S.; multiple synergies could boost upside.
  • Preliminary Phase 3 data on JZP-110 is due before EOY. The drug could replace coming generic loss from Xyrem, as well as expand into obstructive sleep apnea market.
  • Jazz’s products lack substitutable alternatives, meaning successful payer pushback is unlikely.

“Always look ahead, never look back,” was a favorite saying of jazz great Miles Davis. And it couldn’t be more appropriate to the opportunity likely coming in significantly underappreciated mid-cap biotech Jazz Pharmaceuticals (NASDAQ:JAZZ).

With the biotech investing space clearly in risk-off mode, this once overachieving biotech has fallen pretty much in lock-step with the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) for the past 12 months. And that’s despite Jazz differentiating itself by having cornered a very lucrative market with its sleep franchise, and also being one of the best acquirers in the specialty pharma industry.

Jazz paid just $150 million to acquire Xyrem back in 2005, which was one of the biggest steals of the past 11 years, since Xyrem contributes many multiples of that amount in profit each year. Since then, Jazz’s management has shown patience in waiting for the right deals – orphan products with favorable prospects – and has even bought back its own shares ($300 million repurchase program authorized on November 2015), showing that it is not engaged in a reckless growth-at-all-cost strategy.

While there’s no perfect stock, there are multiple reasons Jazz looks set to hit high notes before the end of 2016. I’ll cover risks and potential spoilers in a second, suffice it to say here that Jazz is underappreciated currently due to fears of possible coming generic competition for Xyrem, which pulled in $995 million in sales last year, and currently makes up about 70% of the company’s revenue.

But Jazz is injecting badly needed diversity with three new drugs, and positive news on any between now and the end of the year could catalyze investor interest and reignite the share price. In particular, its next generational sleep medication JZP-110 (assuming FDA approval) could offset any loss to Xyrem’s sales.

In fact, JZP-110 could achieve more than that. The investigational compound has shown better efficacy than Xyrem at treating narcolepsy. This drug is also targeting an additional population group, obstructive sleep apnea (OSA). Currently, there are around 200,000 patients in the U.S. with narcolepsy. An additional 275,000 people use breathing machines to sleep because of obstructive sleep apnea. Clearly, this drug has a shot at being substantially bigger than Xyrem.

Let’s dig further into three important 2016 catalysts that could drive a change in investor perception.

Catalyst 1: Vyxeos is the biggest advance in AML in a generation

The data just keeps getting better on Vyxeos, which Jazz recently acquired by spending $1.5 billion for New Jersey-based Celator Pharmaceuticals (NASDAQ:CPXX). Celator’s lead product is Vyxeos, which is being studied as a potential treatment for acute myeloid leukemia (AML).

Jazz plans to submit the New Drug Application for Vyxeos to the FDA later this year, with hopes of reaching the market in early 2017 and creating accretive value in 2018.

Vyxeos shows terrific potential. In Jazz’s recent data dump of Phase 3 clinical trial results, patients who used Vyxeos increased their overall survival rate to 9.56 months, a big improvement over the 5.95 months observed in patients that received current standard-of-care treatments.

In addition, Vyxeos showed a hazard ratio of 0.69, which represents a 31% reduction in the risk of death. The number of patients alive after 24 months increased to 31.1% (on Vyxeos) compared to only 12.3% for those who used traditional treatments.

The impressive data holds even higher significance because there has been no innovation in treatment for AML for almost four decades. Currently, fewer than 10% of patients with the very highest-risk form of AML live more than five years after diagnosis. When you look at the five-year survival rate for all forms of AML, it is still only around 25%.

Vyxeos has the coveted breakthrough therapy designation by the FDA, speeding up review. It already holds orphan drug status in both the E.U. and U.S. For those who have been closely watching FDA approvals, the agency’s oncology chief, Dr. Richard Pazdur, has been accelerating cancer drugs through the regulatory approval process. Under his tenure, the average decision time on oncology drugs has come down to five months from six months.

In addition to better survival benefits, Vyxeos offers convenience since a portion of the therapy can be given on an outpatient basis. It’s a co-formulation of cytarabine and daunorubicin, using Celator’s proprietary CombiPlex platform, which insures that the optimal ratio of the two drugs reaches the leukemic cells, something not usually accomplished through current therapies. Based on that, Jazz believes that the therapy’s annualized price range of $50,000-75,000 per patient is realistic.

Peak sales targets for Vyxeos widely vary. On the low end, $400 million has been cited for the de-risked application for initial approval. Assuming higher secondary AML sales and/or expansion into other AML patient populations, the target rises to $1 billion in global sales by 2020.

Assuming Jazz is successful at expansion in AML, the upper target looks achievable to me. According to the National Cancer Institute, around 21,000 cases of AML are diagnosed in the U.S. each year. At an average of $62,500 per patient, and assuming 65% receive treatment, that’s slightly over $850 million revenue in the U.S.

In the EU, the total number of cases of MMs (myeloid malignancies) are 43,000 annually, about half of which are AML, or 21,500 cases. Prices in the EU can go as low as one/third of U.S. for cancer meds. If all patients received treatment, we’re looking at $430 million, but let’s assume only 65% would, meaning the drug would reap almost $280 million. So we’re already over $1.1 billion, with the rest of the globe completely left out of the sales projection.

Catalyst 2 – synergies and label surprise could boost Defitelio rollout – peak sales, $500 million

Jazz picked up Defitelio (defibrotide sodium) in its 2013 buyout of Italian biopharma Gentium, paying $1 billion in cash with hopes of expanding the drug’s potential. In 2014, Jazz paid $75 million up front and promised up to $175 million more to Italian biopharma Sigma-Tau in exchange for the U.S. rights.

It was a risky strategy, given that the FDA rejected Gentium’s first pitch for approval in 2011, raising concerns about quality of its data. But Jazz persisted, and on March 30, Defitelio became the first FDA-approved therapy for treatment for severe hepatic VOD (hepatic veno-occlusive disease). VOD is a rare and life-threatening liver condition. Around 20,000 stem cell transplantation procedures are performed in the U.S. each year, with around 10% of those patients suffering from severe VOD.

Jazz slapped a hefty price tag on Defitelio, $825 per vial, $140,000 per treatment course. But it’s in line with what analysts expected. Jazz plans to market Defitelio in the same centers as its drug Erwinaze, taking advantage of synergies. With only a small increase in the sales force, the company hopes to add significant revenues.

There’s another synergy between Defitelio and another Jazz drug that’s being missed by analysts. Cancer patients are sometimes given an infusion of stem cells to restore bone marrow functions. These stem cell transplants sometimes cause the dangerous side effect Defitelio earned the FDA approval to treat. If more patients are driven into remission with Vyxeos, Defitelio should see increased use as well.

Canaccord Genuity analyst puts Defitelio’s peak sales around $480 million for its current indication. Analyst Louise Chen from Guggenheim expects the drug to add $6.64 to Jazz’s profit per share in 2016.

Assuming 2,000 patients need treatment, and a $140,000 treatment course, we’re at annual sales (U.S.) of $280 million. Across the pond, Defitelio is already rolling. Last year, it raked in $70.7 million in European sales.

Jazz is also evaluating the drug for the prevention of VOD in high-risk patients with a Phase 3 study slated to commence in the third quarter of this year. In fact, Jazz admitted in a conference call a few years ago that about one/third of its usage comes from off-label use as a prophylaxis. Defibrotide also has potential in graft-versus-host disease – a larger indication, in which the treatment has orphan drug designation in the EU.

I see peak sales at $500 million, but I also believe it’s early days for this drug. It could well become a blockbuster product.

Catalyst 3: JZP-110 preliminary data due from Phase 3 trial before EOY

Jazz’s answer to any potential loss from generic competition to Xyrem hinges on investigational compound JZP-110, which it acquired from Aerial BioPharma in 2014. The drug is currently in Phase III trials in narcolepsy patients and OSA patients, and Jazz is exploring further label expansion. The company provided this timeline in an update a few days ago:

Click to enlarge

Both narcolepsy and obstructive sleep apnea are diseases with significant unmet need. In terms of narcolepsy, if it is severe, you cannot get restorative sleep at night, you can’t function in the day, and you can’t have a job.

Last quarter, Jazz said that 12,775 patients were on Xyrem, and the company continues to emphasize that the market for the drug is underserved. According to MDGuidelines, it affects between 125,000 and 500,000 people in the U.S., but as few as 50,000 are correctly diagnosed.

Jazz is also working hard to expand Xyrem’s label. The drug is currently in a Phase 3 trial for pediatric narcolepsy, with enrollment completion expected in the second half of 2016. Morningstar’s peak sales projection for Xyrem is $1.7 billion in 2019.

Alexion: 2 Global Drug Rollouts, But Upside Already Priced In

Cheryl%20image%20touched%20croppedBy Cheryl Swanson

MOSSEL BAY, SOUTH AFRICA - APRIL 2014: A great white shark breaches from the water in Mossel Bay, South Africa. GREAT white sharks are one of the few species known to regularly poke their heads above the surface to survey the scene. And this huge female is no exception as she rises from the water in front of a cage of stunned divers. The image was captured by British photographer Dale Morris in Mossel Bay, South Africa. PHOTOGRAPH BY Dale Morris / Barcroft Media UK Office, London. T +44 845 370 2233 W www.barcroftmedia.com USA Office, New York City. T +1 212 796 2458 W www.barcroftusa.com Indian Office, Delhi. T +91 11 4053 2429 W www.barcroftindia.com
NAILED THE CALL ON ALEXION–BUT ITS DOWN ENOUGH IT COULD BE  LESS RISKY NOW.

 

 

 

 

 

 

Published in Seeking Alpha Pro

Launching a rare disease drug usually comes with a big payoff for the company’s investors.

So you might think that’s what’s ahead for Alexion Pharmaceutical’s (NASDAQ: ALXN), with the company approaching global launch with not just one, but two ultra-rare disease drugs. On October 23, Alexion nailed FDA approval for rare disease drug Strensiq. The FDA’s final decision on another drug – Kanuma, PDUFA date, December 8 – is likely in the bag.

While Kanuma’s FDA decision was put off in September, the drug seems destined to sail through this time. The drug’s solid clinical trial data earned the oft-tougher nod from the EU commission this fall. Pivotal data published in the New England Journal of Medicine about Kanuma showed it meeting the primary endpoint of alanine aminotransferase (ALT) normalization compared with placebo (31% vs. 7%, p=0.03) as well as six secondary endpoints.

But regulatory approval is simply an open door to an even riskier stage – commercialization. The risks faced in the clinic and with regulatory approval are well known, but the risks of drug launches get ignored. Not a good idea, because launches can fall well short of the rosy expectations created by the companies and the analysts who follow them. That’s particularly true in rare diseases, where you just do not transform drugs into billions of revenue overnight. Rare disease launches require a notoriously slow build-up over time. The company has to scour the planet for patients and handhold them into treatment initiation.

Thus far, Alexion has managed to achieve that with its rare disease drug Soliris. But Alexon’s stock has been on a monster run on the merits of massively profitable cash cow Soliris for a long time – smashing the returns of the S&P over the past ten years. And that’s precisely the problem. The stock is way ahead of itself.

Stock Price Sanity Check

Read entire article at Seeking Alpha here.

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Biotechs With Snap Back Potential

Buying biotechs may seem like jumping without a net these days, but these stocks pack plenty of snap back potential.

Feb 15, 2016 at 10:01AM
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Image courtesy of Creative Commons, Flickr

Yikes! A few weeks into February, and the indiscriminate sell-off in biotech just keeps getting more unnerving.

But here’s the good news. With virtually ever biotech getting dinged, there’s growing upside for investors able to discern the value from the junk in the sector. While a bigger drop could certainly be ahead, a lot of the downside risk is likely baked in for companies with big catalysts ahead.

But what about all the political posturing about drug pricing? Won’t that continue to weigh? Here’s what the market is missing: Proposals to cut drug pricing have been discussed for many years, and the chances of changes materializing in the coming years are slim. In addition, recent high-profile concerns have focused on the pricing for older pharmaceutical drugs — not the kind of breakthrough treatments many biotechs are pursuing.

Biotech stocks are not for the risk-averse, however, since they drop or pop on a whisper. But maintaining a small position in a few well-chosen biotechs also adds a lot more potential upside to a well diversified portfolio. With that in mind, three of our contributors pinpoint stocks that could help boost your portfolio through 2016 and beyond. Head on over to Motley Fool for all three…here’s my pick for Comeback Kid.

An intriquing play in biotechs right now is multiple sclerosis treatment powerhouse Biogen (NASDAQ:BIIB). Several big upcoming catalysts could send this biotech blue chip’s share price sharply upward in 2016 — assuming that all goes well.

 Biogen expects data this year on a treatment with the odd name of LINGO, potentially the first drug to restore nerve damage caused by multiple sclerosis. Admittedly, LINGO is a long shot, and Biogen’s Alzheimer’s drug candidate aducanumab is even riskier. But the possibility that aducanumab could become an approvable therapy seems to be completely written out of Biogen’s price, so any positive results could skyrocket this stock.
Data on two other Alzheimer’s treatments earlier in development could also boost shares. Meanwhile, Biogen’s joint venture with South Korean-based Samsung in biosimilars is starting to look like a real business. The venture notched its first win with a biosimilar version of Amgen‘s rheumatoid arthritis drug Embrel. A second big win could come if EU regulators approve a biosimilar of Johnson & Johnson‘s blockbuster Remicade.
Biogen’s stock was beaten to its knees last year on concerns about slowing sales of its largest revenue driver Tecfidera (a blockbuster multiple sclerosis treatment), but earnings blew past Wall Street estimates in the recent quarter. Management also eased concerns about Tecfidera, saying U.S. demand has stabilized, while sales are growing in Europe. The company announced 11% growth in annual revenues and a significant cash stockpile of $3.4 billion. The size of that war chest gives Biogen ample ammunition for some price-moving acquisitions this year of either companies or drugs.

 

 

Could Fitbit’s Wearables Transform Healthcare?

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By Cheryl Swanson

Remember when wearing a health and fitness tracker labeled you a geek or a nerd?

Well, don’t tell anyone, however we’re now living in the age of the nerd. According to a report from PricewaterhouseCoopers, over 20% percent of Americans own a health and fitness tracker. And an additional 80 percent are familiar along with at least one wearable healthiness device on the market.

There’s something for everyone in health and fitness trackers now, covering every sport from running, skiing, and surfing, to swimming, moto cross, and snow boarding. There are even social features that enable you to form teams and “cheer” or “taunt” your friends. Mordor Intelligence projects the market could reach $8.3 billion by 2018. A recent report from Business Insider projects a blistering compound annual growth price of 35% for the global wearables market, along with over 148 million units shipped each year by 2019.

Fitbit hits the ground running
Due to the fact that a large part of today’s $2.6 trillion healthcare bill is steered by just what is considered “poor health” behavior, including lack of exercise, it’s no wonder so numerous Americans are tracking their activity levels, heart-rates, and even sleep patterns. however along with a market growing this fast, you’d expect it to be crowded.

Courtesy of Flickr, Creative Commons

That’s an understatement. In fact, the exploding competition in health and fitness tracking, especially from Apple‘s (NASDAQ: AAPL  ) all-purpose wearable, the Apple Watch, was expected by some Wall Street pundits to cool investor enthusiasm for Fitbit‘s (NYSE: FIT  )  IPO last Thursday. Forbes reported that Vox’s Matt Yglesias tweeted the provocative question, “Fitbit filing a sucker IPO prior to Apple Watch puts it from business?”

(Click here to keep reading)

 

Animal Health Stocks: Zoetis and Woof Lead the Pack

 

(Photo courtesy of Flickr, Creative Commons)

By Cheryl Swanson

It’s a dog’s world. Forty-seven percent of American households own at least one dog. In addition to the horde of canines, an estimated 95.6 million felines have human owners (although who owns who is highly debatable with cats).

Money follows love. As a nation, we’re expected to shell out a record $58.5 billion on our beloved furry companions this year. That’s more than double what America spent a mere decade ago.

With other countries following the trend, companion animal spending is at an all-time high. Meanwhile, improving standards of living in emerging markets are driving up demand for meat protein. To meet the demand, the world’s livestock sector is growing at an unprecedented rate, according to the World Health Organization.

These two trends are behind the powerful gains of animal health companies such as Zoetis (NYSE: ZTS), which was spun out of Pfizer (NYSE: PFE) two years ago. In the past year, Zoetis has consistently out-performed its Big Pharma Daddy, both in stock price and earnings gains.

Ready for the kicker? The potential of the animal health space often flies under the radar. Analysts tend to ignore these stocks, despite how minimal generic condition for animal meds gives the industry significant pricing power compared to human pharma. There are also no single payers around (such as government agencies or PBMS) to squash price increases, which can knock a gaping hole in a human health company’s profitability almost overnight.

There’s clear opportunity in the animal health space for investors not afraid to take a bite. Here are two stocks with solid growth prospects over the long term. The first also has a potential catalyst that could lead to big gains this year.

Bill Ackman snaps up Zoetis
Zoetis (NYSE: ZTS) is the largest global animal health company by revenue, and pays a small dividend of about 0.7%.

Scale is a big deal in the animal health, since it allows for higher margins and stronger growth. Zoetis’ size and broad portfolio of drugs helps supports its own sales force, so it can bypass distributors.

Zoetis also has a potentially huge catalyst ahead. Last November, high-profile activist investor Bill Ackman acquired a $2 billion stake in Zoetis and started to work with management. Ackman’s stake is roughly 10% of the company, and he now has one director on the board.

(Click here to keep reading)

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