Saturday, 29 March 2014

Latest Bioassociate for SeekingAlpha: Tonix's Clinical-Stage Drug, TNX-102SL, Is Completely Unneeded

Below is Bioassociate's latest article for SeekingAlpha, "Tonix's Clinical-Stage Drug, TNX-102SL, Is Completely Unneeded", tell us what you think!

  • Tonix Pharmaceuticals' clinical-stage product - TNX-102SL is a disintegrating sublingual tablet containing a very low dose of cyclobenzaprine, targeted for bedtime administration for the treatment of Fibromyalgia.
  • TNXP was a sub-$5 stock following its recent NASDAQ up-listing until a series of articles drove a stock price rally, regardless of any real fundamental advancements or news.
  • Tonix's reformulated cyclobenzaprine doesn't provide any benefits over generic cyclobenzaprine pills that are commonly used as a Fibromyalgia treatment and will not be accepted by physicians and payers.
  • Even if TNX-102SL will be FDA approved, its patent expiration date grants only 3 years of market exclusivity. Consequently, Tonix has no chance of even recouping its development costs.
  • We argue that Tonix's current market cap is inflated and that Tonix's stock price should be traded only slightly over the company's cash (~$6 per share).
Tonix Pharmaceuticals (TNXP) is a small virtual company that focuses on developing treatments for CNS conditions related to central pain. Tonix, which currently has only three employees, a CEO and Chairman, a CFO and a CSO, develops a single clinical-stage product - TNX-102 SL, a disintegrating tablet containing a very low dose of cyclobenzaprine (CBP) that is designed for sub-lingual administration at bedtime. Apart from TNX-102 SL, Tonix has a preclinical asset - TNX-201 for the treatment of tension headache. Tonix is initially developing TNX-102 SL as a treatment for Fibromyalgia (FM), a neuropathic pain disorder with unknown etiology, characterized by widespread pain and fatigue. A second indication for this drug candidate is post-traumatic stress disorder (PTSD).
CBP has been approved by the FDA in 1977 for the relief of muscle spasm associated with acute, painful musculoskeletal conditions as an adjunct to rest and physical therapy. A very low dose of bedtime CBP as a treatment for Fibromyalgia was originally developed by Dr. Iredell Iglehart, acquired in 1998 by Vela Pharmaceuticals (founded by Seth Lederman, Tonix's founder and CEO) and returned to Seth Lederman years later, without any major R&D advancements over a period of a decade and a half.
One must question, if TNX-102 is such a promising technology with great commercial potential, why was it held from proper development through all these years? And why did Vela, which was acquired for only $30 million, pass on the opportunity? The answer is simple - because it already exists on the market, and at bottom low pricing.
Due to its currently unknown etiology, treatment options for FM patients include 3 approved drugs: Pfizer's (PFE) Lyrica, Eli Lilly's (LLY) Cymbalta and Forest Laboratories' (FRX) Savella. In addition, FM treatment relies heavily on numerous generic drugs that are prescribed as off-label FM treatments. These drugs include anti-depressants, pain medications and muscle relaxants, one of which is a low dose of bedtime CBP, with its generic 5mg CBP sold for a few cents a pill.
TNX-102 SL for fibromyalgia
Tonix is developing TNX-102 SL as a treatment for FM, stating this is both a reformulation and repurposing of the original drug, CBP (company presentation). While TNX-102 SL is clearly a CBP reformulation (oral to sublingual formulation), claiming it is repurposed is nothing but a demagogic argument since CBP pills (such as Flexeril and Amrix) have been widely usedas a FM treatment for many years.
According to Tonix, TNX-102 SL will differ from the currently available generic versions of CBP by a faster absorption time and faster clearance from the blood. This, according to Tonix, will result in a faster onset of the drug's action and is expected to reduce the morning drowsiness that is sometimes associated with bedtime CBP (much like many sleeping pills and muscle relaxants). Importantly, in a CBP surveillance program, the reported incidence of morning drowsiness among 10mg CBP users was 16% (about a third of the reported incidence in clinical trials). The equivalent extrapolated morning drowsiness incidence for the 5mg CBP dose is 10% (see p.7-8 here). It seems as if CBP-induced morning drowsiness is not such a problem as the company wants investors to believe.
Tonix has so far conducted two Phase 1 pharmacokinetic studies in healthy subjects that showed that a sublingual formulation of TNX-102 is delivered to the systemic circulation more efficiently and faster than the ingested CBP tablet (company's S-1, p.52). Tonix admits that the final formulation of TNX-102 has not been reached yet, and further studies are planned before the final formulation will be ready (S-1, p.46-7).
Tonix is basing their hypothesis of the very low dose (VLD) CBP for the treatment of FM solely on the results of the Moldofsky Study - "a phase 2a study, a randomized, double-blind, placebo-controlled trial, which demonstrated that up to 4mg of CBP in a capsule swallowed between dinner and bedtime resulted in significant decreases in next-day pain and other core FM symptoms after eight weeks of treatment, as well as in a significant improvement in sleep quality" (S-1, P.50). In fact, the Moldofsky Study has demonstrated, like previous clinical studies (herehere and here), that various doses of CBP in its currently marketed ingested pill form are affective FM treatments. The Moldofsky Study does not provide any proof that a sublingual formulation of CBP, or specifically Tonix's sublingual formulation, is an effective FM treatment.
Tonix is currently enrolling FM patients to its Phase 2b BESTFIT study - a double-blind, randomized, multicenter, placebo-controlled study to evaluate the efficacy and safety of TNX-102 SL 2.8mg tablets at bedtime in patients with FM. The study's results are expected towards the end of 2014. Note that the Phase 2b" title is misleading - while Phase 2b usually indicates a late-stage clinical study, the BESTFIT study is the first time TNX-102 in its sublingual formulation is actually tested for efficacy.
The question for investors is simple - is Tonix's reformulated CBP version meeting an actual need in the FM treatment field?
The answer is plain and simple - No. TNXP tells an allegedly compelling story about why TNX-102 SL would be the perfect drug for FM. However, when digging into the details of the story, contradictions, unsupported claims and half-truths arise as will be demonstrated.
Let's start by reviewing the company's statements as to why TNX-102 SL has/should have advantages over the currently marketed, low cost, generic CBP oral pills:
Tonix's S-1 (p.44) states "We believe that TNX-102 SL is an optimized CBP product for the treatment of FM and PTSD, and is distinct from current CBP products in three ways:
(1) It is being developed at a dose level significantly below the lowest marketed doses of current CBP products;
(2) It is placed under the tongue, to disintegrate, dissolve and provide sublingual absorption, whereas current CBP products are swallowed and provide absorption in the small intestine; and
(3) It is being developed for chronic use, whereas current CBP products are marketed for two to three weeks of use."
The key to Tonix's statement is "We Believe" as there is no clinical evidence to the company's claims. Let's go over these arguments:
(1) Lower CBP dose: Given the bioavailability of oral CBP (33-55%), the plasma levels of a 5mg CBP pill should be more or less equivalent to the TNX-102 2.8mg sublingual dose. Regardless, it has not been established yet, by Tonix or anyone else, that a 2.8mg sublingual dose is either safer or more effective than a 5mg oral pill. As mentioned above, Tonix claims that in TNX-102 SL, CBP is absorbed faster into- and is cleared faster from the blood circulation. Could the reduced dose of TNX-102 SL, together with its claimed shorter plasma time cause the drug to lose its original efficacy? Maybe. No one knows the answer to that because Tonix had never actually tested the SL formulation's efficacy.
(2) Route of administration: According to Tonix, the sublingual route has 2 benefits:
(i) "since TNX-102 SL avoids first-pass metabolism by the liver, a psychoactive metabolite of cyclobenzaprine, norcyclobenzaprine (nCBP), is not generated" (Company website).
Tonix (or anyone else in the scientific world for that matter) has NEVER established that nCBP has psychoactive effects or any other adverse effects. A search in Pubmed for "norcyclobenzaprine and psychoactive" yielded ZERO results! Furthermore, a similar Google search does not provide a single hit that is not related to Tonix! In addition, Tonix has never proved that TNX-102 SL administration does not result in nCBP generation.
Much to one's surprise, in a clinical study that tested oral CBP in FM patients for 6 months, none of the enrolled patients ended up in a mental hospital due to the (never-heard-before) "psychoactive effects" of nCBP.
(ii) "Despite the approved uses of CBP in treating muscle spasm, we believe current marketed formulations of CBP are limited for treating FM by slow and unpredictable absorption" (S-1, p.50).
Tonix's only clinical efficacy data for TNX-102 (the above mentioned Moldofsky Study), which used CBP ingested pills (not the SL formulation) proved the complete opposite when it demonstrated a significant benefit of CBP pills to FM patients. More importantly, there are several published papers showing that the currently available CBP tablets are an effective treatment for FM (see herehere and here), contrary to the company's "belief."
(3) Chronic use: That is correct but utterly irrelevant, as the 2-3 week treatment is related to the muscle spasm indication. In fact, in clinical studies that tested CBP in FM patients, dosing periods of up to 6 months are recorded (see herehere and here).
To summarize so far, CBP has been helping FM patients for over two decades by off-label use of the currently marketed pills. Tonix's sublingual formulation is not addressing any real unmet needs, and might, on the other hand, result in the loss of the efficacy of the marketed formulation due to overly-reduced plasma levels over 24h caused by the reduced dose and faster clearance from the body. The most worrying thing for Tonix's investors, though, is that the company's statements regarding its drug's alleged benefits could not be regarded as a valid investment thesis.
In addition to the above, Tonix is trying to mask a major problem TNX-102 SL will be facing - a long development cycle coupled with a short-term Intellectual property protection: in its company presentation, Tonix estimates that the NDA for TNX-102 will be filed during 2016 and FDA approval is expected in 2017. A closer look at the time-line forecast provided by Tonix in its S-1 (p.47), shows that NDA submission will not happen before 2017, and potential FDA approval will occur not before 2018 (just add up the time periods stated by the company for each stage). The granted patents (hereand here) that protect TNX-102 include formulation and method of use patents that expire in 2020 (S-1, p.60). Given the 505(b)(2) pathway for FDA approval stated by Tonix (S-1, p.3), which grants only 3 years of market exclusivity - the problem does not require further explanations.
So what stands behind the incorporation of a virtual company that employs only 3 people and develops an old drug that is not really needed?
Looking at the financial benefits Tonix's founders and executives are entitled to may give a hint to the answer. Tonix spends a lot of its cash on G&A, at some points even double the amount it spends on R&D (Q3, 2013 and 2012financial reports for example). Moreover, Tonix spends more on G&A than companies employing dozens of employees. For example, Biodel Inc. (BIOD), which spends three times as much on R&D than it does on G&A and has 30 employees, spends on G&A an amount similar to that of Tonix ($1.5m per Q). This 3:1 R&D/G&A ratio is a common feature in many micro- and small-cap biotech companies. Tonix is an exception here with its high G&A costs and low R&D expenditure.
The much discussed biotech bubble has been supporting inflated company valuations and is enabling many companies to easily raise funds, sometimes regardless of the quality of their scientific assets. Tonix's expedited and premature transfer to the NASDAQ capital market was done during mid-2013 with a reverse stock split, followed by NASDAQ up-listing in August 2013. A few months following the NASDAQ up-listing, a media blitz (from December 2013 to February 2014), which included a series of articles and publications, helped drive Tonix's share price from around $4 to almost $20 without any fundamental reason behind it. The blitz period ended, naturally, with an offering.
Even if TNX-102 SL will be eventually approved, 4 years from today, it will have to fight an uphill battle, hampered by the price premium of a branded drug, against many, equally effective and cheap generic drugs, including Cymbalta and the soon-to-be generic Lyrica. Will physicians switch patients from CBP pills to the unneeded sub-lingual form? Will payers agree to pay a premium price just to reduce some rare cases of morning drowsiness? We seriously doubt that.
Given the lack of any relevant clinical data, questioned market potential and short patent coverage of its only clinical-stage drug, Tonix's stock is extremely over-priced and should be traded close to cash at ~$6 per share.
Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Tuesday, 11 February 2014

Bioassociate Reiterates BUY Recommendation on RedHill Biopharma

Redhill biopharma Feb 5  2014 Update Thumbnail
In a report published on February 9, 2014, Bioassociate reiterated a Buy rating on RedHill Biopharma (NASDAQ: RDHL) (TASE: RDHL.TA), and set an ADS price target of $18.1. The report contains a detailed discussion of RedHill's pipeline advancements during the preceding months and adjusted cash flows.
The Update Report is available at:
In the report, Bioassociate noted, "RedHill Biopharma has initiated late-stage clinical studies in the company's two leading programs - RHB-104 for the treatment of Crohn's Disease and RHB-105 for eradication of H. Pylori. In addition, the submission of the RHB-102 NDA is expected by the end of Q1 2014. The RHB-103 program's FDA approval will be delayed by a few months following a request by the FDA for additional CMC information. Importantly, in January 2014, RedHill completed three Private Placements of shares/ADSs for an aggregate gross amount of $20.2 million, ensuring sufficient funding of the company's operations until the end of 2015. Given the latest advancements, we reiterate our BUY recommendation and our target price of $18.1 per RedHill ADS."

Sunday, 19 January 2014

Biotech & Pharma 2013 Licensing & Partnering Activity Review: Diminishing Upfronts, Increasing Platform Licenses Indicate Stronger Risk Aversion among Big Pharma

Let’s face it: everyone finally realized that Pharma’s traditional business model was only as good as the piles of money thrown at it every year. Now that players are feeling the pinch of financial crises and therapeutic droughts, some ingenious dynamics are beginning to play out on the dealmaking landscape. And to begin with, the bulky, disincentivized and unproductive in-house R&D monster is going away forever, leaving behind a legacy of chronic phobia of go-it-alone risky drug development ventures.

So what is replacing the cumbersome in-house R&D? Risk-diluting options are. Although strategies which lower risk by sharing or buying options in clinical programs were already visible in 2005, it wasn’t until the financial burden of the most recent patent cliff that companies really had to implement ways of doing more with less.

Nowadays, in-house clinical projects bear a higher financial risk than ever before

Commitment to traditional in-house drug development model played out all-or-nothing scenarios, where losses were compensated by an abundance of therapeutic targets. But times have changed. Me-too drug niches are saturating at cosmic speeds, which is a clear indicator that emergence of novel disease targets through basic science is simply not up to speed with industry demands.  

Then there’s the dollar-per-approval conundrum: R&D spend has increased with vicious speeds over the last decade, with little growth in the number of approved drugs to show for it (save for 2012 – see fig. 1). Most people would have considered the pharmaceutical industry a pull market, but here, too competition has become another vice, and another major risky step in development, to worry about.

Not only do collaborations lower risk and allow companies to embark on more projects, they also ensure that companies are not competing for the same disease niche. Patent exclusivity times no longer serve as the ultimate protection of the drug's market when there can be up to 10 molecules developed for the same disease target at any given time.

Last year Vertex Pharmaceuticals, for example, had to completely sell off its Incivek (telaprevir) Hepatitis C business after revenues of the drug dropped to zero upon expectation of AbbVie’s and Gilead’s oral competitors. Telaprevir was approved only a year prior to its abandonment, having earned Vertex just under $1 billion in total sales.

All of this boils down to immensely increased financial risk per each drug in development. Because most Big Pharma are becoming acutely cash-aware, new business strategies are much more about risk than gains.

Figure 1. Total spend on drug development vs. number of New Molecular Entities (NMEs) and Biologics License Applications (BLSs) approved each year by the U.S. Food and Drug Administration

Risk is lower together

Nowadays, even when companies choose to outsource the bulk of their pipeline, projects are co-developed with service providers, utilizing risk-diluting and reward-sharing milestone programs. And, amidst what seems like a decade-long criticism of pharma’s secretive nature, the veil of R&D isolationism has suddenly lifted to uncover a series of Big Pharma dating exercises in the form of actual 50-50% pipeline collaborations and data sharing agreements.

Traditional licensing, where a company acquires clinical assets at any stage of development and assumes all further responsibility and cost, is playing out a very visible downward trend. Popularity of traditional licensing has dropped by nearly 10% in just 5 years, while collaborations which assume shared responsibility and rewards increased by 15% (fig. 2).

Figure 2. Collaboration vs License purchases as % of year’s total, 2007-2012
Basic License: Buyer assumes all development responsibility with one-off upfront payment and optional royalties Collaboration:  Shared responsibilities on all or a portion of the drug’s development; shared rewards
Source: Suzanne Elvidge, 2012

Options in the form of success-dependent milestones or pipeline insurance deals are becoming more popular

Collaborations are overtaking one-off license purchases as they allow for lower up-front payments and hedge risks of failure into success-dependent milestones. In M&A exits, too, upfront payments as proportion of total deal value have been on a significant decline (fig. 3), indicating that acquirers are diluting risk through future options and milestones are now holding more and more of the value.

Figure 3. M&A Upfront payments, total deal value and upfront payments as % of total deal value, 2005 -2012
Source: Silicon Valley Bank

For public companies, options in the form of Contingent Value Rights (CVR) stocks seem to be more and more populous on exchanges. Most recently Cubist issued CBSTZ for Obtimer shareholders – the stock will pay out certain dollar per share if Optimer’s Dificid sales targets are met. Meanwhile Sanofi-Genzyme’s Lemtrada-approval-dependent GCVRZ might have actually played out Wagner’s “Ride of the Valkyrie” in the unpredictable days between a negative FDA review and a final approval:

2013 Collaborations, Co-Developments and Licenses: Top 50

Table 1 has some of 2013’s top licensing, co-development, collaboration and general partnership deals. 
(Clicking the picture will open PDF file)

Development Stage

Figure 4 shows the development stage segmentation of last year’s largest licensing and collaboration deals.

The majority of the top 50 largest licensing deals of 2013 involved molecules in Phase II stage of clinical development. Platform technologies which granted companies access to novel methods of drug development, screening and synthesis were the second most popular target of licensing and collaboration.

Platforms are perhaps the most effective way of capitalizing on investment as they may cover several projects at a time, thereby yielding the highest probability of success – which explains their rising popularity for discovery and preclinical projects. For instance, the $1 billion Gilead-MacroGenics collaboration is a prime example of efficient risk hedging. The deal will provide Gilead with access to the MacroGenics’ Dual‐Affinity Re‐Targeting (DART) technology on up to four cancer projects, totaling a reasonable $250 million per oncology lead with zero upfront fees.

Figure 4. 2013 and 2012 top 50 Pharma licensing and collaboration deals by stage of development

Therapeutic Area

In 2013, cancer became an even more popular target of licenses and collaborations than in 2012. 42% of all top partnership deals were in the area of oncology, in contrast with 37% in 2012 (fig. 5). This was followed by Central Nervous System (17%) and Autoimmune Disorders (15%). Alzheimer’s and Parkinson’s disease were the most targeted CNS disorders in 2013. 

Figure 5. 2013 and 2012 Pharma partnerships, collaborations and licenses by therapeutic area

Financials: Commissioning Success

In 2013, the top 50 collaborations, partnerships and licenses cost an average of $99 million in upfronts and $641 million in total deal values.  The largest upfront ($1130 million) was paid by Aspen to GSK for the company’s two divested thrombosis brands, Arixtra and Fraxiparine, both of which are marketed. The lowest upfront payment ($0 out of a total deal value of $1150 million) was made to MacroGenics by Gliead following 9-month negotiations. The deal covers MacroGenics’ Dual‐Affinity Re‐Targeting (DART) technology which produces dual specificity “antibody-like” therapeutic proteins capable of targeting multiple different epitopes with a single recombinant molecule.

Unsurprisingly, upfronts in 2013 were directly proportional to the stage of development. Platform technologies were worth an average of $46 million in upfront payments, while marketed and Phase III products cost an average of $355 million in upfronts.

Deals are increasingly shifting towards long tail royalties and earn-outs at the expense of larger upfront payments. Combined with the fact that a large portion of licensing deals are signed for products in early development stage, it seems that pharma companies aim at starting deals earlier, with less upfront payments, and share the risk with their partners. In other words, when it comes to licensing agreements, it looks as if Big Pharma's strategy is going for many small deals, rather than a few big ones.   

The presence of zero upfront payments in 2013 is likely to be shortly setting the trend of “commissioning” success in Pharma. 

Saturday, 14 December 2013

2013 Biotech & Pharma IPO Review – Most Popular Therapeutic trends, Trending Clinical Stages and post-IPO Winners & Losers

2013 was generally a good year for the markets (and underwriters!). The S&P 500 is up 26% on this time last year, with the NASDAQ composite running slightly higher at 30% - but not even close to the stellar 56% performance of the Biotech Index (fig 1). In fact, few events in other industries could compete with the Great Biotech IPO Fever of 2013, when the IPO conveyor belt went full overdrive, churning out an average of four biotechs a month into the public domain.

Figure 1. Performance of the NASDAQ composite Index, the S&P500 and the NASDAQ Biotech Index, Dec 11, 2012 – Dec 11, 2013
An awesome $3.5 billion was raised in 46 NASDAQ biotech IPOs this year (not even including the monster $1 billion IPO of the global CRO Quintiles, or companies which have gone public on other exchanges) – second only to the historic year 2000, when altogether 63 biopharmaceutical players floated, raising nearly $6 billion. Table 1 has a list of this year’s 46 biopharmaceutical IPOs – the last one of which, TetraLogic, began trading just 20 hours ago (on Dec. 12th).

Judging by the performance of the biotech IPO class of ’13, the markets didn’t seem to mind the craze at all. In contrast with last year, when the opening share price median was 20% below anticipated target range, the vast majority of ’13’s IPOs opened above IPO offer price (despite several necessary revisions), and as of December 11 are performing at an average of +46% on IPO price, and at +32% (mean) and +3% (median) since their share price on the first day of trading.

Table 1. Biopharmaceutical IPOs on the NASDAQ in 2013

For some companies, dreams of public markets did not materialize this year. Some companies have postponed going public as the markets no longer seem favorable this year, whilst others have withdrawn IPO filings altogether. Table 2 has queued, postponed and withdrawn IPOs.

Table 2. Queued, postponed and withdrawn IPOs
(CLICK HERE for PDF Text version of this table)

Stage of Development

PhII and PhIII products constituted an equally shared majority of this year’s IPOs’ products (fig. 1), as one of the Phase III products already failed in clinical trials (Prosensa’s disapersen). 9 of the leads in 2013 were already marketed products, and one somewhere in between—the yet-unapproved Omthera’s (now AstraZeneca) Epanova is anticipating an FDA verdict on May 5th.

There were no pre-clinical lead players in the 2013 IPO frenzy, unlike the two – Verastem and Regulus—seen in 2012. However, the non-negligible portion of 5 Phase I leads appears to show that going public for earlier-stage companies is certainly trending, although not excelling – see below.   

Figure 1. Development stages of lead products of companies which had an IPO in 2013

Best performing clinical stage

As one would expect, market interest is very visibly deterred by perceived clinical development risk. Development stage is directly proportional to the performance of the company’s stock post-IPO, and 2013 was no exception (Fig. 2). Companies with leads in PhI have performed at an average of just +5% since opening day, whilst marketed products in contrast performed at t 87% - thanks to some major stars like Insys and GW Pharmaceuticals.

Figure 2. Average performance of 2013 IPO Companies’ lead products by stage of development

Therapeutic Area

The most popular therapeutic area of leads whose companies went public in 2013 was, by a large margin, cancer – no surprises there (fig. 3). The popularity of this therapeutic area resonates in other 2013 pharma activities, such as Mergers and Acquisitions and Drug Approvals. With a higher chance of success, CNS would have long been the therapeutic area of choice, but pharma and biotech are seemingly shying away as chances to trial success are now extremely low (with the exception of pain).

A novel therapeutic area in this year’s IPO landscape was pet therapeutics (which will probably be gaining popularity in the near future). Meanwhile, ophthalmology is a quickly expanding therapeutic field, mainly aimed at eye disorders in the growing elderly population.

So far, hematology, CNS and pet medicine players are the best performers of this year’s IPO cycle. The worst performers are orphan and genetic diseases, with a -44% average since first trade. 

Emerging trend in biomarkers & other diagnostic tools

Novel diagnostic tools took second place in this year’s therapeutic area popularity rankings, comprising 11% of 2013 IPO leads. Biomarkers and novel indicators of hard-to-detect disease, or disease which needs to be detected in its early stages, such as Alzheimer’s, are a quickly emerging trend – not just for diagnostic purposes in hospital settings, but as useful tools which would help companies better define concrete endpoints in clinical trials.

Many failed CNS drugs of recent years, for instance, have failed to demonstrate efficacy based on endpoints which many have deemed far too ambiguous (cognitive improvement based on verbal memory/performance tests, etc).  In fact, it is likely that the massive potential of CNS will only explored again when better metabolic and/or genomic markers are present – firstly, to signal the presence of disease decades before it manifests, and secondly, to eradicate the destructive ambiguity of questionnaire-type clinical trial design. 

Figure 3. 2013 Biopharma IPOs by therapeutic area of lead product

Rising Stars

Some of the brightest stars in this year’s IPO group were perhaps unexpected, particularly because two of them – Alcobra Pharma and GW Phrarmaceuticals are foreigners, hailing from Israel and the UK, respectively.

Rather suspiciously, the markets were particularly interested in the “weed experts” Insys Therapeutics (INSY) and GW Pharmaceuticals (GWPH), which specialize in opioid and cannabinoid marijuana-derived therapeutics for cancer pain and nausea management. Unlike the majority of IPOs this year, both companies already had products on the market prior to IPO. Insys has had everyone talking with a 564% surge in just 5 months, from an opening price of $8.50 on May 2nd all the way up to $53.64 in October. GW Pharmceuticals is up 264% since its debut in May, having hit a peak performance of 338% in November. Two more opioid developers are due to join GW and Insys soon: Cara Therapeutics and the Danish Egalet have both filed for IPOs in Nov/Dec.

Update: On Dec 13th Insys Therapeutics received a subpoena from the Office of Inspector General of the Department of Health and Human Services in connection with an investigation of potential violations involving Health and Human Services programs. Insys stock plunged by 22% intra-day. 

Another rising star is Aratana Therapeutics (PETX) – one of the first ever developers of specialty medicines for pets (primarily cats and dogs). Aratana’s $6 IPO share price was below its expected $11-13 range, as the company’s unfamiliar business model may have caught some investors off guard. Having conveyed the massive, untapped and much-too-long ignored potential of the pet market, the PETX share price has now been steadily climbing, currently up 129% since it started trading. Despite the fact that pet owners spent $53 billion in 2012 on their animal companions (according to Aratana’s website), pet drugs are still mostly dose-adjusted drugs prescribed for humans. Aratana’s business model is centered around licensing drugs proved effective in animals and humans, and commercializing them through the FDA's Center for Veterinary Medicine (CVM). The cost of licensing Aratana pays is low in comparison to potential returns, and CVM regulatory pathways are obviously less stringent than pathways regulating human drugs. Aratana is currently advancing three pet drugs through their pipeline, and it shares soared on October 14 when the company announced its intention to acquire Vet Therapeutics, Inc. 

Entanta Pharma (ENTA) is another starlet worth watching – the company is now at +111% on its first-trading-day price as its Hepatitis C drug ABT-450, co-developed with AbbVie, and is getting encouragingly close to the market following some great results of its Phase III Sapphire-II trial. ABT-450 is part of an antiviral  cocktail shown effective in treating an amazing 96% of the most common genotype 1 HepC sufferers who have not responded to older treatments. Enanta’s drug is seen as one of the most threatening contenders to the throne of new, safer and more effective HepC medications – a throne currently being conquered by Gilead with Sovaldi, approved just last Friday (December 6th). Like Sovaldi, ABT-450 received a Breakthrough Therapy Designation (BTD) from the FDA, which shortens development and paperwork times. ABT-450 is thus looking at a New Drug Application (NDA) in Q2 2014, and a Prescription Drug User Fee Act (PDUFA) date of 3-4 months later.

Alcobra Pharma (ADHD), based in Israel, is the newest entrant to the Attention Deficit Hyperactivity Disorder (ADHD) scene, dominated by drugs like Ritalin, Concerta, Vyvanse and Strattera. Alcobra’s lead compound, MG01CI, is an extended-release version of metadoxine – a hepatoprotective drug which has been on the market for nearly 30 years for the treatment of acute alcohol intoxication, alcoholism and alcoholism-related fatty liver.  Although MG01Cl is not a novel compound, it has a crucial advantage over its “black box warning competitors” in that it is not a neurostimulant based on methylphenidate or amphetamines. In addition, having been tried and tested for 30 years now, metadoxine has a significantly better side effect profile than other ADHD meds – an important factor for a medication intended to be taken daily for many years.

An encouraging sign of buyout potential for Alcobra is the fact that New River Pharmaceuticals, the original developer of Vyvanse - now an $800-million-a-year modified version of Adderall, was bought by Shire in 2006 for $2.6 billion. New River was a company roughly comparable to Alcobra, and was acquired when Vyvanse was in Phase III clinical trials. Shire and New River were already in collaboration on the drug since Phase II.

Update: On Dec. 18, 2013 U.S. Food & Drug Administration has granted "Orphan Drug" designation to Alcobra's metadoxine for the treatment of Fragile X Syndrome.

Falling comets

The Dutch Prosensa (RNA), developing disapersen for the treatment of Duchenne’s muscular dystrophy in collaboration with GlaxoSmithKline, announced that the drug did not meet its primary endpoints in Phase III clinical trials, just two months after the company began trading. Prosensa’s share price tumbled on the news, and is currently hovering at -78% on first trading price. Several investors are holding on, as Prosensa has two more drugs in the pipeline, which are, however, based on the same RNA Exon-skipping idea as disapersen. 

Sunday, 8 December 2013

2013 Pharma M&A Review: Earlier-Stage Pipelines, Lower Premiums, and Cancer

2013 will go down in history as the year of biotech IPO frenzy, but some may also know it as the year dealmaking bounced back to fertile levels. In 2012, $109 billion was spent on biopharma and medical device M&A, with only one deal exceeding the $10 billion mark, in contrast with four in 2011. In 2013, three $10+ billion megadeals have been struck, which include Amgen’s $10.4B takeover of Onyx and Thermo Fisher’s $13.6 billion takeover of Life Technologies.

Overall, pharma, biotech and medical device M&A deals have continued to outpace the global market, according to Dealogic. Whilst the global M&A scene performed only 9.3% on last year, pharma deals are up 38%. The average deal volume is 15% up on last year, with the total standing at over $141 billion. So far, there have been 225 biopharma, diagnostics and medical device deals, 14 of which exceeded the 500million+ mark in 2013.

The most voluminous mega-deals of the year were in medical device and diagnostic sectors, as pharmaceutical players have opted for less pricey earlier-stage acquisitions. In terms of numbers, however, biotech has certainly outshined the rest, accounting for 76% of all Pharma, Medical and Biotech (PMB) sectors, according to a recent report by Mergermarket.

Unlocked Pharma Cash

Post-patent-cliff in-house R&D closures are unlocking substantial deal-ready cash for Big Pharma. After several years of pawning, re-organizing and sorting out previous acquisitions the giants entered 2013 with cash, strategy and malnourished pipelines, braced for more inorganic growth. Whilst mega-M&A activity of recent years has been filled with power play and consolidation activities, 2013 was more about pipeline acquisitions and occasional foreign market entries. 
Below (table 1) is a list of the year’s most prominent acquisitions:

Table 1. Top 2013 Biopharma deals
Pipeline interests
Liver, kidney, breast, colorectal, thyroid cancers
Alzheimer’s, bipolar, Down syndrome, Multiple Sclerosis, Crohn’s disease
Warner Chilcott
Seven pipeline products in women’s health and Urology
Five investigational antiviral products
Four investigational gastrointestinal products
Endo Health
Paladin Labs
Gastroenterology and growth in Canadian and emerging markets
MAP Pharma
Migraine specialty
Seven oncology products
Cubist Pharmaceuticals
Trius Therapeutics
Antibiotic-resistant gram-positive antibacterials
Novel drug delivery platforms
650 (+350 milestones)
Johnson & Johnson
Aragon Pharmaceuticals
Phase II prostate cancer lead, milestone subject to FDA approval
560 (+590 milestones)
Pearl Therapeutics
Chronic respiratory diseases
Cubist Pharmaceuticals
Omthera Pharmaceuticals
Cardiovascular: fish oil – derived medicines
Obagi Medical Products
Specialty skin health products
AOP Orphan
Orphan diseases
Genetic vaccines
Lymphoma drug mechlorethamine gel, deal subject to FDA approval, which was granted in August
225 (+275 milestones)
Medimmune (AstraZeneca)
Cancer and autoimmune diseases
Targeted Secretion Inhibitor (TSI) in development for treatments of cancer, neurological, endocrine and inflammatory disorders
200 (+240 milestones)
Medimmune (AstraZeneca)
DNA sequence targeted agents for cancer
200 (+470 milestones)
Clovis Oncology
EOS (Ethical Oncology Science)
Targeted Therapies business of Nordion
TheraSphere targeted technology for cancer treatment
Microdose Therapeutx
Seven respiratory, constipation, COPD and auto-immune pipeline products
S.A. Uteron
Women’s health
140 (+334 milestones)
The Medicines Company
Rempex Pharmaceuticals
Gram-negative antibiotic resistant anti-bacterials
Respiratory disorders

Development Stage

2010 and 2011 M&A landscapes were characterized by late- and marketing-stage pipelines, in line with pharma’s pressing need to compensate for immediate patent cliff losses. In 2012, earlier-stage shifts became apparent with 42% of acquired products in Phase II clinical trials. In 2013, Phase III products marked a nearly 10-fold comeback, whilst the number of market-stage acquisitions remained virtually unchanged from last year (Fig. 1). Early-phase and pre-clinical leads remained a popular acquisition choice in 2013. Roughly two thirds of early-stage deals included some form of approval-dependent milestones.

Figure 1: Development stage of acquired products in 2013 and 2012 

Therapeutic landscape

Oncology remained the most popular acquisition area in 2013, growing in popularity nearly 35% on last year, in line with increasing global incidence (fig. 2). However, CNS disorders, which still appear to be the most lucrative therapeutic area in terms of numbers and unmet need, accounted only for 7% of acquisitions in 2013 (down 10% from 2012), following a series of loud and painful CNS trial failures in recent years. Rather than embarking on high-risk CNS trials, pharma players have this year opted for new therapeutic entrants, such as novel drug delivery systems, women’s health, and orphan specialists. In comparison with 2012, when cardiovascular leads accounted of 12% of all acquisitions, 2013 saw virtually no activity in this area, with the exception of AstraZeneca’s acquisition of the fish oil specialist Omthera.

Another strong comeback was made by the infectious diseases niche, growing nearly 3-fold in 2013. For the most part, drugs in this area are targeting the unmet need for effective treatments against antibiotic resistant bacteria, particularly gram-negative bacteria. Vaccines and anti-viral agents remain highly coveted.

Ophthalmic acquisitions have made a surprising comeback in recent years, due to increasing incidence of eye disorders in the world’s ageing populations. They have accounted for 4% of all acquisitions in 2012 and 2013.

Figure 2:  Therapeutic area of acquired products in 2013 and 2012 


Of the top 28 biopharma deals shown in Table 1, 12 of the acquisitions were public companies, 15 were private and one was a divested unit. In terms of premiums paid by public companies, the average premium figure for 2013 was 37% - significantly lower than the 52% average of 2012, pushed up by the Bristol-Myers – Inhibidex 163% acquisition - the highest premium paid in five years. 2013’s highest premium was 89% in the year’s most expensive Amgen-Onyx deal, followed closely by the 88% AstraZeneca – Omthera acquisition deal. It will be interesting to watch happens to the premiums of the graduating IPO class of 2013.