Friday, August 10, 2012

DOTW Takes A Look At Stock Movements

In the hum-drum days of August, deals have been sparse, but a spate of bad clinical trial results in recent weeks shows how risky pharma R&D is.

The news -- around J&J/Pfizer/Elan's Alzheimer's disease monoclonal antibody bapineuzumab, Merck's 0524b cardiovascular drug, Amgen's pancreatic cancer drug AMG 479, and Bristol's nucleoside polymerase inhibitor for HCV -- led DOTW to wonder about the correlation between clinical trial data releases and biopharma stock prices, and whether negative or positive data has a bigger relative impact. Of course, one can hypothesize, but few rigorous studies of the topic seem to exist, and a host of variables make generalizing difficult. 

The most recent news didn't seem to have much effect on stock prices of the sponsors, likely because investors anticipated the bad news, given the nature of the compounds and previous work done in the class of drugs involved. Nevertheless, thanks to a nudge from pharma analyst Mark Schoenebaum of ISI Group, we came across an article that appeared in Oct. 2011 in the Journal of the National Cancer Institute. Co-authored by Allan Detsky, former physician in chief at Mount Sinai Hospital in Toronto, and colleagues, it studied the stock movements of companies sponsoring Phase III oncology drug trials between Jan. 2000 and Jan. 2009.

The stock prices of companies that owned the drugs were analyzed for 120 trading days before and after the first public announcement of clinical trial results and regulatory decisions. The study found, as follows: "The mean stock price for the 120 trading days before a Phase III trial announcement increased by 13.7% (95% confidence interval) for companies that reported positive trials and decreased by 0.7% (95% confidence interval) for companies that reported negative results...Changes in company stock prices before FDA regulatory decisions did not differ statistically between companies with positive and negative decisions." The implication was that at this "later stage of drug development there is less speculative interest, given that the supporting data are already available."

I'm not entirely sure what this tells investors, given the limitations of the retrospective study and the vagaries of the stock market. But looking for the most accurate drivers of biopharma stock prices, be they clinical trial data results, deal announcements, or M&A, is a key responsibility of biopharma investors and an obsession in the biopharma industry at large. For those who track markets and are scientifically inclined, it offers an analysis in a familiar format and makes for a new ingredient to throw into the mix. Whether it is more than beach reading is in the eye of the beholder.

Now, on to deals of the week...

Novartis/University of Pennsylvania - Looking to move further into the emerging field of cancer immunotherapies, Novartis announced a collaboration with the University of Pennsylvania on Aug. 6 in which a joint team of researchers will work to discover and develop anti-cancer immunotherapies that target chimeric antigen receptors (CAR). Novartis gains worldwide rights to CART-19, a Penn-discovered anti-CD19 candidate that is being tested in a pilot clinical trial in chronic lymphocytic leukemia. No deal terms were disclosed; Novartis said it will pay Penn an upfront payment, research funding, milestones pegged to clinical, regulatory and commercial achievements and royalties on any products that reach the market. In addition, Novartis will establish an R&D facility – the Center for Advanced Cellular Therapies, where the work will take place--on the university’s Philadelphia campus. Mark Fishman, president of the Novartis Institutes for BioMedical Research, said the company will commit $20 million to pay for the R&D site. The deal grants Novartis worldwide license to all CAR compounds developed through the partnership, but the primary focus at the start is CART-19. CART-19 has yielded headline-making results in a three-patient pilot trial in CLL. The drug showed potent anti-leukemic effects in CLL patients who previously had undergone multiple courses of chemotherapy and biological therapy. Two of the patients were in remission more than one year after beginning therapy with the candidate, while a third has maintained partial remission for seven months. Novartis plans to begin a Phase II trial with CART-19 during the fourth quarter of 2012.—Joseph Haas

MEI Pharma/S*BIO: In another deal that signals industry’s interest in epigenetics, the San Diego-based oncology company MEI Pharma will acquire exclusive worldwide rights to S*BIO’s oral histone deacetylase (HDAC) inhibitor pracinostat, MEI Pharma announced Aug. 8.  Pracinostat is a selective HDAC inhibitor that has demonstrated clinical evidence of activity in patients with advanced hematologic disorders such as acute myeloid leukemia and myelofibrosis. A drug targeting hematologic disorders will broaden MEI Pharma’s portfolio, which includes two lead drugs targeting solid tumors. MEI Pharma is developing novel isoflavone-based drugs and has two candidates in early clinical development. MEI Pharma will issue $500,000 of common stock to Singapore-based S*BIO in exchange; the deal also includes potential milestones of up to $75.2 million. HDAC inhibitors are one of the main classes of epigenetic drugs, which affect gene expression by inhibiting enzymes that add, remove or recognize chemical modifications on DAN or chromosomal proteins. Dozens of HDAC inhibitors are in development, but much remains unknown about their activity.—Jessica Merrill

Cempra/Curetis: Getting ready to enroll patients in a pivotal Phase III trial of the oral formulation of its antibiotic solithromycin, Cempra will team with Germany’s Curetis in a research and development collaboration through which Curetis will use its Unyvero diagnostic system to examine patient samples for bacteria and antibiotic resistance. No financial terms were disclosed; each party can use the generated data for its own product development and regulatory filings. North Carolina-based Cempra, which went public in February, netting $57.4 million in an IPO that sold for $6 per share, is developing oral and intravenous formulations of solithromycin for community-acquired bacterial pneumonia (CABP). In previous trials, Cempra’s candidate demonstrated efficacy and a favorable safety profile compared to the current standard of care for CABP, Janssen’s Levaquin (levofloxacin). Cempra will test solithromycin in an 800-patient, 100-plus clinical site worldwide trial expected to begin in the fourth quarter and enroll patients into 2014. Curetis said the partnership will enable it to generate further data on the clinical sensitivity and specificity of Unyvero, a versatile hardware platform designed to perform all of its detection in a single run.—J.H.
Intrexon/Synthetic Biologics: Two synthetic biology companies that were already partners are planning to collaborate more closely in infectious diseases. Privately-held discovery platform operator Intrexon has licensed its technologies to Synthetic Biologics in order to develop at least three monoclonal antibodies for as-yet-undisclosed indications. The partnership, which includes use of Intrexon’s proprietary mAbLogix and UltraVector technologies, can be expanded to include up to eight targets. The new deal comes nine months after the companies agreed to develop a pulmonary arterial hypertension therapy, when Synthetic Biologics was known as Adeona Pharmaceuticals. As in the previous transaction, Synthetic Biologics will make its up-front payment in equity rather than cash, granting 3.6 million shares to Intrexon, currently worth about $7.2 million. That brings the latter's stake to about 18%. Synthetic Biologics can pay additional fees in cash or stock if it chooses to expand the partnership, and will owe milestone and royalty payments if and when drugs discovered under the partnership pass through the clinic and are commercialized. Well-funded Intrexon closed a $100 million financing in June 2011, bringing its total funding to $259 since 1998.—Paul Bonanos

Pfizer/Nodality: Pfizer has tapped San Francisco start-up Nodality in a personalized medicine partnership that will initially focus on lupus and other autoimmune diseases. While specifics of the collaboration were not disclosed, Nodality revealed that the partnership is structured like a typical biotech/Big Pharma deal with an initial upfront and potential milestone payments. Nodality will use its Single Cell Network Profiling (SCNP) technology to help Pfizer pick the right clinical trial subjects, characterize mechanisms of action, as well as develop companion diagnostics. Pfizer has been investing in the company since 2008 and co-led a $15 million venture round in Nodality in July along with TPG Biotech, Kleiner Perkins Caulfield & Byers, and Maverick Capital. Nodality also signed a partnership with Belgium’s UCB in February. “This collaboration, which is Nodality's second major strategic pharma partnership this year, provides continuing validation of the value the SCNP platform technology can bring to drug development," said Nodality CEO and Chairman Michael Goldberg.—Lisa Lamotta

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