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Biotech Sector – Falling While the Market Rallies
The iShares Nasdaq Biotechnology ETF (NASDAQ:IBB), which tracks the Nasdaq Biotechnology Index (NASDAQ:NBI), has pulled back sharply since the beginning of March, while the broader market continues to rally off the February low, despite that the fundamentals of the biotech sector still look strong. According to FactSet, the Biotechnology sector is projected to report double-digit revenue growth for the first quarter 2016, one of the highest sales growth forecasts among the S&P 500 sectors. High prescription drug costs have been a hot-button issue in both Democratic and Republican presidential primary campaigns since September 21, when Hillary Clinton sent out a tweet about “outrageous” price gouging by a pharmaceutical CEO. Based upon investors’ reactions, remarks from presidential candidates during their stump speeches and debates continue to be a dark cloud over the sector. Recent sell-offs in the biotechnology sector have been tied to the collapse of Valeant Pharmaceuticals’ (NYSE:VRX) share prices, after the company cut its earnings guidance on March 15 and warned about a potential default on its debt due to a delayed filing. Valeant was scrutinized earlier in February by members of Congress for many things, including raising prices on existing drugs. Panic selling in the biotech sector may have created buying opportunities for investors looking for some risk diversity, as IBB now trades at about 18 times forward 12-month earnings, down from a peak of 55.76 in early 2015, according to FactSet. This report focus on five companies that may represent these buying opportunities.
MannKind Corp. (NASDAQ: MNKD)
MannKind Corporation (MannKind), incorporated on February 14, 1991, is a biopharmaceutical company. The Company is focused on the discovery and development of therapeutic products for diseases, such as diabetes. The Company’s product candidate is AFREZZA, inhaled insulin used to control high blood sugar in adults with type one and type two diabetes and also to improve glycemic control. AFREZZA consists of a dry formulation of human insulin delivered from a small and portable inhaler. AFREZZA utilizes its Technosphere formulation technology. The Company’s Technosphere powders are based on the Company’s fumaryl diketopiperazine (FDKP), which is a potential of Hydrogen (pH)-sensitive organic molecule that self-assembles into small particles under acidic conditions. The Company manufactures AFREZZA in its Danbury, Connecticut facility. The Company has also created breath-powered, dry powder inhalers. Its inhalers can be produced in both a reusable (chronic treatment) and a single-use (acute treatment) format.
Recent News and Analysis:
The company recently reported financial results for the fourth quarter and full year ended December 31, 2015. For the fourth quarter of 2015, research and development expenses decreased 64.8%, from $17.6 million to $6.2 million, reflecting effects of our restructuring measures taken in 2015 and the transition from development to commercial activities. General and administrative costs declined 33.6%, from $12.5 million to $8.3 million, mainly due to a decrease in non-cash stock compensation expense. Sales of Afrezza continued to be lower than expected during the fourth quarter of 2015, culminating in a decision by Sanofi on January 4, 2016 to return the Afrezza rights to MannKind after a notice period, all of which impacted the value and recoverability of long-lived assets in accordance with accounting guidance. As a result, non-cash impairment charges of $206.6 million were recorded for the fourth quarter of 2015, of which $140.4 million related to impairment of fixed assets and $66.2 million related to loss on future purchase commitments, primarily for insulin. No such impairment charge was recognized in 2014. Product manufacturing costs for the fourth quarter of 2015 were $51.8 million related to under absorbed labor and overhead and inventory write-offs. The company did not recognize any product manufacturing costs in the fourth quarter of 2014 as we had not yet commenced commercialization of Afrezza.
For the full year 2015, our total operating expenses, excluding fixed asset impairment and loss on purchase commitments, were $138.1 million compared to $179.6 million for the full year 2014, a decrease of 23.1%. Total research and development costs for 2015 were $29.7 million compared $100.2 million for 2014, a decrease of 70.4%, primarily due to decreased development expenses resulting from the shift to commercial production of Afrezza, decreased clinical trial-related expenses and the effects of restructuring measures, in addition to reduced non-cash stock compensation expense resulting from the non-recurring achievement of performance and modification events in 2014 and the first quarter of 2015. General and administrative expenses for 2015 were $41.0 million compared to $79.4 million in 2014, a decrease of 48.4%, primarily due to reduced non-cash stock compensation expense resulting from the modification and achievement of performance-based awards in 2014 and in the first quarter of 2015 and the effects of restructuring measures, in addition to the non-recurrence of professional fees incurred in the third quarter of 2014 associated with the entry into the Sanofi License Agreement. Product manufacturing costs for 2015 were $67.4 million related to under absorbed labor and overhead and inventory write-offs.
The net loss for 2015 was $368.4 million, including total non-cash impairment charges of $206.6 million, or $0.91 per share based on 406.2 million weighted average shares outstanding, higher than the net loss of $198.4 million, or $0.51 per share on 385.2 million weighted average shares outstanding in 2014. The number of common shares outstanding at December 31, 2015 was 428.7 million.
“Our financial results for 2015 were not what we expected going into the year, but we are looking forward to the next twelve months with optimism and great excitement,” said Matthew Pfeffer, Chief Executive Officer of MannKind Corporation. The statement just about sums it up. MannKind’s fourth-quarter results were disappointing, with the company posting a wider-than-expected loss. Moreover, termination of the agreement with Sanofi is a big setback for MannKind. However, analysts were pleased with company’s commercialization efforts for Afrezza and the post-marketing studies on the drug. With the transition of Afrezza rights to MannKind, analysts expect investor focus on the company’s efforts to commercialize the product.
Opko Health Inc. (NYSE: OPK)
OPKO Health, Inc. (OPKO), incorporated on November 18, 1991, is a biopharmaceutical and diagnostics company. The Company is involved in developing a range of solutions to diagnose, treat and prevent various conditions, including point-of-care tests, laboratory developed tests (LDTs), molecular diagnostics tests, and pharmaceuticals and vaccines. The Company operates in two segments: pharmaceutical and diagnostics. Its pharmaceutical segment consists of two operating segments, its pharmaceutical research and development segment, which is focused on the research and development of pharmaceutical products and vaccines, and its pharmaceutical operations in Chile, Spain, Mexico, Israel, Uruguay and Brazil. Its diagnostics segment consists of two operating segments, its pathology operations and point-of-care and molecular diagnostics operations. The product pipeline includes several pharmaceutical compounds and technologies in research and development for a range of indications and conditions.
The Company’s product development candidates are in various stages of development. The Company’s two lead renal products are Rayaldee (CTAP101), a vitamin D prohormone to treat secondary hyperparathyroidism (SHPT) in patients with stage 3 or 4 chronic kidney disease (CKD) and vitamin D insufficiency, and Alpharen (Fermagate Tablets), a non-absorbed phosphate binder to treat hyperphosphatemia in Stage 5 patients on chronic hemodialysis. The Company’s lead product candidate utilizing Carboxyl Terminal Peptide technology (CTP), hGH-CTP, is a recombinant human growth hormone product under development for the treatment of growth hormone deficiency (GHD), which is a pituitary disorder resulting in short stature in children and other physical ailments in both children and adults. HGH-CTP is in a global Phase III trial in adults and a global Phase II trial in children. In addition to hGH-CTP, the Company is focused on products extending the life span of Factor VIIa (hemophilia) using the CTP technology. In addition to hGH-CTP and Factor VII-CTP, the Company’s internal product development program is focused on extending the circulatory half-life of oxyntomodulin. Oyxntomodulin, a natural appetite suppressor, is a peptide hormone secreted by the intestine following food intake that induces satiety when it reaches the brain.
The Company is developing a long-acting oxyntomodulin consisting of oxyntomodulin linked at its N-terminus to polyethylene glycol (PEG) linear chain through a bi-functional hydrolysable linker. The Company through FineTech Pharmaceutical, Ltd. (FineTech), an Israeli company, develops and produces high value, high potency specialty active pharmaceutical ingredients (APIs). The Company has ongoing pre-clinical studies for several of these compounds, with a focus on orphan diseases, including Dravet Syndrome, Rett Syndrome and MPS-1. The Company is engaged in the sale of 4Kscore in the United States, Europe and Mexico. The 4Kscore measures the blood plasma levels of four different prostate-derived kallikrein proteins: Total PSA, Free PSA, Intact PSA and Human Kallikrein-2 (hK2). OPKO Lab, the Company’s laboratory, operates as a full-service medical laboratory specializing in urologic pathology and provides the company with the commercial platform to support the United States commercial launch of the 4Kscore for the detection of prostate cancer as a laboratory developed tests (LDT). The Company also offers point-of-care diagnostics and molecular diagnostics.
Recent News and Analysis:
The company recently announced dosing of the first subject in a Phase 1 single dose escalation study evaluating the safety and pharmacokinetics of a long-acting Oxyntomodulin (MOD-6031) in healthy, overweight or obese subjects. The study is intended to enroll 40 subjects in Israel. Oxyntomodulin is a peptide hormone that acts as a dual GLP-1/Glucagon receptor agonist, with the potential to promote weight loss while improving glycemic control. Oxyntomodulin has been shown to increase energy expenditure, while reducing food intake and body weight, although its clinical utility is limited by its short circulating half-life. OPKO’s MOD-6031 has been designed, using a proprietary bi-functional hydrolysable linker, as a long-acting version of Oxyntomodulin for the treatment of Type II Diabetes and obesity, and is intended to reduce the required dosage frequency by prolonging the half-life, while improving the hormone’s pharmacokinetics and pharmacodynamics.
Nothing looms larger for Opko than the fate of Rayaldee. The FDA is scheduled to announce its verdict on the secondary hyperparathyroidism treatment on March 29. While anything can happen with regulatory decisions, the chances of Rayaldee winning approval seem to be pretty good. Assuming the FDA gives its thumbs-up, the next big hurdle for Rayaldee is succeeding in the marketplace. Opko is ramping up for a product launch in the second half of 2016. The company thinks Rayaldee’s addressable market size could be as large as $12 billion. Some analysts remain skeptical, however, questioning if the drug will even hit $500 million in peak annual sales. Some of the doubts about Rayaldee’s pathway to success are likely related to potential competition on the way. Amgen (NASDAQ:AMGN) is hot on the trail with its own secondary hyperparathyroidism drug, etelcalcetide. The FDA is expected to announce its decision on etelcalcetide by Aug. 24. Like Rayaldee, Amgen’s drug demonstrated positive results in clinical trials. Analysts are not too worried about Rayaldee winning regulatory approval, but there are valid concerns about how big of a commercial success the drug will be. Additionally, there are no serious qualms about Varubi, but there are some risks associated with the launch of any new drug. And while the Bio-Reference acquisition and 4Kscore will no doubt boost earnings, it remains to be seen if Opko overpaid.
Novavax, Inc. (NASDAQ: NVAX)
Novavax, Inc. (Novavax), incorporated on June 18, 1987, is a clinical-stage vaccine company engaged in the discovery, development and commercialization of recombinant nanoparticle vaccines and adjuvants. The Company through its recombinant nanoparticle vaccine technology produces vaccine candidates to respond to both known and newly emerging diseases. The Company’s product pipeline focuses on a variety of infectious diseases with vaccine candidates in clinical development for respiratory syncytial virus (RSV), seasonal influenza, pandemic influenza and the Ebola virus (EBOV). The Company’s lead adjuvant for human applications, Matrix-M, is in a Phase I/II clinical trial for pandemic influenza H7N9 vaccine candidate. The Company is also testing Matrix-M in conjunction with its EBOV vaccine candidate in a Phase I clinical trial. The Company is developing additional pre-clinical stage programs in a variety of infectious diseases, including Middle East respiratory syndrome (MERS). The Company through its wholly owned subsidiary, Novavax AB, is also developing a technology for the production of immune stimulating saponin-based adjuvants.
The Company is developing respiratory syncytial virus fusion (F) protein nanoparticle vaccine candidate (RSV F vaccine candidate) for three target populations: the elderly, infants (receiving protection through antibodies transferred from their mothers who would be immunized during the last trimester of pregnancy) and pediatrics. The Company through its RSV Elderly Program is developing RSV vaccine candidate, which is in Phase II of clinical trial. The Company through its RSV Maternal Immunization Program is developing RSV vaccine candidate, which is in Phase II of clinical trial. Its RSV Pediatric Program is developing RSV vaccine candidate, which is in Phase I of clinical trial. The Company’s vaccine candidates for Influenza include Seasonal Quadrivalent Influenza Vaccine and Pandemic H7N9 Influenza Vaccine. Seasonal Quadrivalent Influenza Vaccine and Pandemic H7N9 Influenza Vaccine are in Phase II stage of clinical development. The Company is also developing vaccine candidates for Ebola Virus. Ebola Virus (EBOV) is in Phase I stage of clinical development. The Company is developing a combination respiratory vaccine candidate by combining Seasonal Quadrivalent Influenza vaccine candidate and RSV F vaccine candidate. It is in pre-clinical stage of development.
The Company holds a 20% interest in CPL Biologics Private Limited (CPLB), a joint venture company. The Company through CPLB is developing a number of vaccine candidates, including its seasonal VLP influenza vaccine candidate and rabies vaccine. Seasonal VLP influenza vaccine candidate is in Phase III of clinical development and rabies vaccine is in Phase I/II of clinical development.
Recent News and Analysis:
The company recently announced its financial results for the fourth quarter and twelve months ended December 31, 2015. Novavax issued a total of $325 million Convertible Senior Notes, resulting in net proceeds of approximately $276 million. These proceeds further strengthen Novavax’ balance sheet ahead of data from the pivotal Phase 3 Resolve™ clinical trial, expected in the third quarter of 2016, and in support of discussions for the commercialization rights to its RSV F Vaccine franchise outside North America, while minimizing dilution. The company completed target enrollment of the Resolve trial of its RSV F Vaccine in older adults (60 years of age and older), completed enrollment of 1,330 older adults in a Phase 2 rollover clinical trial of its RSV F Vaccine in older adults enrolled in the prior Phase 2 trial, Initiated enrollment in a global pivotal Phase 3 clinical trial, known as Prepare™, of its RSV F Vaccine in healthy pregnant women and appointed Jeffrey Stoddard, M.D. to Vice President, Medical Affairs and Mark Twyman to Vice President, Marketing and promoted Jody Lichaa to Vice President, Quality Assurance.
Novavax reported a net loss of $78.8 million, or $0.29 per share, for the fourth quarter of 2015, compared to a net loss of $31.5 million, or $0.13 per share, for the fourth quarter of 2014. For the twelve months ended December 31, 2015, the net loss was $156.9 million, or $0.60 per share, compared to a net loss of $82.9 million, or $0.37 per share, for the same period in 2014. Novavax revenue in the fourth quarter of 2015 decreased 13% to $5.9 million, compared to $6.7 million for the same period in 2014. Revenue for the full year 2015 increased 18% to $36.3 million, compared to $30.7 million in 2014. The increase in full year revenue results from the recovery of additional costs under the BARDA contract of $7.7 million for the settlement of indirect rates for fiscal years 2011 and 2012 and $3.1 million relating to the Company’s prior Phase 2 clinical trial of our quadrivalent seasonal influenza VLP vaccine candidate in Australia as collection of the amount became reasonably assured in 2015. These increases in revenue were partially offset by a decrease in revenue resulting from a lower level of development activities under the BARDA contract and our prior PATH agreement, as compared to 2014.
The company’s shares tanked last month after releasing its fourth-quarter earnings, where the company posted a wider-than-expected loss per share for the three-month period. Specifically, Novavax reported a net loss of $78.8 million in the fourth quarter, or $0.29 per share, whereas the Street was predicting a figure closer to $0.14 per share. Quarterly earnings for clinical-stage biotechs typically don’t mean a whole lot in the bigger scheme of things. However, this double-digit drop by Novavax illustrates just how risk-adverse the market has become lately. After all, the company’s higher-than-expected cash burn rate was actually due to the launch of the late-stage Resolve trial for its respiratory syncytial virus, or RSV, F vaccine in adults 60 years or older, along with another late-stage trial dubbed “Prepare” assessing the same vaccine in healthy pregnant women. The bottom line is that the only available product on the market right now for this common ailment is AstraZeneca’s palivizumab (brand name Synagis), and its use is presently limited to children at high risk of infection. Since the CDC reported last year that roughly 177,000 hospitalizations and 14,000 deaths occur per year as a result of RSV infections in adults aged 65 or older, Novavax is clearly targeting a huge unmet medical need with this experimental vaccine. As such, analysts believe this recent dip in Novavax’s share price represents a compelling buying opportunity for seasoned biotech investors who understand nothing is guaranteed when it comes to clinical trials.
Exelixis, Inc. (NASDAQ: EXEL)
Exelixis, Inc. incorporated on November 15, 1994, is a biopharmaceutical company. The Company is engaged in developing small molecule therapies for the treatment of cancer. The Company’s development and commercialization efforts are focused primarily on cabozantinib. The Company is evaluating cabozantinib in a development program consisting of over 45 clinical trials, across multiple indications, including two ongoing Phase III pivotal trials focusing on metastatic renal cell carcinoma (mRCC), and hepatocellular carcinoma (HCC). The Company entered into co-development agreement with Genentech for the development and commercialization of cobimetinib. Cobimetinib is an inhibitor of MEK a serine/threonine kinase that is a component of the RAS/RAF/MEK/ERK pathway. This pathway mediates signaling downstream of growth factor receptors, and is prominently activated in human tumors. The Company discovered cobimetinib internally and advanced the compound to investigational new drug (IND) status.
The Company has established collaborations with other pharmaceutical and biotechnology companies, including GlaxoSmithKline, Bristol-Myers Squibb Company (Bristol-Myers Squibb), Sanofi, Merck (known as MSD outside of the United States and Canada) and Daiichi Sankyo Company Limited (Daiichi Sankyo), for various compounds and programs in its portfolio. The Company had collaborated with GlaxoSmithKline to discover and develop therapeutics in the areas of vascular biology, inflammatory disease and oncology. The Company had collaborated with BristolMyers Squibb to discover optimize and characterize ROR antagonists that may subsequently be developed and commercialized. The Company has collaborated with BristolMyers Squibb for the discovery, development and commercialization of therapies targeted against LXR a nuclear hormone receptor implicated in cardiovascular and metabolic disorders. The Company entered into an agreement with Sanofi for SAR245408 and SAR245409 inhibitors of phosphoinositide3 kinase (PI3K) and collaboration for the discovery of inhibitors of PI3K for the treatment of cancer. The Company entered into an agreement with Merck for PI3Kdelta program, including XL499 and other related compounds. The Company’s collaborated with Daiichi Sankyo for the discovery, development and commercialization of therapies targeted against the mineralocorticoid receptor a nuclear hormone receptor implicated in a variety of cardiovascular and metabolic diseases.
Recent News and Analysis:
The company recently announced results for the fourth quarter and full year of 2015 and provided an overview of key 2016 corporate objectives and clinical development milestones. In 2016, Exelixis will continue to focus its development efforts and financial resources on the opportunities for cabozantinib in advanced renal cell carcinoma (RCC) and advanced hepatocellular carcinoma (HCC). With regulatory applications under review for advanced RCC in the United States and European Union (EU), Exelixis is actively preparing for the potential commercialization of cabozantinib as a treatment for patients with advanced RCC and will soon be launch-ready for this indication should a positive regulatory decision come in the United States. The Company anticipates that operating expenses for the full year 2016 will be between $240 million and $270 million, including approximately $30 million of non-cash items related to stock-based compensation expense.
Net revenues for the quarter ended December 31, 2015 were $9.9 million, and consisted almost entirely of net product revenue from the sale of COMETRIQ®. This is compared to $7.4 million for the comparable period in 2014. For the year ended December 31, 2015, net revenues were $37.2 million, compared to $25.1 million for the comparable period in 2014. Net revenues for the year ended December 31, 2015 included $3.0 million of contract revenues for a milestone payment received from Merck in the third quarter of 2015 related to their worldwide license of our PI3K-delta program as well as the net product revenue related to the sale of COMETRIQ. Net loss for the quarter ended December 31, 2015 was ($43.6) million, or ($0.19) per share, basic, compared to ($58.0) million, or ($0.30) per share, basic, for the comparable period in 2014. Net loss for the year ended December 31, 2015 was ($169.7) million, or ($0.81) per share, basic, compared to ($268.5) million, or $(1.38) per share, basic, for the comparable period in 2014. The decreases in net loss for both the quarter and year were primarily due to decreases in research and development expenses and an increase in net revenues, partially offset by an increase in selling, general and administrative expenses.
Long-term investors needn’t worry about the short-term changes in valuations. Sure it hurts on double-digit down says — and is great on double-digit up days — but the moves shouldn’t have much effect on Exelixis’ long-term value. Years from now, we’ll be talking about the sales of cabozantinib for kidney cancer — and perhaps liver cancer as well — rather than the daily gyrations of the stock price. The schizophrenic stock chart could be because investors are worried about whether cabozantinib will be approved by U.S. and EU regulators, but it seems more likely they’re confident in an approval but worried about the potential sales given Bristol-Myers Squibb’s (NYSE:BMY) quick approval of Opdivo for kidney cancer. That Exelixis hasn’t released the overall survival data, which would help investors compare the efficacy of the two, makes it hard for investors to know whether Exelixis or Bristol-Myers Squibb will be able to win the battle for kidney cancer patients.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)
ACADIA Pharmaceuticals Inc., incorporated on January 16, 1997, is a biopharmaceutical company. The Company is focused on the development and commercialization of medicines for the treatment of neurological and related central nervous system disorders. The Company’s drug candidate NUPLAZID (pimavanserin) is under development for the treatment of Parkinson’s disease psychosis, Alzheimer’s disease psychosis, Schizophrenia and Sleep disturbances. The Company is also conducting preclinical programs for alpha adrenergic agonists indicated for the treatment of chronic pain and muscarinic drugs for the treatment of glaucoma.
NUPLAZID has an active ingredient pimavanserin, is a selective serotonin inverse agonist (SSIA) preferentially targeting 5-HT2A receptors that was discovered by the Company and under development for the treatment of psychosis. NUPLAZID is being developed for the treatment of Parkinson’s disease psychosis, Alzheimer’s disease psychosis, Schizophrenia and Sleep disturbances. The Company has completed a pivotal Phase III clinical trial, referred to as the -020 Study, evaluating the efficacy, tolerability, and safety of NUPLAZID in patients with Parkinson’s disease psychosis (PDP). The -020 Study was a multi-center, double-blind, placebo-controlled clinical trial. A total of 199 patients were enrolled in the study and randomized on a one-to-one basis to receive either 34 milligrams (mg) of NUPLAZID (the equivalent of 40mg of pimavanserin tartrate) or placebo once-daily for six weeks, following a two-week screening period that included brief psycho-social therapy. Patients also received stable doses of their existing anti-Parkinson’s therapy throughout the study. NUPLAZID met the primary endpoint in the -020 Study by demonstrating a highly significant reduction in psychosis (p=0.001) as measured using the SAPS-PD, a scale consisting of nine items from the hallucinations and delusions domains of the Scale for the Assessment of Positive Symptoms. NUPLAZID also met the key secondary endpoint for motoric tolerability as measured using Parts II and III of the Unified Parkinson’s Disease Rating Scale, or UPDRS. These results were further supported by highly significant improvements in all secondary efficacy measures, including the Clinical Global Impression Severity, or CGI-S, scale (p<0.001), the Clinical Global Impression Improvement, or CGI-I, scale (p=0.001), and a CGI-I responder analyses (p=0.002). The United States Food and Drug Administration (FDA) granted Breakthrough Therapy designation for NUPLAZID for the treatment of Parkinson’s disease psychosis. NUPLAZID was safe and well tolerated in the Phase III trial. The Company is also conducting an open-label safety extension study, referred to as the -015 Study, involving patients with Parkinson’s disease psychosis who have completed the -020 Study and its earlier Phase III studies. A total of over 250 patients have been treated with NUPLAZID for at least one year, and of those at least 100 patients have been treated for at least two years. The Company’s longest single-patient exposure is greater than nine years.
The Company is conducting a Phase II study exploring the utility of pimavanserin for the treatment of Alzheimer’s disease psychosis (ADP). The Phase II trial also referred to as the -019 Study, examines the efficacy and safety of pimavanserin as a treatment for Alzheimer’s disease psychosis. The -019 Study is a randomized, double-blind, placebo-controlled study designed to enroll 200 patients with Alzheimer’s disease psychosis. Following a screening period that includes brief psycho-social therapy, patients are randomized on a one-to-one basis to receive either 34 milligrams (mg) of pimavanserin (the equivalent of 40mg of pimavanserin tartrate) or placebo once-daily for twelve weeks. The -019 study will assess several key efficacy endpoints, including use of the Neuropsychiatric Inventory-Nursing Home scale to measure psychosis and other behavioral disorders. Key efficacy endpoints will be based on the change at week 6 from baseline. The study will also assess additional exploratory endpoints, including the cognitive status of patients and the durability of response to pimavanserin, through twelve weeks of therapy.
The Company has completed a Phase II study of pimavanserin as a co-therapy (risperidone) in patients with schizophrenia. The trial results showed several advantages of co-therapy with pimavanserin and a 2 milligram, or low, dose of risperidone in patients with schizophrenia. These advantages included efficacy comparable to that of a 6 milligram, or standard, dose of risperidone, combined with a faster onset of antipsychotic action and an improved side effect profile, including significantly less weight gain, compared to the standard dose of risperidone.
Clinical benefits of pimavanserin were observed in an exploratory efficacy measure of sleep during the Company’s -020 Study. Pimavanserin has shown benefits in nighttime sleep and daytime wakefulness in studies conducted in elderly patients with PDP. Sleep was assessed using the SCOPA-sleep scale, which was designed to evaluate nighttime sleep and daytime wakefulness.
The Company in collaboration with Allergan, has discovered small-molecule product candidates for the treatment of chronic pain. Its alpha adrenergic agonists are designed to provide pain relief without the side effects of current pain therapies, including sedation and cardiovascular and respiratory effects. Allergan has conducted several Phase II trials in this program, and has reported preliminary results, including positive proof-of-concept in a visceral pain trial in patients who had hypersensitivity of the esophagus, and efficacy signals in two chronic pain trials in the areas of fibromyalgia and irritable bowel syndrome. The Company has discovered and, in collaboration with Allergan, are developing small-molecule product candidates for the treatment of glaucoma. Using its discovery platform, the Company identified a subtype of the muscarinic receptors that controls intraocular pressure and discovered lead compounds that selectively activate this target. In preclinical models, its product candidates have demonstrated a promising preclinical profile, including robust efficacy and a long duration of action. This program has reached Phase I development.
Recent News and Analysis:
The company recently announced its financial results for the fourth quarter and year ended December 31, 2015. ACADIA reported a net loss of $45.8 million, or $0.45 per common share, for the fourth quarter of 2015, compared to a net loss of $28.4 million, or $0.28 per common share, for the fourth quarter of 2014. The net losses for the fourth quarters of 2015 and 2014 included $8.9 million and $4.6 million, respectively, in non-cash, stock-based compensation expense. For the year ended December 31, 2015, ACADIA reported a net loss of $164.4 million, or $1.63 per common share, compared to a net loss of $92.5 million, or $0.95 per common share, for 2014. The net losses for 2015 and 2014 included $40.2 million and $16.0 million, respectively, in non-cash, stock-based compensation expense. At December 31, 2015, ACADIA’s cash, cash equivalents, and investment securities totaled $215.1 million compared to $322.5 million at December 31, 2014. Net proceeds of approximately $281.6 million received from ACADIA’s follow-on public offering in January 2016 are not reflected in the balance sheet as of December 31, 2015.
The company highlighted that it submitted NDA for NUPLAZID in September 2015, which was accepted for filing with Priority Review by the FDA in October 2015 with a PDUFA goal date of May 1, 2016. Additionally, the company launched an integrated awareness campaign for Parkinson’s disease psychosis, or PDP, including educational programs with over 12,000 health care professionals, a PDP educational website targeting physicians, neurology journal and digital placements, and PDP educational booths at major medical meetings. They continued to enroll patients in the ongoing Phase II study with pimavanserin in Alzheimer’s disease psychosis, or ADP. The company also conducted a comprehensive life cycle management review of pimavanserin to lay the foundation for additional development in multiple areas of significant unmet medical need beyond PDP and ADP.
The FDA accepted the company’s New Drug Application (NDA) for Nuplazid and granted the drug fast-track approval for the indication of Parkinson Disease Psychosis (PDP). The approval date for it is set for May 1, 2016. However, on March 29 the focus will be on the FDA Advisory Committee. This is where a panel of doctors will review Acadia’s data and discuss the drug’s efficacy and safety. There seem to be concerns weighing on the stock: cash burn; black box warnings (the strictest warning the FDA will place on a prescription drug); QT interval issues (a very dangerous potential side-effect), flaws in the design of the trial; and if there were enough trials conducted. Of course a major concern is what the result of the committee meeting will be. It is important to understand that Nuplazid is a completely new way to treat psychosis, especially in PDP. Nuplazid is a Selective Serotonin Inverse Agonist (SSIA) that specifically targets the 5HT2A receptor. An SSIA blocks the activity of Serotonin, in this case specifically at the 5HT2A receptor site, which allows patients to function more normally.
Cash burn became a major concern after the company completed a secondary offering in January of 2016. The company priced approximately 10 million shares at $29 and raised approximately $280 million. This increased its balance sheet from about $220 million to nearly $500 million. Obviously, there are risks until it is known for certain what the outcome of the FDA panel will be. Background materials will be made public at least two days prior to the AdCom. If the AdCom has a negative ruling or request more trials, which is certainly a possibility, it would seriously jeopardizes Acadia likelihood of an approval for Nuplazid.
The iShares Nasdaq Biotechnology ETF, IBB, has pulled back sharply since the beginning of March while the broader market continues to rally off the February low, despite that the fundamentals of the biotech sector still look strong. Recent sell-offs in the biotechnology sector have been tied to the collapse of Valeant Pharmaceuticals, but panic selling in the sector may have created buying opportunities for investors looking for some risk diversity considering the valuation has come down to the level comparable to other sectors in the S&P 500. IBB has tried several times, but failed, to bounce off its support levels during the recent downturn although IBB components, Amgen and Gilead Sciences, may have bottomed. Celgene, Biogen and Regeneron chart patterns look similar to IBB, meaning the stocks may have yet to find a bottom. The future for biotech is not as bright as in the past, but as we know, what goes up must come down; just how far down?
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