Ariad Pharmaceuticals(ARIA) has shed 12% of its stock market value since Monday's early and positive peek at data from a pivotal study of the company's leukemia drug ponatinib.
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Readers Rob D. and Charles W. both emailed me articles published elsewhere attributing Ariad's sell off to troublesome side effects associated with ponatinib in the study. Not so. The 17% incidence of serious adverse events and 15% patient discontinuation rate observed to date in the ponatinib pivotal study almost exactly mirrors safety data from an earlier phase I study of the drug. Moreover, the 3.7% rate of pancreatitis (the most worrisome ponatinib-related side effect) is markedly lower than the 12% rate seen in the previous phase I study. Eight patient deaths on the study have also been raised as a possible concern and reason for Ariad's weakness. Again, I don't see anything worrisome here. Three of the deaths were deemed possibly drug-related; we won't have any more details until the ponatinib data are presented at the American Society of Hematology annual meeting next month. Seven of the eight deaths, however, were in the sickest of the "blast phase" leukemia patients enrolled in the study. Overall, 94% of patients entering the study failed at least two prior therapies, 57% failed three or more prior therapies. For perspective, both Tasigna and Sprycel (both prior therapies used in these patients) had on-study deaths in their pivotal studies, which didn't stop them from being approved.If ponatinib's side effect profile is fine, what's causing Ariad's stock price to fall? Perhaps @sharkbiotech got it right: "$ARIA was up 50% in last 5 weeks going into the news."In other words, Ariad is just like every other biotech stock with a trading catalyst: Run up, sell the news.@cfgill asks, "There seems to be a little buzz about ARNA. Any perspective?"I haven't detected any buzz around Arena Pharmaceuticals(ARNA). If I had to guess, you might be picking up on traders hoping to catch an uptick tied to the expected resubmission of Arena's weight-loss drug lorcaserin before the end of the year.
Vivus(VVUS) traders have done OK playing the resubmission and FDA acceptance of Qnexa, so perhaps they're looking for a repeat performance with Arena.
The FDA is not going to approve either obesity drugs on this second go-round without copious quantities of new clinical data, most importantly outcomes data from cardiovascular outcomes studies. Just like the 10,000-patient study the FDA is making Orexigen Therapeutics(OREX) conduct.
I know you've heard me prattle on about this before. Here's a Cowen note echoing my bearish view:"We believe Qnexa should probably be approved; we just don't think that the FDA will approve Qnexa without at least interim data from a CVOT [cardiovascular outcomes trial] done pre-approval," wrote Cowen in a note to clients this week. The note continues:"We believe that the most likely outcome next spring is that the agency, through the AdComs [advisory committee meeting] scheduled for 1Q12 and/or a second CRL [Complete Response Letter] issued in April 2012 will request that Vivus runs a large (probably around 10,000 patient) CVOT before approval, similar to what it requested from Orexigen."@weezrichardet asks, "Are you positive on $VRTX? I'm confused."Vertex Pharmaceuticals(VRTX) has achieved one of the fastest drug launches in history with its hepatitis C drug Incivek, which is already on a $1 billion-plus annual run rate just five months after launch. Yet Vertex's stock has been crushed, down 40% in the past two months. A market value of $10 billion is now $6 billion. Confusing? No doubt. Without getting deep into numbers, the simplest way to understand Vertex today is by drawing a parallel to a typical technology upgrade cycle. Incivek is a revolutionary Hep C therapy, but it's also version 1.0. Investors, however, have caught a glimpse of Hep C therapy version 2.0 and even though it's not here yet, they're already pining for it. Version 1.0 is still great but enthusiasm for it has waned. So yes, to get a grip on the investment dynamics of the Hep C market, think of these drugs like smartphones. Nobody wants an old Blackberry when they can wait a few months to buy a shiny new iPhone.
It's totally strange to think about Incivek as being obsolete but that's how the market (cruel as it is) views the drug because Incivek therapy remains tied to weekly shots of interferon in order to achieve a cure. Flattening prescription growth hasn't helped either.
Hep C therapy version 2.0 eliminates weekly shots of interferon. This "new new" therapy is all pills -- two or three, maybe even one -- taken once a day. Easy. Convenient. Effective. It's also still experimental but we've seen enough clinical data -- most recently at last weekend's American Association for the Study of Liver Disease meeting -- to be confident that all-oral Hep C therapies are coming real soon.
Pharmasset(VRUS) is at the vanguard of Hep C version 2.0. Inhibitex(INHX)caught fire. Roche bought Anadys to move in this direction. Abbott(ABT) is in the hunt, as is Bristol-Myers Squibb(BMY) and others. And Vertex? An early effort to conjure an all-oral Hep C regimen didn't work out. Newer efforts are underway now but the perception is that the company is falling behind, stuck at version 1.0.My sense also is that Vertex is trying to get investors to think of the company as more than just sellers of a Hep C medicine. On its recent conference call, Vertex executives emphasized the cystic fibrosis drug Kalydeco (and rightly so, because it's a groundbreaking therapy) as well as its mid-stage pill for rheumatoid arthritis. Both these drugs have real potential, but investors tend to be myopic so for now, Vertex still equals Incivek.Amarin(AMRN) has frozen me out. Emails sent asking for additional clarity on AMR101's patent and new chemical entity status have been ignored. Amarin management continues to stick its head in the sand. It's a terrible communications strategy but one that's supported by the company's sell-side analyst enablers, who are motivated surely by the prospect of more investment banking fees."Amarin stated in its press release and reiterated on its call that its policy is not to comment on the patent prosecution process," writes Leerink Swann analyst Joe Schwartz. "While this may surprise some given the amount of negative attention that has been placed on this issue, we can understand its decision since the patent process normally has more rejections than acceptance… so engaging investors on a process that is relatively foreign to them and normally behind the scenes can only amplify the anguish."Unbelievable. Mike A. writes, "Adam, I know you have been a proponent of Amarin for quite a while. As an individual investor without a voice, I greatly appreciate your articles regarding CEO Joey Z's cavalier attitude. He sold a lot of stock right around the time of ANCHOR results and as you know has done nothing to help the stock in any way since he became CEO. Every time he opens his mouth the stock goes down. And now that when he needs to open his mouth, he says nothing as you so ably have written… Basically, I just wanted to thank you for staying on top of this situation."FBSKA, posting a comment under my Amarin story this week, writes, "Adam, you came out very strongly for this company when the blockbuster trial results came out and talked down the patent problems initially, but now perhaps out of a feeling of responsibility and impatience, you now lambast the CEO for not commenting on patent exchanges with the patent office. How is this any different than when companies refuse to talk about ongoing discussions with the FDA? And many companies talk about going it alone. It makes sense to me for the CEO to play things close to the vest and for investors to sit tight and be patient."He's correct, I did make the mistake in the past of underplaying the intellectual property issues tied to AMR101. Understanding the patent estate of any new drug should always be a part of your investment research, but in Amarin's case, I'm guilty of overlooking the issue. No longer, however.I'm not asking Amarin to divulge the exact back-and-forth with the patent office, but I do believe a more thorough airing of the AMR101 patent strategy, including an explanation of how the process works, would have helped avoid all the confusion and uncertainty. The patents aren't even the most concerning issue. Whether or not FDA awards AMR101 new chemical entity status (NCE) is more important, but Amarin has said nothing at all about this to my knowledge. Don't you think it would be helpful if management laid out its case for why AMR101 deserves an NCE? What steps has the company taken to make that happen? Ed L. emails, "Any thoughts on why Inhibitex Chief Scientific Officer, Dr. Joseph Patti, would unload all 209,000 of his shares at just under $8 per share after the announcement of the positive news? It certainly doesn't seem like a vote of confidence for Inhibitex going forward."I forwarded the question to Inhibitex outside investors relations spokesman, who in turn, forwarded me a response that Patti sent to investors asking about his stock sale:"As we discussed in August I entered into the 10b5-1 plan, my price target for execution of the plan was above most of the analyst's [sic] price targets at that time. FYI: 175,000 shares were restricted stock from 2006 and 35,000 were exercise & sell options that expire in about 4 months. To my knowledge, I have approximately 850,000 options remaining. The 105b-1 is now effectively terminated."Patti made approximately $1.6 million from his sale of Inhibitex stock. Yes, the stock sale was pre-planned but still, the timing was impeccable.The next Biotech Stock Live Chat is scheduled for Thursday, Nov. 17 at 12 p.m. ET. --Written by Adam Feuerstein in Boston>To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein.>To submit a news tip, send an email to: tips@thestreet.com.Follow TheStreet on Twitter and become a fan on Facebook.
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