2012-11-30 13:57:32 -
By Scott Matusow, Contributor
Alexza Pharma (NASDAQ: ALXA) - Alexza engages in the research, development, and
commercialization of novel proprietary products for the acute treatment of
central nervous system conditions worldwide. Its product candidates are based on
a proprietary technology, the Staccato system, which vaporizes an excipient-free
drug to form a condensation aerosol that, when inhaled, allows for rapid
systemic drug delivery. The company's lead product candidate includes Adasuve
(Staccato loxapine) for the acute treatment of agitation in adults with
schizophrenia or bipolar disorder.
The first catalyst event for Alexza is a decision on its Marketing Authorization
Application (MAA) submitted to the European Medicines Agency (EMA) for Adasuve.
This decision is scheduled for the middle of December, 2012.
The second catalyst event for the company is Adasuve 's Prescription Drug User
(PDUFA) date of 12/21/12, which is the bigger catalyst driver.
In May of this year, Alexza received a Complete Response Letter (CRL) from the
FDA regarding its New Drug Application (NDA) for Adasuve inhalation powder -- 5
mg and 10 mg.
In the CRL, the FDA noted, "During a recent inspection of the Mountain View, CA
manufacturing facility for this application, our field investigator conveyed
deficiencies to the representative of the facility. Satisfactory resolution of
these deficiencies is required before this application may be approved."
The CRL went on to state that discussions can continue on the proposed Risk
Evaluation and Mitigation Strategy (REMS) after the response to the action
letter has been submitted. The CRL also contained comments on Alexza's draft
product labeling. The company now believes there is a substantial agreement with
the FDA on the REMS and product labeling.
Senior Vice President of R&D Jim Cassella said recently:
The issue that the FDA noted was an inspectional issue, so that was the only
thing really in the letter. We addressed the issues with the CDRH reviewers who
had raised the issue and then we responded to their questions. We resubmitted
the NDA, which is basically a labeling resubmission, so there is not a lot of
work left to do. We believe that we have addressed the inspectional issues and
we have resubmitted an advanced draft of the label and we have probably a little
bit of work left to do on some of the REMS documents.
Since there was no clinical or safety issues identified, and no other
deficiencies outlined in the CRL, Adasuve has a good chance at approval this go
around in my opinion. Manufacturing, labeling, and REMS can be dealt with --
efficacy and serious safety concerns cannot.
Avg Vol (3 month): 506,563
Avg Vol (10 day): 801,857
Shares Outstanding: 15.69M
% Held by Insiders: 19.55%
% Held by Institutions: 18.10%
Shares Short (as of Oct 31, 2012): 1.96M
Short Ratio (as of Oct 31, 2012): 3.70
Short % of Float (as of Oct 31, 2012): 17.10%
Shares Short (prior month): 1.99M
Alexza has a very small float of which over 17% of it is held short. An FDA
approval for Adasuve would likely cause a short squeeze. It's a good bet the
smarter shorts will be covering their positions as we draw close to both
catalyst event dates. Again, if safety and efficacy issues were the main concern
here, then I could understand shorts holding their positions. However, this is
not the case.
Recently, we saw a 200% jump in ACADIA Pharmaceuticals' (NASDAQ: ACAD) stock
price when its drug Pimavanserin showed positive Phase III clinical results.
Pimavanserin is designed for the treatment of Parkinson's disease psychosis.
Adasuve is similar to Pimavanserin in that both are designed to treat
psychosomatic disorders, and both drugs saw initial failures. Also, Acadia still
needs to engage in another clinical study for Pimavanserin, so there still
remains considerable uncertainty in Acadia. On a related note, I feel Acadia is
overvalued at its current price level and there remains too much downside risk
at this time for me to consider it a good long trade/investment.
I would not be surprised to see a double of the company's stock on FDA approval.
However, there is considerable risk for traders and investors holding through
the PDUFA date. If the FDA rejects Adasuve again, it's likely Alexza as a
company will not survive because they will simply run out of cash. At the very
least, the company would have to engage in dilutive financing to survive. While
I believe this will not occur, it's wise to consider this possibility.
Alexza was beaten down after its last CRL, but since then it has begun to
reverse leading into the December PDUFA date. The stock is wedged between two
trend lines and poised to break out as sentiment remains strong. There is a
psychological support level at $5.00 and the stock could break out to test the
$6.00 level it touched earlier this year or perhaps even higher.
With a market cap of around $80M, I strongly feel Alexza is undervalued at this
My price target opinion before the PDFUA date is $6. If approval is confirmed,
$12/share is my expectation.
Amicus Therapeutics, Inc. (NASDAQ: FOLD) focuses on the discovery, development,
and commercialization of orally-administered, small molecule drugs for the
treatment of lysosomal storage disorders and diseases of neurodegeneration. Its
drugs are known as pharmacological chaperones, which selectively bind to the
target protein, enhance the stability of the protein, help it fold into the
three-dimensional shape, as well as allowing proper trafficking of the protein.
This increases protein activity, enhances cellular function, and reduces cell
In its Fabry program, the company is investigating the use of AT1001 to bind to
destabilized a-galactosidase A enzyme (a-GAL) and thereby restore its intended
A potentially big catalyst coming up for Amicus is the release of the phase III
011 six month results related to its medication for Fabry disease. This is a
disorder caused by the deficiency of an enzyme called a-galactosidase A (a-GAL).
Reduced or absent levels of this enzyme's activity leads to the accumulation of
a complex lipid in the affected tissues, including the central nervous system,
heart, kidneys, and skin. This accumulation is believed to cause the various
symptoms of Fabry disease including pain, kidney failure, and increased risk of
heart attack and stroke.
There has been historic difficulty in finding successful treatments for rare
genetic diseases. If Amicus can show successful phase III data here, it could be
quite a breakthrough in the treatment for Fabry's disease.
On 9/6/12, Amicus issued a press release to update the screening profiles
related to the 011 study, which is one of two ongoing Phase III studies of
migalastat HCl monotherapy being conducted by the company and GlaxoSmithKline
(GSK). The updated screening profiles included the following:
* A total of 180 Fabry patients (60 males and 120 females) were screened for
Study 011. Prior to screening, sites used genotype information when
available to enrich Fabry patients with amenable mutations who were more
likely to be interested in participating in the study.
* Approximately 86% (154/180) of patients screened had missense mutations
(compared to a current estimate in the Fabry population of approximately
* Approximately 88% (136/154) of those patients, or 76% of patients screened,
had alpha-galactosidase A mutations amenable to migalastat HCl monotherapy,
and were potentially eligible for enrollment.
* Approximately 50% (67/136) of those patients, or 37% of all patients
screened, enrolled in Study 011 upon meeting all entry criteria, including:
1) naïve to ERT or had not received ERT for at least 6 months prior to study
entry; 2) genetic mutations amenable to chaperone monotherapy and; 3) for
study purposes, urine globotriaosylceramide (GL-3) levels at least four-
times the upper limit of normal at baseline.
The primary endpoint in Study 011 is a change in interstitial capillary GL-3, as
measured in a kidney biopsy at six months versus baseline. The six month primary
treatment period in Study 011 was completed in the second quarter of 2012 and
the six-month follow-up period is expected to complete in December 2012. Amicus
and GSK will also un-blind and analyze data from the primary six month treatment
at this time. Currently, both companies remain blinded to all results.
Also of significance, on November. 8, 2012, the company announced additional
preliminary results from an open-label Phase 2 drug interaction study (Study
013) to evaluate a single oral dose of migalastat HCl (150 mg or 450 mg) co-
administered with enzyme replacement therapy (ERT) in males with Fabry disease.
In a poster at the American Society of Human Genetics (ASHG) Annual Meeting, Dr.
David G. Warnock, University of Alabama-Birmingham, presented results from all
12 patients in the migalastat HCl 150 mg dose group.
Based on the bullish move the stock has been making lately, I think it's
possible the release of the expected December data comes before the middle of
the month. If the results prove to be positive, I expect the stock to be at
least double its current price for a couple of factors:
* GlaxoSmithKline owns 20% of Amicus. It's a good bet in my opinion that Glaxo
will acquire the rest of Amicus if the clinical trial results prove to be
positive. Fabry's is a rare disorder, and Amicus's Chaperone technology is
cutting edge in my opinion, which if confirmed, would be worth a lot of
money. Even if Glaxo does not acquire Amicus, with 20% interest in the
company, Glaxo has a significant vested interest in seeing Amicus succeed.
* Amicus has a small trading float of around 24.42M, with a market cap coming
in at $290.76M. As mentioned prior, Acadia Pharma recently saw its stock
price move up 200% on positive results from its Phase III drug study.
Acadia's drug is nowhere near the worth of Amicus's in my opinion, yet
Acadia has a current market cap of $304.05M with a larger trading float of
around 40M shares.
In 2001, two Enzyme Replacement Therapies (ERTs) were released which attempt to
replace the deficient enzyme by means of infusion. The drugs are expensive, with
an annual cost of approximately $200,000 per patient, it's estimated about
10,000 people suffer from Fabry's disease globally. Insurance companies normally
cover treatments for rare diseases such as Fabry's, so this is also a big
positive for both Glaxo and Amicus. For a big pharma such as Glaxo, it always
comes down to making big money - period. Glaxo would not be involved with Amicus
and own 20% of the company for any other reason.
Amicus also has other drugs in earlier clinical development, which adds further
speculation value to the company in my strong opinion.
Amicus recently bounced off of a support level at $4.25 with conviction, and
since then the stock has gained significantly leading into its crucial Phase III
data release. The stock needs to consolidate here at the 61.8% retrace point a
bit but is setting up for the next leg higher to the $6.60 range, possibly even
before the data is released in December.
My price target opinion for Amicus: Over $10 a share on positive Phase III 011
data, $12 to $14 on potential Glaxo acquisition.
Arena Pharmaceuticals (NASDAQ: ARNA) - Arena engages in discovering, developing,
and commercializing oral drugs that target G protein-coupled receptors in the
therapeutic areas of cardiovascular, central nervous system, inflammatory, and
Since the approval of its weight loss drug Belviq in June, the stock has fallen
from a yearly high of $11.39 to $7.21, a fall of 37%. I feel long term investors
have excellent value here at its current price level of around $9 a share. The
focus on Arena should now be on potential top-line growth from its strong
clinical pipeline. Because Arena will likely receive a large amount of cash from
Belviq sales, I believe it is a strong speculative bet that management will re-
invest this cash into its pipeline. This would gain leverage for the company in
any potential deal with a large pharma partner for any of its pipelined drugs
APD811: An orally available agonist of the prostacyclin receptor is intended for
the treatment of pulmonary arterial hypertension, or PAH. In December 2010,
Arena initiated a Phase 1 clinical trial to evaluate the safety, tolerability
and pharmacokinetics of single-ascending doses of APD811. The company believes
the results of this early stage clinical trial suggest APD811 has the potential
for once-daily, oral dosing.
APD334: A potential oral treatment for a number of conditions related to
autoimmune diseases, including multiple sclerosis and rheumatoid arthritis.
APD371: For the potential treatment of pain. The analgesic effects of CB
receptor agonists are well established in the scientific literature.
GPR119: A novel pharmaceutical target for discovering orally available small
molecule agonists for the treatment of type 2 diabetes.
Temanogrel: An inverse agonist of the serotonin 2A receptor intended for the
treatment of arterial thrombosis and other related conditions has completed
Phase 1a and Phase 1b clinical trials.
In my opinion, if Arena can get the first weight loss drug approved since 1999,
the company can get others approved in time as well.
Also, if the company can manage its money correctly, it can become a large
pharma within 3 to 5 years, similar to how Jazz Pharma (JAZZ) has grown in a
little over 3 years from $0.52 on April 22nd, 2009, to a current stock price of
$53.58 a share.
However, TheStreet.com continues to Rate Arena as a sell with a ratings score of
D-. One area they are negative on is poor profit margins from the company. I
find TheStreet's rating system to be insufficient at best concerning
developmental small cap companies. Of course Arena is going to have poor profit
margins -- it does not have Belviq out on the market yet. The drug will be
available to consumers through a doctor's prescription in early 2013.
Arena also expects to receive $65 million before the end of 2012 from its
marketing partner Eisai following the Drug Enforcement Agency (DEA) scheduling
for Belviq, which does not include any of the revenue under marketing agreement
with Eisai such as product sales of the drug.
Arena is more of a speculative long term investment than just a trade, so I will
not engage in any chart analysis for the stock.
My 3 to 5 year price target opinion for Arena (barring a market crash) is $25 to
$45 a share.
Disclosure: Long ALX, FOLD
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