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On top its JAK programs, Incyte has been developing two additional programs it intends to out-license. The first program is INCB13739 for diabetes, which already reached clinical proof of concept and could be licensed imminently. The second program, INCB7839 for breast cancer, is less advanced but could become very interesting later this year depending on data from an ongoing trial.
Last week, Incyte (INCY) sold over $130M worth of stock and $400M worth of convertible debt in an effort to solve its balance sheet issues. Thanks to the stronger cash position, the company can finally be evaluated based on its promising pipeline rather than its capital structure. More importantly, it will be able to complete a series of business development deals and focus on becoming a commercial stage company.
A drug with an almost certain approval and immediate sales potential of hundreds of millions of dollars is an asset very few biotech companies possess. In that sense, Incyte (INCY), which is developing a breakthrough drug for blood disorders, represents a unique opportunity in an industry plagued by risk and uncertainty. Incyte is also unique in its problematic capital structure, which makes an otherwise simple investment decision into a tricky one.
This year’s ASCO was packed with promising early stage trials, but very few positive late stage trials with an impact on medical practice. The two most important practice changing trials were phase III studies for Eli Lilly’s (LLY) Alimta and Roche’s (RHHBY.PK) Herceptin. These drugs are likely to enjoy a boost in revenues starting from next year, as both demonstrated impressive survival prolongation in lung and gastric cancer patients, respectively. The studies also underscore the paradigm shift in the industry towards personalized medicine, where a drug is given only to patients who have a high likelihood of deriving benefit. This article will focus on Alimta, which was, in my opinion the winner of ASCO 2009. (more…)
Seattle Genetics – Another step towards approval
Seattle Genetics (SGEN) will present results from a phase I trial of SGN-35 in two rare blood cancers. This agent is important not only because it represents Seattle Genetics’ first opportunity for commercial revenue, but also because it serves as a proof of concept for the company’s antibody- drug conjugate (ADC) technology. The drug already generated impressive data when given every three weeks, and this year it will probably show even stronger activity in a weekly regimen. The company wanted to use a more frequent dosing in order to increase the overall amount of SGN-35 it can give and see whether it leads to higher efficacy without increasing side effects.
The ASCO annual meeting, one of the most important events in the pharmaceutical industry will take place in Orlando next weekend. With over 4,000 abstracts to be presented this year, separating the wheat from the chaff is difficult, but below is an incomplete list of intriguing trials that deserve investors’ attention.
Two weeks ago, Micromet (MITI) hosted its annual R&D day, where it discussed plans for 2009 and beyond. The meeting provided plenty of information regarding the company’s technology and drug candidates, but more importantly, it served as an appetizer for next month’s EHA meeting. As a reminder, Micromet is expected to present data from 2 trials evaluating its lead agent, blinatumomab (MT103), in two forms of blood cancer: Non-Hodgkin Lymphoma (NHL) and Acute Lymphoblastic Leukemia (ALL).
Of all the healthcare companies that took a beating in 2009, Celgene (CELG) seems to be the most undervalued one. Looking at the company’s financial performance and upside potential, it is very hard to understand how a growing biotech company with virtually no potential threat to its leading products is traded at such a low price, a real steal. I typically write about development stage companies, where financial metrics are irrelevant and the focal point is on scientific and medical data. In Celgene’s case, all that is needed is to examine the financial performance and the markets in which the company operates.
The past six months have not been kind to microcap biotech stocks, as it is hard to find a lot of love in today’s market for tiny, high risk, cash burning biotech companies. Honestly, who can blame investors for throwing stocks that offer a distant dream with minimal success rates and heavy spending? Surprisingly (or not), the negative sentiment also presents unprecedented opportunities in the microcap arena, as some microcaps are making tremendous progress, which is not yet reflected in their stock prices.
There are quite a few companies with market cap under $100M active in the fields of oncology and inflammatory diseases, the two fastest growing segments in the pharmaceutical industry. Hypothetically, these companies represent huge upside potential in the form of imaginary returns over a period of several years. The issue with these companies is that they usually have only one or two drugs in very early stages, the vast majority of which are doomed to eventually fail. While identifying the right drugs based on concrete clinical data is complicated but possible, evaluating drugs based on earlier results is even more challenging. The idea is therefore to identify companies who have already reached proof of concept in humans, thus facilitating better visibility to investors. Since investors today focus primarily on risk mitigation, they typically ignore potential reward and shrug off any positive developments. This, in turn, may result in an “arbitrage-like” situation, where companies with a potential success rate of 25% are traded as if they had a potential success rate of 10%, simply because the progress they have made is not factored into stock price.
Last week, the company announced it no longer expects to have a deal by the end of March. Instead, it intends to wait until it has results from two ongoing trials, due this summer. Deciding to wait until more data is available makes a lot of sense, providing the data is good. Typically, the further a drug gets in clinical development, the higher its value in the eyes of potential partners. The problem is not the decision itself, but its timing, as this kind of decision could have been made long ago. So what led Rigel’s management to suddenly change its mind after a year of expectations build up?
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