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Good day PSW Members! It has been a while since the last post, but biotech plays have been active in chat, as well as in Stock World Weekly with new trades, and updating existing ones. I must say that the biotechs and pharma are doing well in my portfolio! This article is mainly for the many new members that have joined the PSW chat over the past few months, as many of us oldie' but goodies are in the stock plays below in some form or another.
It remains my belief that the next few years are going to be big years for biotechs. Pharma has expiring patents, and the big players continue to scour the landscape for up and coming companies and therapies. One we played was MITI, and that was a nice winner for a longer term hold. At PSW, buying and selling biotechs as day trades is not the style, as we invest in companies for longer term holds, or play them into major events, then reduce our risks/exposers using options and hedging strategies.
At the end of January, Infinity Pharma (INFI) dropped like a rock and we jumped an a conservative buy write that was a bit too conservative (bought the stock and sold the April $8/7 strangle). INFI's stock is now above where it was when it dropped, amazing but this is how we like to enter biotechs, as if we bought at $10, well, it may not have recovered…..but that is water under the bridge now. The company has 3 development candidates described below:
- Saridegib (also known as IPI-926) is a novel, potent, oral molecule that inhibits Smoothened, a key component of the Hedgehog pathway. The chemical is semi-synthetic derivative of the alkaloid cyclopamine. The hedgehog pathway was noted in the Curis article here.
- Retaspimycin hydrochloride (also known as IPI-504) is an intravenously administered, potent and selective heat shock protein 90 (Hsp90) inhibitor. HSP90 is a chaperone to other proteins – in other words, they help in the folding or unfolding of proteins as they are being made or broken down. Think of them as the arm in a car assembly line that aid in the production or destruction of the automobile. In cancer, HSP90 helps stabilize proteins that are upregulated in cancer. Thus, HSP90 inhibitors are given with other chemotherapeutics to enhance their activities.
- IPI-145 is a potent, oral inhibitor of phosphoinositide-3-kinase (PI3K) delta and PI3K gamma. PI3Ks are a family of enzymes involved in key immune cell functions, including cell proliferation and survival, cell differentiation, and cellular trafficking. Targeting PI3K delta and gamma may provide multiple opportunities to develop differentiated therapies against inflammatory diseases as well as hematologic cancers. It is in Phase 1 clinical trials, so it is too early to tell.
Overall, if INFI is $12, I think CRIS is worth at least $10…..Selling a few INFI July $10 puts to get back in would be good to start a new position in INFI.
Curis (CRIS) is one of my favorites, and at PSW we have been in them since they bottomed out at approximately $1.23 over a year ago. Now, Vismodegib (trade name Erivedge) is on the market for treating basal-cell carcinoma (partnered with Roche). Also,Curis completed a Phase I clinical trial for:
- CUDC-101, a first-in-class inhibitor of EGFR, Her2 and HDAC, in the first half of 2010 and Phase Ib expansion study in 2011. In August 2011, the Company also initiated a Phase I clinical trial in HPV- locally advanced head and neck cancer in combination with standard-of-care treatment (cisplatin and radiation).
- Curis has an orally-available PI3K/HDAC inhibitor CUDC-907 as a development candidate and expects to begin Phase I clinical testing with this molecule in early 2012.
INFI and CRIS have some overlap, and HDAC is a great target for cancer treatments, and one is currently marketed by Merck under the name of Vorinostat (Zolinza).
Protalix (PLX) is my single biggest holding, and one can read my write-up here about the company. Just look at the stock price of BMRN (one of my first write-ups at PSW when they were $21) or Genzyme's purchase price, and one will understand why I am high on this company. The technology is transferable not only to enzymes (BMRN), but antibody production and other biologics (look out AMGN). It is a much lower cost of production, and they will prove the technology is worthwhile over the next few years. I like a small stock position, and also like the May $5/7.5 bull call spread to play into the FDA PDUFA date.
YMI Biosciences (YMI) is one of the cheapest plays around. INCY and NVS have the market right now, as INCY was just approved for their oral JAK 1/2 inhibitor (Jakafi) to treat myelofibrosis – a rare but serious hematological disorder where abnormal bone marrow stem cells produce scar tissue instead of healthy bone marrow. Patients with advanced myelofibrosis (MF) often experience anemia and a significantly enlarged spleen. YMI's drug, CYT387, actually shows that patients (33%) have reduction in spleen size at six months. Even more impressive is the number of anemia patients that went from transfusion-dependent at the start of the study to transfusion-independent for more than 3-months (46% of evaluable patients). It is this data that make me excited about YMI's potential in the coming years as other treatments have not been able to achieve this endpoint. I like buying the stock in here.
And last, but not least, a new speculative play is Zalicus (ZLCS). I call this speculative because the stock is down near $1, and there is really nothing to note in the pipeline in the near future. A few tidbits to consider though are:
- Synavive is a product candidate with a novel mechanism designed to enhance the anti-inflammatory benefits of glucocorticoids without the associated dose-dependent side effects. Synavive is a combination drug, comprised of prednisolone and the platelet aggregation inhibitor dipyridamole, which inhibits the release of pro-inflammatory mediators, including TNF-alpha, IL-6, RANTES and MMP-9. Phase 2b trial data (SYNERGY) is due out in Q3 or 4 for the treatment of rheumatoid arthritis (RA). I have my reservations because RA is very difficult to treat, but any positive data could cause this stock to double.
- Zalicus has multiple Ion channel compounds undergoing clinical and preclinical safety and efficacy evaluation including Z160, a novel, oral, N-type calcium channel blocker in clinical development for chronic inflammatory and neuropathic pain and Z944, a novel, oral, T-type calcium channel blocker, in clinical development for the treatment of acute and inflammatory pain. Z160 was previously Neuromed's NMED-160 (also known as MK-6721 – yes Merck) for the treatment of pain. MRK and Neuromed discontinued due to not demonstrating "the ideal pharmaceutical characteristics considered necessary to advance the compound further in development. No serious adverse events with MK-6721 were observed in clinical trials in which up to a 1,600mg single dose was administered." Well, basically that means that the drug was horrible in the formulation development (making of pills). So, what now? Well, Phase 2a studies should be underway later in 2012 or 2013, so I would get in now. If it works as well as advertised in animal models of neuropathic pain, then they could have a good one on their hands. Abbott and several other companies are in the same space, but are a bit behind in the clinic.
I would start small and buy a 1000 shares in here.
