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Well PSW Subscribers….I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired….buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND other drugs must often be used with it adding to the cost. So, for more convenience and a better response rate….why not go for the best drug out there for HepC? Other drugs are increasing in price, and the diagram below from Bloomberg shows that even Viagra has gone up in price considerably over the past 7 years. Big pharma has infrastructure it needs to pay for, as well as investors that like outsized returns. Biotechs, on the other hand, have drugs in clinic that can make or break the company. Therefore, doing homework on these companies is critical, and understanding the science is imperative.
The trend in industry (biotechs especially), is to go after the harder to treat diseases, which then also command a premium IF the drug is successful. BMY bought Amira Pharmaceuticals for >$370M on the chance that their IPF drug (LPA1 receptor antagonist) works in these patients (life expectancy is 5 yrs). Gilead bought Arresto for >$200M for the same indication (IPF), but a different mechanism of action (LOXL2 monoclonal antibody). Both of these companies were finishing Phase 1…which means there was NO efficacy seen!!! Intermune's drug Esbriet is expected to cost about $60k/yr, so if either of these drugs from BMY or GILD hit, and are better than Esbriet, then one can expect their prices to be higher!
So, which companies should be the focus? Well, one is new(er), and one is a favorite that continues to be just that…a favorite.
Epizyme (EPZM) – EPZM stock came out of the gate ripping ahead on its IPO debut. Since last year, the stock has ping ponged up and down, settling in the $20-22 range. The company is focused on hard to treat cancers by using genetics to focus on oncogenes. Their main program has small molecule inhbitors against histone methyltransferases, or HMTs. HMTs help regulate the winding and unwinding of DNA. So, in cancer, DNA unwinds quickly, as they cancer cells generally grow faster than normal cells. The two HMTs the company's drugs are targeting are DOT1L (inibitior name: EPZ-5676) and EZH2 (inhbitor name: EPZ-6438). DOT1L is indicated in adult MLL-r, adult MLL-PTD, and pediatric MLL-r. MLL-r is an aggressive subtype of two of the most common forms of acute leukemia, acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL).
In November, the Phase 1 results were released. Background: patients in Phase 1 had previously been treated with 4 other drugs which have since failed to stop their cancer. The data were very exciting (albeit a small sample number). First, there were no adverse events in patients as the dose escalated (good). Second, EPZ-5676 PK data showed a nice linear increase of the systemic drug, and the pharmacodymamic data showed effects of 'methyl marks' (aka, drug did what it was supposed to do!). Interestingly, investigators observed treatment effects (those on EPZ-5676) in 50% of the patients with MML-r and NO effect in patients without MLL-r. So, the million dollar question is, IF EPZM raises the dose in those that did not respond…will they then respond? EPZM has also initiated a pedicatric Phase 1b study in patients with MLL-r leukemia, which is considered to be one of the last inadequately treated pediatric acute leukemias.
Their second program is EPZ-6438, a small molecule inhibitor of EZH2. EZH2 is implicated in non-Hodgkin lymphoma patients who have an oncogenic (cancer-causing) point mutation in that HMT. As of June 2013, the clinical trial is ongoing.
While the investment is risky, as these are early trials, the path is clear cut. The company is using genetic markers to select patients with mutations in HMTs. This greatly enhances the POS, and therefore the recommendation is buying 100 shares of stock (~ $22.XX at the time of this writing) and selling one of the November $25 Calls and $20 Puts for a net $6 (spreads are as wide as a truck FYI).
Seattle Genetics (SGEN) – where to start with a company that has been touted here since, well, one of my first writings (October 2011)! Either way, the TAP technology can be read about here, and their pipleine continues to impress. Money has been made on the company's stock rise through the years, and the techology continues to be a mainstay in many pipelines AND the company has its own set of ADCs to make money on as well. What's not to like about them? Think about it as a soccer game….things take time to develop, but there are a ton of shots on goal! So, in member chat is where I will be with other members discussing biotechs….so join us there for the SGEN recommendation!
So let's pop the bubbly with SGEN and/or EPZM make us some dough!
– Pharm
