Discovery Labs setback exacerbated by potential cash crunch (DSCO)
Discovery Laboratories Inc . (Nasdaq: DSCO) shares are down 50% on roughly 5 times normal volume after the company said its Surfaxin candidate targeting respiratory distress syndrome (RDS) was not likely to get FDA approval soon — particularly disappointing news for a company facing a potential pending cash crunch.
The news follows an FDA decision in April in which the agency declined to approve Surfaxin to treat RDS in premature infants.
Discovery Labsended the first quarter with about $19 million in cash and securities. Given its current burn rate, that might not be enough to last the company until the fourth quarter without the need for a cash infusion from a partner, or from some sort of offering.
Discovery labs does have access to a credit facility, but it is only accessible if the company’s stock price stays above 60 cents; it’s currently near 50 cents a share.
The low stock price may complicate efforts to raise capital using its stock.
The FDA suggested that additional studies be run on Surfaxin for RDS, but Discovery Labs plans to focus on earlier stage programs including its Phase II trial of Surfaxin LS.
It appears that the FDA unexpectedly changed the rules on Discovery Labs’ trial. The company said it believed data already submitted to the FDA supported its approval. Yet the agency is now applying a newly defined standard that would require the company to demonstrate the same relative changes over time it already showed in previous research.
If resources were unlimited, perhaps Discovery Laboratories would continue with its Surfaxin trial in RDS. But given the cash situation, that doesn’t appear to be the case — Mike Tarsala.
Discovery Labs… Lessons of FDA Changes For Others To Heed (DSCO)
Discovery Laboratories, Inc. (NASDAQ: DSCO) is getting crushed on FDA actions. This was already a small company, but a 50% share price hit now has this trading around $0.50 and has the market cap now under $55 million. While we normally focus on more broad or more crucial issues, the lessons here are crucial for any small biotech and small drug development companies to asses as risk when dealing with the Food and Drug Administration.
The company received written minutes from the FDA with the results of its June 2, 2009 meeting with the FDA. It followed the FDA’s April 17 complete response letter for Surfaxin for the prevention of Respiratory Distress Syndrome in premature infants. The meeting was convened to discuss resolution of the remaining primary issue necessary for marketing approval of Surfaxin. It focused on the Surfaxin fetal rabbit biological activity test, specifically whether data that had been previously submitted to the FDA and generated using both the BAT and a well-established preterm lamb model of RDS adequately supports the comparability of Surfaxin clinical drug product to commercial drug product, and whether the BAT can adequately distinguish change in Surfaxin biological activity over time.
At the recent June 2 meeting, Discovery Labs learned that the FDA is now going to apply a newly-defined standard to determine whether Discovery Labs has adequately demonstrated comparability of Surfaxin clinical to commercial drug product. In short, this could send everything back to the drawing board and could delay endlessly an approval or make an approval much harder to reach.
This new standard represents a significant hurdle for approval of Surfaxin. Discovery Labs said that it believes that the information provided to the FDA for the meeting demonstrates comparability and supports Surfaxin approval. But… Considering the FDA’s newly-defined standard, the company now believes that it is unlikely to satisfy this requirement with existing pre-clinical comparability data and gain Surfaxin approval in the near term.
In short, this takes just about all the wind out of the company’s sails.
FULL DETAILS OF THE RELEASE AND OUTCOME HAVE BEEN INCLUDED BELOW:
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BioSante’s Acquisition of Cell Genesys, Actual Beauty in Biotech Zombies (BPAX, CEGE)
Buying up troubled and dead biotechs is a tricky business. But this week’s news that BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX) was acquiring Cell Genesys (NASDAQ: CEGE) actually makes more than a lot of sense. Cell Genesys had already done a debt tender and had already engaged Lazard Freres & Co. to explore strategic alternatives.
Upon settlement of the exchange offer, the Cell Genesys’ cash balance is expected to be (or was) close to $36 million and 109.6 million shares of stock are outstanding. The merged company will focus on LibiGel® in Phase III clinical studies for female sexual dysfunction and will look for future opportunities for GVAX immunotherapies. What makes this deal so interesting is that BioSante Pharmaceuticals, Inc. is actually raising cash by making this acquisition because it is an all-stock deal. In fact, at the last quarter-end, BioSante had less than $11 million in cash and short-term securities before taking into effect any financing and operational flows from this last quarter.
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Why Acorda shares are sinking after seemingly positive development news (ACOR, BIIB)
A co-development deal under which Acorda Therapeutics Inc. (Nasdaq: ACOR) gets $110 million in cash upfront to comercialize its multiple sclerosis drug outside the United States has decreased takeover speculation in the stock, amid a potentially increased chance of more FDA scrutiny.
Piper Jaffray downgraded Acorda shares following its development deal with Biogen Idec (Nasdaq: BIIB) outside the U.S. The research firm ackknowledged that some investors that were looking for a near-term acquisition from Biogen may be disappointed.
In addition, Piper suggested it’s possible that an FDA advisory committee meeting scheduled for September might spend some time focusing on the safety profile of Acorda’s MS drug.
And an advisory committee meeting might possibly represent a delay in getting the drug to market. The company’s MS drug Fampridine-SR was granted priority review status, with a FDA action date of October 22, 2009.
Given that Acorda’s shares have nearly doubled since December from around $15 to nearly $28, it’s possible the market already expects FDA approval on or before that October date.
On a conference call, this morning, Acorda said it will not be giving any additional guidance at this point, primarily because the company need to get clarity around the regulatory pathway in the U.S. for Fampridine. It says once it has that, it will be in a better position to give guidance.
Biotech Stocks On the Move Early Wednesday (AMAG, MYGN, SPPI, NVAX)
AMAG Pharmaceuticals:
AMAG Pharmaceuticals Inc. (Nasdaq: AMAG) are up about 6 percent with more than 17,000 shares traded as of 8 a.m. Eastern this morning, after the FDA approved the company’s Feraheme drug as an iron replacement therapy for patients with chronic kidney disease.
The approval removes an overhang for the company. It first sought FDA approval for the drug in December 2007, and twice received requests for more information on it last year.
Myriad Genetics:
Myriad Genetics (Nasdaq: MYGN) shares are down more than 15 percent on very strong premarket trading volume early this morning. The company last night said it expects fiscal Q4 revenue of $86 million, shy of the $91.6 million analysts had anticipated, citing high unemployment and patients cancelling or delaying doctor visits.
Several analysis firms including Oppenheimer and RBC Capital have downgraded the company’s shares this morning, with several citing worries about revenue growth rates.
Spectrum Pharmaceuticals:
Spectrum Pharmaceuticals (Nasdaq: SPPI) Inc. shares are down roughly 8 percent on nearly 60,000 shares traded as of 8:15 a.m. Eastern. The company announced early this morning that it will raise $21 million from institutional investors at $7.15 a share. The stock had been trading near $7.65 a share.
Novavax:
Shares of vaccine maker Novavax Inc. (Nasdaq: NVAX) are up very slightly in premarket trading, seeing some continued buying a day after Spanish health authorities licensed its technologies to make pandemic and seasonal flu vaccines.
The stock had risen more than 30 percent yesterday on the news.
Boutique research firm Rodman and Renshaw raised its target on Novavax shares to $5 from $4 this morning, suggesting Spain is providing additional validation fo the company’s technology and it may be a foothold for Novavax to register its vaccine in other countries. — Mike Tarsala
Two More Promising Attacks on Flu and Swine Flu (VICL, NVAX)
Vical Inc. (NASDAQ: VICL) showed promising swine flu test data in its animal model today and was one of the top rising stocks. A pact from Novavax, Inc. (NASDAQ: NVAX) with the government of Spain and ROVI Pharmaceuticals sent its shares even higher on a percentage basis.
Vical Incorporated (NASDAQ: VICL) said tests in its vaccine against A/H1N1 pandemic influenza, the swine flu, produced robust immune responses that were “well above the accepted protection threshold in 100% of vaccinated mice and rabbits” after a standard two-dose vaccine regimen. The company said that at least 75% of vaccinated animals achieved or exceeded the protection threshold after a single dose of vaccine. Vical went so far as saying that it is ready to advance directly to large-scale cGMP manufacturing of the vaccine for human clinical trials, subject to securing external funding for this program.
Novavax, Inc. (NASDAQ: NVAX) signed a deal with Spain’s health ministry and ROVI Pharma, a specialty drug maker in Spain, to license its genetically engineered technology to produce pandemic and seasonal flu vaccines and build that country’s first vaccine-making plant.
While exact terms are outstanding, this could easily bring in tens of millions of dollars in future royalty and milestone payments if and after the vaccines are approved and marketed. The target here is to get both pandemic flu vaccines and seasonal flu vaccines by 2012.
ROVI has committed to make a $3 million equity investment in Novavax at $2.74, a 10% premium to yesterday’s close. The Spanish government is forming a foundation and will invest in a 60 million facility and a non-profit foundation will be formed will be formed and initially funded with a 25 million euro credit line from the Spanish government.
This was a huge boom for both companies today. Vical Inc. (NASDAQ: VICL) rose over 22% to $2.70, on over 8 million shares. Novavax, Inc. (NASDAQ: NVAX) shares closed up 31% at $3.28, on over 32 million shares. As far as how high that volume is, that is about 14-times average on Vical and nearly 8-times average volume on Novavax.
Jon C. Ogg
Dendreon Gets Mixed Analyst Take (DNDN)
A smaller broker dealer has come out with a positive, yet cautious, note on Dendreon Corp. (NASDAQ: DNDN) in new coverage this morning. Morgan Joseph has initiated the maker of PROVENGE for prostate cancer with a “Hold” rating in new coverage. The firm believes that Dendreon can become a leader in therapeutic vaccines for the prostate, so there is a positive nature and positive outlook. But as for the valuations, Morgan Joseph has said it would try to wait to see if you can get a better price.
Dendreon shares closed at $25.49 yesterday. So far we are seeing shares indicated firm, but the 52-week trading range is $2.55 to $27.40. Shares have had a hard time getting much higher and staying much higher than this $25.00 to $27.00 range. Most trading days over the last 75 days have seen a $20.00 to $25.00 range, yet the range has been slightly higher in the more recent days.
JOn C. Ogg
Stem cell companies get endorsement from industry heavyweight (GERN, STEM, ASTM, GE)
Geron Corp. (Nasdaq: GERN) are up more than 25% in premarket trading after announcing an exclusive global licensing agreement with General Electric Co.’s (NYSE: GE) GE Healthcare.
The announcement is seen as an endorsement of the research done over the years by small-cap stem cell research companies. Rival stem cell biotechs including Stem Cells Inc. (Nasdaq: STEM) and Aastrom Biosciences Inc. (ASTM) also are rising on the news.
The GE Healthcare announcement is likely to be seen as an endorsement of the work that Geron had done on its own in bringing human embryonic stem cell-based therapies to market. The company plans to begin a Phase I trail of a therapy called GRNOPC1 for patients with thoratic injury, potentially in coming weeks.
by YE09.
The two companies have established a multi-year alliance program under which their respective scientists will work together to develop products for drug discovery.
GE Healthcarewill fund the R&D program and will be responsible for manufacturing, sales and distribution of products developed under the agreement. — Mike Tarsala
Long-term insulin makers shares sink on possible study (SNY, NVO, MRK, LLY)
Sanofi-Aventis (NYSE: SNY) and Novo Nordisk AS (NYSE: NVO) shares are trading lower on strong volume Friday as analysts anticipate a potentially negative analysis in a major medical journal that may link Sanofi’s Lantis long-acting insulin product — the second-biggest seller in its product lineup — to cancer risk.
Novo Nordisk makes a similar long-lasting insulin product called Levemir. The fear among some traders is that the yet-to-be published study could also affect drugs in the same general class.
Facts are lacking, since the article has not been published. But the worry among some traders is that any study that may result in fewer prescriptions being written for long-lasting insulin products, until the safety data can be weighed further.
Some market participants are recalling Glaxo Smith Kline’s drug Avandia, which suffered steep sales declines two years ago after an analysis tied the drug to potential heart attack risk.
Should the study results have a major impact on sales of long-acting insulin, there are a few products that may stand to benefit. One is Byetta, made by Amylin Pharmaceuticals (Nasdaq: AMLN) and Eli Lilly & Co. (LLY). It works diffently than the long-acting insulin products, and is not a substitute for insulin.
Another may be Merck’s (NYSE: MRK) Januvia, a once-daily pill that is not an insulin product, but can can help lower blood sugar levels in patients with Type II diabetes. — Mike Tarsala
White House signals suport for biosimilars (NVS, AZN, AMGN, DNA, GENZ, GILD, CELG)
The Obama Administration in a letter released Thursday recommended that seven years is enough time to protect brand-name biotech drugs from cheaper generic competition, roughly half the time sought by industry lobbyists.
“Innovation is driven by appropriate competition, and the administration’s policy will spur that competition,” said the letter from Office of Management and Budget Director Peter Orszag and Nancy-Ann DeParle, director of the Office of Health Reform.
Making generic biotech drugs, called biosimilars, available to the masses is part of the Obama Administration’s strategy to lower the price of the prescription drugs, many of which can cost in excess of $20,000 a year per patient.
A shorter time of market exclusivity for brand-name drugs may be detrimental to some biotech companies. Brand-name biotech drug makers such as Amgen Inc. (Nasdaq: AMGN), Genentech Inc. (NYSE: DNA) and Genzyme Corp (Nasdaq: GENZ), Gilead Sciences Inc. (Nasdaq: GILD) and Celgene Corp. (Nasdaq: CELG) are fighting against biosimilars to protect exclusivity for their products.
The Biotechnology Industry Organization, which represents brand-name companies, “is extremely concerned” that seven years is not enough time, and may limit product development.
Yet it could be beneficial to generic drugmakers such as Novartis AG (NYSE: NVS), as well as drugmaker AstraZeneca plc (NYSE: AZN), which recently began targeting the biosimilars market.
See related story on biosimilars.