Recs

3

3 More Stock-Moving Binary Events to Watch in 2012

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Binary events, FDA decisions, and clinical trial results, are the lifeblood -- and death wish -- of the biotech industry. They're a necessary part of the drug development process. They don't always fall your way, but they're always fun to watch, even if you're sitting on the sidelines, which is often the most appropriate place to be for many binary events.

Since drugs have FDA review times of six or 10 months and the approximate end of clinical trials is known after the last patient is enrolled, investors get forewarning that the binary events are going to happen. There are a lot of drugs that will face binary events in 2012, and I've already reviewed three -- but here are three more I think you should watch.

Party like its 2010
On April 17 and sometime in the middle of the year, VIVUS (Nasdaq: VVUS  ) and Arena Pharmaceuticals (Nasdaq: ARNA  ) , respectively, should both get decisions about their obesity drugs that were turned down in 2010. The companies have been working diligently throughout 2011, attempting to satisfy the FDA's requests for additional information about the safety of their drugs.

VIVUS has already resubmitted its application, avoiding women who could become pregnant to eliminate the risk of a potential birth-defect issue, and should hear back from the FDA on April 17. Arena has guided for a resubmission around the end of the year, which would put a decision in the middle of next year.

The FDA has treated obesity treatments as lifestyle drugs that require a clean bill of health before approval. Thus far, meeting that high standard has proved difficult. From the agency's perspective, there's little motivation to approve the drugs and risk another fen-phen issue.

My prediction: Same result as 2010, with the caveat that the FDA can be schizophrenic and could shift gears and become more lenient -- or bow to some outside pressure. Either way, stay away until it's clear the agency has turned over a new leaf.

Don't forget the binary event
Near the middle of next year, Elan (NYSE: ELN  ) , Johnson & Johnson (NYSE: JNJ  ) , and Pfizer (NYSE: PFE  ) will finally get results from the phase 3 trials testing their Alzheimer's treatment bapineuzumab. Elan has only a 25% stake in the drug, but being considerably smaller than either of the pharmas, Elan has the most to gain from a positive result.

Predicting the results of the upcoming trial based on the phase 2 results is difficult, because, as you may recall, the earlier trial was marred with controversy. With little to go on, we'll have to turn to history of previous Alzheimer's treatment, which doesn't bode well for bapineuzumab. There was Myriad Genetics' Flurizan, and Medivation (Nasdaq: MDVN  ) and Pfizer's (NYSE: PFE  ) Dimebon, and the list of failures in the Alzheimer's disease space goes on. It's a tough space to work in; even the drugs that have been approved don't work all that well.

Fortunately for Elan, I think expectations for bapineuzumab are fairly low; I doubt a negative trial will crush the stock, but a positive one will surely cause Elan to skyrocket.

My prediction: I'm going with history on this one and predicting that one or more of the phase 3 trials fails.

Succeed indeed
In early June, the FDA should make a decision about Ariad Pharmaceuticals (Nasdaq ARIA) and Merck's (NYSE: MRK  ) sarcoma drug ridaforolimus. Nothing is a guarantee when the FDA is involved, but the drug looks like it has a very good chance at getting on the market next year. The companies' phase 3 trial, SUCCEED, lived up to its name, improving the progression-free survival by 21% compared with placebo.

My prediction: I'll go out on a limb of steel and predict an FDA approval.

Flip a coin?
Holding shares -- or shorting them, for that matter -- through a binary event is appropriate only for investors with strong stomachs and the ability to sustain substantial losses. That might mean sitting on the sidelines or substantially cutting back on the amount you invest.

Also keep in mind that FDA demission dates are goals that the FDA sets for itself. Recently, decisions, especially for cancer drugs, have been coming early, but it's also possible for the agency to miss the deadline, which might be announced or not. Day-trading the events is highly discouraged.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Elan, Johnson & Johnson, and Pfizer and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2011, at 3:45 PM, PhillyDan wrote:

    Brian - the FDA is turning over a new leaf, yes to be fair, it may or may not help Arena or Vivus but don't bet against it. My question to you is why you have not reported on this significant development being undertaken by the FDA?

    The "Obesity Project"

    This project is the start of the FDA to host a series of disease-specific meetings to identify key risk/benefit goals of patients. The goal is to obtain the patient's perspective on disease severity and unmet medical need.

    (JS comment: As stated, the intent is not help Arena, Vivus or Orex. But, in my opinion, the results of these meetings will be coming into the FDA in the first half of 2012. These results/feedback certainly can work to help change the attitude/environment of the FDA towards Obesity, we can only hope.)

    Focus on Identifying Patient Priorities—Not Salvaging Applications.

    The GW project won't directly help (implies indirect help) any of the pending sponsors. For one thing, Woodcock says it is just getting organized and should start in the fall or winter of 2011. (Actually is is underway.)

    More to the point, though, the goal of the effort isn't to salvage pending applications, but to set better standards for future drug development in the class. The weight loss drug experiences, in effect, have provided a case study that supports the agency's push to build in better regulatory standards up front in the regulatory process.

    GW will "serve as a neutral convener" to host "a series of meetings that include patients, patient societies, bariatricians, ethicists, regulated industry, different regulators and so forth." The plan will be to "talk about obesity and what are potential benefits you could get from reducing weight. What evidence is there about their benefit? What are the harms that we are considering in these obesity drugs and how do you balance those two?"

    The goal will be to drill down into explicit tradeoffs in risks and benefits for weight loss, to give the agency a deeper understanding of how to make risk/benefit judgments in the class—and to give sponsors better guidance on how to design trials (and choose interventions) to optimize the risk/benefit ratio.

    The incorporation of patient perspectives into FDA's benefit-risk decision-making is a major change to its approval calculus, being pursued on multiple fronts. (Brian: The leaf is already turning...)

    In addition to the weight loss project and the workshops described in the PDUFA discussion with industry, FDA has also recently contracted with Sonal Singh in the Department of Medicine at Johns Hopkins for further work on the effort to create a systematic benefit-risk assessment process.

    FDA describes the objective of the Hopkins project also with the patient's view of benefit-risk high in the priorities. The agency is looking to the Hopkins benefit-risk process to "allow for quantitative and qualitative input from various stakeholders." The objective is to find a way to "systematically address risks and benefits in a transparent patient-centered way."

    In addition, the agency is doing extensive work on developing patient-reported outcomes to gather more data about patient experiences in clinical trials themselves.

    A Better Way?

    For Woodcock, in other words, the GW project isn't just aimed at a better path forward in obesity, but a better model for drug development overall.

    "What happens now is that people bring us stuff, development programs that may have cost $500 million to complete, and they say: 'Is this good enough?'" Woodcock said. "We might take it to an advisory committee and then everybody scratches their head." (JS comment: Sounds familiar!)

    "What would really be preferable is to work with the patients and the treating physicians in a proactive way before the development programs are done" to define exactly how individual patients weigh the burden of their disease and the potential harm of therapies. She noted a recent survey of IBS patients conducted by the International Foundation for Functional Gastrointestinal Disorders which asked patients explicitly whether they would trade a 1 in 100 mortality risk for symptom relief. "That kind of input is very important."

    Rather than debate those issues when the development program is done, Woodcock says, it is far better to "lay that all out in advance and then have people do development programs against those standards that are basically consensus standards."

    The seeds of the GW project in obesity followed from the rejection of the three pending applications. In March, Woodcock met with medical and patient representatives from the Obesity Action Coalition, the Obesity Society, the American Dietician Association, and the American Society for Metabolic & Bariatric Surgery. The associations described the meeting as an opportunity to discuss their "concerns about innovation" in pharmacotherapy for the condition.

    CDER will be working with GW School of Public Health & Health Services Professor Christine Ferguson, who is also director of the STOP Obesity Alliance, whose steering committee includes the Obesity Society and the Obesity Action Coalition, as well as other prominent medical (AHA, ADA), health industry (AHIP), employer and labor organizations.

    Ferguson herself joined the GW faculty after serving as head of the Massachusetts Department of Health under then-Governor Mitt Romney (R.). She also spoke during the 2011 Pharmaceutical Research & Manufacturers of America annual meeting in a session focusing on the need to address the societal cost of diseases like obesity. (Doesn't sound like a lifestyle issue to me...)

    On FDA's side, the project will be managed directly out of Woodcock's office. That will further insulate the initiative from direct consideration of the near-term weight loss therapies.

  • Report this Comment On January 02, 2012, at 12:00 PM, TechNicole wrote:

    You go Philly Dan!

    Maybe you need to take Brian's place.

Add your comment.

Compare Brokers

Fool Disclosure

DocumentId: 1750995, ~/Articles/ArticleHandler.aspx, 5/27/2012 2:07:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 12,454.83 -74.92 -0.60%
S&P 500 1,317.82 -2.86 -0.22%
NASD 2,837.53 -1.85 -0.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/25/2012 4:00 PM
PFE $22.13 Down -0.01 -0.05%
Pfizer, Inc. CAPS Rating: ****
VVUS $24.59 Down -0.18 -0.73%
VIVUS, Inc. CAPS Rating: **
MRK $37.55 Down -0.05 -0.13%
Merck & Co., Inc. CAPS Rating: ****
ARNA $6.00 Down -0.04 -0.66%
Arena Pharmaceutic… CAPS Rating: **
JNJ $62.51 Down -0.59 -0.94%
Johnson & Johnson CAPS Rating: *****
MDVN $87.38 Down -1.54 -1.73%
Medivation, Inc. CAPS Rating: **
ELN $14.30 Up +1.11 +8.42%
Elan CAPS Rating: ***

Advertisement