Today's health care headlines are dominated by earnings from two of the sector's biggest players: Johnson & Johnson and UnitedHealth. However, a duo of small biotechs are making their own waves after successful negotiations with the Food and Drug Administration over Special Protocol Assessment for critical phase 3 trials.
For those who don't know what an SPA is, it means that the FDA and Threshold have agreed to the trial design and endpoints that will lead to approval for TH-302 in pancreatic cancer. This is important as less confident companies will eschew the SPA in favor of endpoints they deem good enough, but that leads to a lot of uncertainty heading into the approval process.
If a drug aces its phase 3 trials with SPAs, like Amarin's (NASDAQ: AMRN ) Vascepa, it may skip the advisory committee step entirely. Vascepa's approval was considered such a sure thing by investors that Amarin shares actually traded lower when the market opened the next day.
Two companies today reaching SPAs were Threshold Pharmaceuticals (NASDAQ: THLD ) , which was up more than 5% in early trading before paring gains, and ArQule (NASDAQ: ARQL ) , which has held on to its 5% climb. Let's take a closer look at both.
Threshold has stumbled recently after seeing more than a 600% increase in 2012 alone; however, shares are still up over 300% this year. Concerns mounted that its mid-stage trial -- which saw a 2.3 month increase in median overall survival, but only a 4.5% reduction in relative risk of death -- might play out unfavorably in the larger late-stage studies. Despite management's insistence that the control group switching to TH-302 skewed the results, shares plunged 20% that day.
Combine that negativity with positive buzz over competitor Celgene's (NASDAQ: CELG ) soon-to-be-released abraxane phase 3 trial results in pancreatic cancer, and you can understand why Threshold has had a rough go of it. While getting an SPA doesn't make the approval of TH-302 any more likely, the drug will have to ace its trials, and those trial results will be critical with differentiating the drug from its competitors if they both reach the market.
In ArQule's case, the SPA for tivantinib in liver cancer couldn't have come at a better time. Earlier this month, shares of ArQule were chopped in half after halting a late-stage trial for tivantinib in lung cancer. After the trial had been halted for safety issues, patients were faring no better than those on the placebo. So, here we go again, although investors should be encouraged that cancer drugs have a history of failing in one, but not all tumors. Still, given the safety issues in the one trial and the complete lack of efficacy in the other, I would caution investors not to get too excited here, even if management still has plenty of faith in its lead drug candidate.
Finally, MAP Pharmaceuticals (UNKNOWN: MAPP.DL ) is up after resubmitting Levadex for FDA approval after its March rejection. This was one of the best rejections to get; according to MAP, the FDA cited no safety or efficacy issues for its inhaled migraine treatment. What tripped up approval, then? Concerns over usability by patients, third-party manufacturing issues, and something else relating to chemistry, manufacturing, and controls.
The FDA has been tough on inhalable products before, especially if they aren't treating lung issues. MannKind (NASDAQ: MNKD ) , for instance, has seen two rejections despite being well-tolerated. MAP is charting its course to profit, and investors should watch for the FDA to set an approval date along with a likely advisory committee.
Many investors are attracted to MAP and biotechs like it since they hold the allure of substantial short-term gains. But there is more than one approach to building long-term wealth and retiring well. In our free report "3 Stocks That Will Help You Retire Rich," we reveal some stocks that could help you as well as some winning wealth-building strategies. Click here to keep reading.