This Week in Biotech

With the SPDR S&P Biotech Index up 31% year to date, it's evident that investment dollars are willingly flowing into the biotech sector. Keeping that in mind, let's have a look at some of the rulings, studies, and companies that made waves in the sector last week.

Unlike previous weeks, the news out of the biotech sector was overwhelmingly negative this week. The only piece of non-negative news to report came from Johnson & Johnson's (NYSE: JNJ  ) subsidiary Janssen Biotech that it's submitted a biologics license application with the FDA and a type II variation to the European Medicines Agency to expand the use of Stelara beyond just psoriasis. Specifically, J&J and Janssen are targeting its use as a treatment for psoriatic arthritis and noted its successful late-stage trial results as a reason it should eventually be approved.  

And then came the cluster of bad news...

This year's worst-performing biotech, Chelsea Therapeutics (NASDAQ: CHTP  ) , received yet another throttling after releasing mixed late-stage data on its neurogenic orthostatic hypotension drug, Northera. Chelsea's drug was denied approval by the FDA in March and has since been running additional long-term efficacy trials per the FDA's request. Data released this week showed that while Northera demonstrated a reduction in dizziness in patients within the first week, the effect beyond that wasn't statistically significant. Approval is beginning to look less and less likely now.

Anika Therapeutics' (NASDAQ: ANIK  ) problems this week were much more direct that just mixed late-stage data. Anika had appealed the FDA's decision to reject its osteoarthritis treatment, Monovisc, and found out this week that the FDA was going to uphold its decision to reject the drug. Monovisc has been approved for use in treating osteoarthritis pain in patients' knees in Canada and Europe, but it can't seem to get past the more stringent FDA. While not a crippling defeat, it nonetheless took the wind out of Anika's sails this week. 

Cancer-focused biotech Geron (NASDAQ: GERN  ) lost more than a fifth of its value this week after announcing it'll stop the development of GRN1005 for brain cancers and would instead turn its attention to imetelstat, a cancer drug that hasn't impressed in recent clinical trials. In addition, Geron also said it'll shelve 40% of its staff to reduce costs. Someone get the life support machine, because we're going to need it! 

Rounding out the week was the one biotech company I noted to keep your eyes on this week, Zogenix (NASDAQ: ZGNX  ) , which went before the FDA panel with its moderate-to-severe chronic pain management drug, Zohydro ER, and came out bloodied (and put egg on my face). Although trading was still halted as of this writing, the FDA panel recommended against approval by an 11-2 vote, with one member abstaining. Specifically, the panel worried about patient addiction. Needless to say, I'm not expecting a positive opening come Monday. 

A bad-news cure
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  • Report this Comment On December 08, 2012, at 12:59 PM, kthor wrote:

    Zohydro ER - no adverse effect on liver toxicity ...idk why not? other ones in the market as addicted as Zohydro ER but less adverse effect ... hopefully the FDA itself has more sense than the panel ..but unlikely LOL

  • Report this Comment On December 08, 2012, at 7:14 PM, esf123 wrote:

    Dear Sean:

    I had a lengthy argument in multiple posts specific to ZGNX. I expected this outcome; I felt the FDA would be more apt to approve Zohydro if Zogenix were to insert and antagonist in its core. Zohydro is another "me-too" pain drug and the system is having difficulty managing what is already approved and about to be approved. I also took the time to listen to the conference call. They are talking about antagonists, but are still waiting for March 1, 2013. I am unsure if executive officers are still in denial. The end result is positive for Americans. I am truly saddened by the individuals that might be affected by the FDA Advisory group’s decision, but they were ignorant to expect any other outcome. It proves even experts conduct inadequate due diligence, which is ludicrous. I would be very upset if I was an individual investor and placed into this investment by a so-called expert.

    Best Regards,

  • Report this Comment On December 09, 2012, at 3:55 PM, esf123 wrote:

    Dear Sean:

    One of the positives here is ZGNX shares are very tightly held; however, the psychology of the investment quality of the company’s shares moves from highly speculative, to off the charts speculative. As I stated in comments one year ago as pharma2u and FollowsGartman (SeekingAlpha), ZGNX should have restructured its entire workforce at that time. The company should have serviced only their valuable headache centers; other less profitable writers could have been served by a telephonic customer service entity. ZGNX is a textbook example of poor management. They have a very good conceptual product in Sumavel Dosepro, (except that injections can be painful) but their overall market is miniscule. The product itself has promotion value only, and they now have additional competition with nasal delivery systems that make a little more sense. The ZGNX sales force and contractors are selling to a niche within a niche, within a niche of a market. Management is unwilling to accept this reality. To be successful you have to be able to change, and change quickly in this environment. I do not believe that ZGNX was looking seriously at a core antagonist. Now Zogenix is at least three years to product approval, and the market will be smaller for ZGNX in three years. Moreover, I feel that they have a few weak links within their sales management team, this weakness extends from midlevel management upward within the organizational design. It is important for ZGNX to have a good rapport with their sales reps; to be coaches and mentors. I feel they are not perceived by others as a serious threat to the competition. I further feel that they are just plain limited in their skill-set (base on today’s Pharma environment) at their assigned position. Officers of the company have a different viewpoint; they have gone so far as to say (and I will summarize) that now we have shed their previous contracted sales force our own team has the skills to work GP’s more so than any other alternative. I am curious to know if these opinions turned out to be accurate; I would be very surprised if they were. I will say that they do have a quality sales force for the most part, but they are faced with limitations based on the product itself. To the ZGNX share price on Monday. I do not think the share price will drop much below $1.28. I think there will be accumulation if it reaches $1.28, but these huge entities that are now stuck need a way to exit. I do not see an exit opportunity coming anytime soon. To summarize, they key for ZGNX is to control the bleeding, and try and avoid going to the well again within the next year. This is only my opinion, but I have held multiple securities licenses in multiple countries, conducted a syndicated report on business, and I was a leading broker nationwide in the early eighties. I have put together public companies from scratch. I am now a student of the market, but I have been a student of the market for greater than thirty years. I do have great concern for both the investors and ZGNX employees, I sincerely hope that this situation has a better resolve than I have described.

    Best Regards,

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