Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Let's take a closer look at four companies -- Geron (GERN 3.12%), Zogenix (ZGNX), Synta Pharmaceuticals (NASDAQ: SNTA), and Pfizer (PFE -0.33%) -- which could all loom large in health care headlines this morning.
Geron plunges after the FDA halts trials of imetelstat
Our top story this morning is Geron, which is down 65% after the FDA placed a full clinical hold on its IND (investigational new drug) application for its lead cancer drug imetelstat, due to concerns regarding liver damage. The hold will affect its mid-stage thrombocythemia, polycythemia vera, and multiple myeloma studies, and could delay its planned phase 2 trial for its closely watched myelofibrosis indication.
Investors had hoped that imetelstat, which previously failed as a treatment for breast cancer and non-small cell lung cancer (NSCLC), could be approved as a treatment for various blood disorders. Imetelstat belongs to an experimental class of drugs known as telomerase inhibitors, which inhibit the production of the enzyme telomerase. Telomerase enables rapid cell division and therefore plays a possible role in the proliferation of cancer cells. However, no telomerase inhibitor has ever been approved.
Geron's stock soared nearly 200% over the past 12 months, thanks to positive data from a Mayo Clinic study of 22 patients testing imetelstat as a treatment for myelofibrosis. Unfortunately, problems started surfacing in January, when Geron announced that 20 out of 79 of patients enrolled in a Mayo Clinic trial for myeloid malignancies had dropped out and that enrollment in the trial had ceased.
Now that several key trials of imetelstat have been halted, Geron is in a precarious situation. It has no marketed products, and finished last quarter with $66.2 million in cash and equivalents. Geron's negative operating cash flow of $40.3 million over the past 12 months also indicates that the company might need to offer additional shares to generate more cash to fund future trials.
Purdue Pharma's new drug could force Zogenix's Zohydro off the market
Zogenix, the maker of the controversial painkiller Zohydro ER, is down about 14% as of this writing, after a Bloomberg report stated that Purdue Pharma plans to apply for a regulatory approval for a tamper-resistant rival painkiller to force Zohydro off the market.
Zohydro ER, an extended release formulation of the narcotic painkiller hydrocodone, is notably five to ten times more potent than vicodin, which is a milder mix of hydrocodone and acetaminophen. Zohydro is not tamper resistant, which means that it can be crushed or dissolved for recreational drug use. It is currently classified as a Schedule II controlled substance.
That potential for abuse has caused 28 state attorneys general and two U.S. senators to ask the FDA to reconsider Zohydro's approval. Zogenix is working on a tamper-resistant version of Zohydro, but it won't be available until 2016 at the earliest, according to the company. Analysts had originally hoped that Zohydro would generate $300 million in annual sales.
Purdue will ask the FDA for a priority review of its tamper-resistant painkiller hydrocodone bitartrate, which recently met its goal of reducing chronic lower-back pain in a late-stage trial.
Bob Rappaport, the FDA's director of pain medications, notably stated on October 25 that "serious consideration" would be given to assuring "non-abuse formulations are removed from the market" -- indicating that the FDA could pull Zohydro off the market if Purdue's drug is found to be a suitable alternative.
Synta gets slammed by an analyst downgrade
Meanwhile, Synta, which just reported its fourth quarter and full year earnings yesterday, is down 17% as of this writing after BMO Capital analyst Jim Birchenough downgraded the stock from Market Perform to Underperform and reduced his price target to $1 -- indicating a huge drop from its closing price of $5.28 yesterday.
Birchenough stated that the company's limited cash (its year-end cash and equivalents fell 9% year-over-year to $91.5 million), the recent departure of its CEO, and the questionable future of its lead drug candidate ganetespib, a potential treatment for non-small cell lung cancer, breast cancer, ovarian cancer, and acute myeloid leukemia. In particular, he noted that the extension of the timelines of GALAXY-2, its crucial phase 3 trial for NSCLC, have been pushed back to 2016 and beyond the "year-end limits of current cash."
Promising data regarding Pfizer's Prevnar 13
Last but not least, Pfizer just presented positive data regarding Prevnar 13, a vaccine against the disease caused by the bacteria Streptococcus pneumoniae, also known as pneumococcus, as a treatment for adults 65 years of age and older.
The CAPiTA trial, which tested the vaccine on 85,000 elderly patients, could expand Prevnar 13's market to an older group, since the FDA originally approved the vaccine in 2010 for infants, children (6 to 17 years of age), and adults over the age of 50. Prevnar 13 is one of three PCVs (pneumococcal conjugate vaccines) available on the market, along with GlaxoSmithKline's Synflorix and Pfizer's original Prevnar.
The Prevnar family of vaccines is a major source of revenue for Pfizer, generating $3.97 billion in sales in fiscal 2013 and accounting for 8% of the company's top line. However, Prevnar sales fell 3% year-over-year in 2013, which means that expanding the Prevnar 13 indication to adults over the age of 65 could help Pfizer reverse those losses in 2014.
