Which Biotech Blow-Up Is a Bad-News Buy?

On this edition of Market Checkup, Motley Fool health-care analysts David Williamson and Michael Douglass take a look at two of the weeks biggest biotech losers, and why one of them could make an interesting buy today.

Shares of Exelixis (NASDAQ: EXEL  ) were hit hard -- down by over a third after announcing that an independent reviewer determined its prostate cancer trial for cabozantinib should continue. While it seems counterintuitive that the market would react badly to that, the expectation was that efficacy would be so high that the trial would be stopped early because of overwhelming success. While the sell-off was massive when that didn't happen, this drug has already been approved to treat thyroid cancer, and the trial in prostate cancer is continuing. David sees this as perhaps an interesting time for investors to get in.

Meanwhile, Insmed's (NASDAQ: INSM  ) prospects may not be as rosy. The company released phase 2 data for its non-TB mycobacterial lung infection drug Arikayce, and the data was mixed at best. David talks investors through the phase 2 data, discusses why he isn't confident that it will pass phase 3, and mentions that even though is has passed phase 3 in its trials for cystic fibrosis lung infections, there are questions around the strength of those results as well.

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  • Report this Comment On March 30, 2014, at 6:50 PM, jsblvbjb wrote:

    Guys, you should read this investor's recent take on the phase 2 NTM data from Insmed recently posted on the Yahoo! MB. While, IMO Insmed's not going for a phase 3 trial with this data, rather something better!

    Breakthrough Therapy designation now possible

    FDA guidance explaining why Insmed can now apply for Breakthrough Therapy designation -

    [ What are the differences between the breakthrough therapy designation and the fast track designation?

    Although breakthrough therapy and fast track designation programs have similarities, as they both are intended to expedite the development and review of drugs for serious or life-threatening conditions, there are differences in what needs to be demonstrated to qualify for the programs.

    A breakthrough therapy program is for a drug that treats a serious or life-threatening condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement on a clinically significant endpoint(s) over available therapies.

    In contrast, a fast track program is for a drug that treats a serious or life-threatening condition, and nonclinical or clinical data demonstrate the potential to address unmet medical need ]

    So ....... the primary endpoint we were all hoping would be met was a greater number of trial participants in the Arikace arm recording a significant decrease in bacterial concentration - as evidenced by the culture analysis.

    That result may have been sufficient to support a fast track approval - on the basis that evidence that Arikace decreases bacterial concentration (not of itself clinically significant) is reasonably predictive of eventual conversion to culture-negative (clinically significant).

    There was no realistic expectation of early culture conversion in this patient population - therefore that outcome was included only as a secondary endpoint.

    However 25% of the trial participants on Arikace did in fact convert to culture-negative with just twelve weeks of therapy.

    Unexpectedly hitting an endpoint which IS clinically significant promoted Arikace from a potential fast track approval to a potential Breakthrough Therapy approval.

  • Report this Comment On March 31, 2014, at 8:29 PM, jad9000 wrote:

    What you also fail to disclose is that the NTM trial was at the behest of the FDA who has been involved since day one. The unmet primary endpoint was one point on a seven point scale. It was an extremely aggressive endpoint for a clinical trial population with intractable NTM - the worst of the worst. There was improvement in this population but not a 14% improvement. However, the secondary endpoint exceeded any expectation by a massive amount. And, in fact, the secondary endpoint is far the more important of the two. When the FDA issues Breakthrough Therapy designation in a couple of months or less I look forward to your apology for poor analysis. BTW, the sp was up 11% today.

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