When the FDA approved Sarepta Therapeutics' (NASDAQ:SRPT) controversial Duchenne muscular dystrophy drug, Exondys 51, it caused shares in the company to surge 74% -- a market cap of $2.4 billion may fairly value it now. If so, then investors considering new positions in Sarepta Therapeutics might want to look at other ideas, including these three clinical-stage biotech stocks.
No. 1: Overcoming headwinds
Setbacks at Portola Pharmaceuticals (NASDAQ:PTLA) this year have caused its shares to sink about 50% from their peak above $50 last year, but headwinds could shift to tailwinds soon, and if they do, shares could be about to head higher.
This past spring, Portola Pharmaceuticals reported mixed results for its factor Xa anticoagulant, betrixaban, which was being studied head-to-head against Lovenox for use in acutely ill patients who have recently been discharged from hospitals.
Unfortunately, a complex trial design resulted in three cohorts of patients in which results were to be viewed sequentially, and betrixaban missed the market in the first cohort. Although it missed its mark in this subset of patients, it was effective in both cohort 2 and cohort 3, and across the entire study, there was a 24% relative risk reduction for patients on betrixaban versus Lovenox, with a p-value of 0.006.
There's no telling how the FDA will view these mixed results during a review, but Portola Pharmaceuticals still plans to file for betrixaban's approval soon, so there could be additional clarity on the subject next year.
Portola Pharmaceuticals' second setback came in August, when the FDA delayed an approval decision on AndexXa, a reversal agent for the multibillion-dollar factor Xa anticoagulants Xarelto and Eliquis. AndexXa's efficacy and safety in trials appears solid, but FDA questions regarding AndexXa's manufacturing and the use of it to reverse other factor Xa drugs prompted the rejection.
In both instances, Portola Pharmaceuticals' stumbles appear to me to be more an indictment of management's failure to execute than a failure of these drugs, both of which have 9-figure-plus potential. If I'm correct, both of these drugs could net FDA decisions in 2017 that could cause share prices to spike.
No. 2: Improving outcomes
At Cougar Biotech, Alan Auerbach developed Zytiga, a multibillion-dollar prostate cancer drug that he sold to Johnson & Johnson for $1 billion in 2009. Today, Auerbach is trying to capture lightening in a bottle a second time with neratinib, a breast cancer therapy he's working on at his new company, Puma Biotechnology (NASDAQ:PBYI)
Puma Biotechnology submitted an application for neratinib's approval earlier this year, and that application was accepted by the regulator for review earlier today. If approved, neratinib could become a staple used for the extended adjuvant treatment of patients with early-stage HER2+ breast cancer who have been previously treated with Herceptin to delay the recurrence of their cancer.
In trials, neratinib patients saw a 33% reduction of risk of invasive disease recurrence or death versus placebo, and the two-year invasive disease-free survival rate for neratinib patients was 93.9% compared to 91.6% for placebo patients.
While every advantage is welcome in this important indication, there's no guarantee the FDA will approve neratinib, because there are some concerns over the percentage risk of severe diarrhea. The disclosure of the diarrhea risk caused a significant sell-off in Puma Biotechnology shares in 2015; however, studies are ongoing that include the use of anti-diarrhea medicine that could manage that risk.
Although 39.9% of patients reported grade 3 or higher diarrhea while receiving neratinib in phase 3 studies, interim results from a phase 2 study show that using the anti-diarrhea drug loperamide reduced the rate of grade 3 or higher diarrhea in neratinib patients to between 13% and 18.5%.
If the FDA determines that anti-diarrhea prophylaxis overcomes any objections regarding this drug's safety, then Puma Biotechnology could have a blockbuster drug on its hands. In addition to the potential use in the adjuvant setting, neratinib is also being evaluated for earlier use in breast cancer. If those trials pan out, Puma Biotechnology could be an attractive pure-play cancer stock that a suitor may want to cozy up to.
No. 3. Big decisions on deck
Tesaro Inc. (NASDAQ:TSRO) recently reported compelling results from a registration-ready study of niraparib, a PARP inhibitor being studied as a treatment to delay disease progression in ovarian cancer in previously treated patients.
In trials, niraparib statistically and significantly outperformed the control arm of the study, delivering progression-free survival of 21 months in patients with germline BRCA mutations versus 5.5 months for the control arm. PFS was 9.3 months in non-germline BRCA patients, which was also significantly better than the 3.9 months for the control arm.
Tesaro expects to complete a rolling filing for FDA approval in Q4 and if so, then a quick review by the FDA could get this drug on the market in the first half of 2017. Additional trials that could expand niraparib's use to earlier in ovarian cancer treatment are ongoing.
At the onset, Tesaro estimates niraparib's addressable patient population is 10,000 people in the U.S. and while management hasn't said what it will charge for the drug, a competing PARP-inhibitor, Lynparza, costs $13,000 per month and generated almost $100 million in sales during the first six months of 2016.
In January, Tesaro also expects a FDA decision on an IV formulation of Varubi, its chemotherapy induced nausea and vomiting (CINV) drug. An oral formulation of Varubi is already on the market, and it's quickly becoming the most widely used oral drug in the NK-1 class of CINV medicines. An approval of the IV formulation would significantly increase Varubi's addressable market because oral NK-1 drugs only represent about 20% of the NK-1 market. Although it's anyone's guess what peak sales could be for Varubi, the NK-1 drug Emend generates more than a half billion dollars in sales annually, so that could be a good proxy.
Tying it together
Sarepta Therapeutics' approval of Exondys 51 is undeniably a win, but it will be a while before investors get clarity into the drug's commercial progress, and that could keep a lid on the company's share price. In that case, investors considering a new position in Sarepta Therapeutics may find upcoming FDA catalysts for Portola Pharmaceuticals, Puma Biotechnology, and Tesaro Inc. make them more attractive.
Todd Campbell owns shares of Portola Pharmaceuticals. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this.
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