A deep line-up of milestones could help retain gains the sector has been holding onto since 1Q12. In particular, investors would love to see further breakthroughs in difficult areas such as Alzheimer's disease and obesity.

Top of mind for almost every specialist investor are Phase III data in Alzheimer's disease that are due this quarter - even though none of these buysiders expect the data to be positive.

Bapineuzumab is a humanized mAb against beta amyloid from Johnson & Johnson and Pfizer Inc. that originated at Elan Corp. plc. Eli Lilly and Co.'s solanezumab (LY2062430) is an antibody that binds soluble beta amyloid.

"It's fair to say the expectations are not very high," said LSP-Life Sciences Partners' Joep Muijrers. "If something hits there, it could have a spillover effect to the rest of the sector, but that goes against what most people are expecting."

If bapineuzumab misses, International Biotechnology Trusts' David Pinniger expects Elan to fall to $9 or $10 per share. "But if this does work, it would be the biggest news on a biotech product for decades. It would be a $5-$10 billion product, with Elan getting 25% plus mid-single digit royalties," he said. "It could generate a lot of positive noise for the sector."

Arena Pharmaceuticals Inc. last week scored a long-awaited approval of its Belviq lorcaserin to treat obesity. The stock was up 220% going into the PDUFA date, after an FDA committee voted in favor of approval for the serotonin (5-HT2C) receptor agonist. Last week, Arena shares added only 1%.

Investors took the news as a good sign for Qnexa phentermine/topiramate from Vivus Inc., sending the shares up 8% last week.

"We're pretty squarely in the camp for Vivus," said Behzad Aghazadeh of venBio. Compared with Arena, "it feels like there's been more dialog with FDA, and it has best-in-class efficacy."

In April, FDA delayed the Qnexa PDUFA date by three months to July 17 to review the company's updated REMS. The candidate had a positive FDA committee vote in February.

Big caps make good

Among the big cap biotechs with milestones this half, investors highlighted Gilead Sciences Inc., Biogen Idec Inc. and Celgene Corp.

In 4Q, Gilead is expecting additional data on an HCV combination that could help justify its $11.2 billion acquisition of Pharmasset Inc. in January.

In April, Gilead added more than $4 billion to its market cap after reporting positive Phase IIa data for Pharmasset's nucleotide analog HCV NS5B polymerase inhibitor GS-7977 paired with the selective HCV NS5A protein inhibitor daclatasvir from Bristol-Myers Squibb Co. While another study for this combo is slated to report in 4Q12, the companies are expected to part ways and pursue their own cocktails (see BioCentury, April 23).

Gilead also has an Aug. 27 PDUFA date for its Quad HIV treatment, which combines elvitegravir, cobicistat, emtricitabine and tenofovir.

For Biogen Idec, a long-anticipated approval of BG-12 for multiple sclerosis (MS) could come by year end, based on a February submission and a standard 10-month review at FDA. The oral dimethyl fumarate that activates the nuclear factor (erythroid-derived 2)-like 2 (NFE2L2; NRF2) pathway is under review in the U.S. and in Europe.

Next half, Biogen Idec also will have Phase III data for dexpramipexole to treat amyotrophic lateral sclerosis (ALS), as well as for two long-acting hemophilia products (see "Revving the Engine," A20).

"We have had a lot of positive data from Biogen Idec for BG-12," noted Stefan Kraft of Medical Strategy. "It's already appreciated relatively well by the markets."

Celgene, meanwhile, shed more than 17% of its value last quarter on the withdrawal of a European application to expand the label of multiple myeloma (MM) drug Revlimid lenalidomide. But the company has several milestones through year end that might help it regain favor, according to buysiders.

This half, Celgene expects data from a Phase III trial of Revlimid to treat relapsed and refractory mantle cell lymphoma (MCL). Other Phase III milestones include pomalidomide to treat myelofibrosis by year end; Abraxane nab-paclitaxel in treatment-naïve metastatic melanoma early this quarter and in advanced metastatic pancreatic cancer late this year or early next; and apremilast to treat psoriatic arthritis this summer, and to treat psoriasis late this year or early next.

Abraxane nab-paclitaxel also has an Oct. 12 PDUFA date for first-line treatment of advance non-small cell lung cancer (NSCLC).

Minding the middle

Among the larger mid-caps, buysiders had about a dozen picks, including known or rumored acquisition targets Amylin Pharmaceuticals Inc., Human Genome Sciences Inc. and BioMarin Pharmaceutical Inc. (see "Magic in Mid-Caps," A29).

Bristol-Myers proved some investors correct when it announced late Friday an agreement to acquire Amylin for $31 per share in cash, which will come out to an aggregate price of about $5.3 billion after the two-step deal, which also involves AstraZeneca plc.

Investors anticipate a deal for HGS by year end. If this doesn't come through, one buysider expects its share price would fall below $10.

HGS finished last quarter at $13.13.

Onyx Pharmaceuticals Inc. gained more than 40% in June on the vote by FDA's Oncologic Drugs Advisory Committee in favor of Kyprolis carfilzomib to treat relapsed and refractory multiple myeloma. The July 27 PDUFA date could be an occasion for another leg up. In addition, this half it will have Phase III data for Nexavar sorafenib to treat metastatic thyroid cancer.

Prostate cancer favorite Medivation Inc. could also see a PDUFA date this year for enzalutamide (formerly MDV3100) to treat castration-resistant prostate cancer (CRPC) in patients previously treated with docetaxel.

It submitted an NDA to FDA on May 22 and requested Priority Review. If granted, the PDUFA date would be in November. The compound has Fast Track designation.

"The data have been very good," said Kraft. "The probability that it's approved in metastatic prostate cancer is relatively high."

He added enzalutamide could have an advantage over J&J's Zytiga abiraterone, because Zytiga is given with steroids, and trials suggest enzalutamide could be used without them.

"We see the product reaching peak sales of about $3 billion," said Kraft. "If it could reach that level or higher, then a higher valuation would be achievable. There's not much room left, but there's still some potential."

Robert Hodgson of Lenus Capital Partners cautioned that the prostate cancer frenzy might be overblown, because he thinks watchful waiting will continue to be the best option for many elderly patients with slow-moving disease.

Another PDUFA date is coming in September for linaclotide from Forest Laboratories Inc. and partner Ironwood Pharmaceuticals Inc. to treat chronic constipation and irritable bowel syndrome with constipation (IBS-C). The original June date was extended by three months.

Muijrers said, "Linaclotide is one of the big ones for the industry; this could be a big asset."

Two more PDUFA dates are teed up for Amarin Corp. plc and United Therapeutics Corp. The former has a July 26 PDUFA date for AMR101 to treat hypertriglyceridemia, while the latter has an Oct. 27 PDUFA date for UT-15C oral treprostinil to treat pulmonary arterial hypertension (PAH).

Amarin shares have more than doubled this year on IP news, and the Street last week added 11% on positive remarks from the U.S. Patent and Trademark Office about three patents for AMR101.

Investor Muijrers thinks AMR101 has "a pretty fair chance" of FDA approval and that the biotech is taking the right steps on IP.

The ethyl ester of eicosapentaenoic acid (ethyl-EPA) is a purified omega-3 fatty acid derived from fish oil. Omega-3 products are available as nutritional supplements but are not concentrated to a comparable degree.

"The office actions announced are another big step forward, assuming they result in patent approvals. Amarin has really lived up to its promise to make every possible effort to strengthen the IP estate around AMR101, and those efforts seem to be paying off significantly," Muijrers said.

Pinniger was more skeptical. He likes AMR101's data but thinks the "barriers to entry are really, really low" for potential competitors.

Kraft noted that an approval for tofacitinib, an oral pan-Janus kinase (JAK) inhibitor from Pfizer, could be good news for biotechs with JAK inhibitors, such as Incyte Corp. and small cap YM BioSciences Inc.

Incyte's Jakafi ruxolitinib was approved in November to treat myelofibrosis. The biotech said the oral JAK-1 and JAK-2 inhibitor was the first of its class approved. YM's CYT387 hits the same targets and is in Phase II testing for the same indication.

Tofacitinib is under review for rheumatoid arthritis (RA), with an August PDUFA date. The compound had a favorable FDA committee vote in May.

Also in the RA space, AstraZeneca will report the first Phase III data for a spleen tyrosine kinase (SYK) inhibitor, fostamatinib (R788), in 1H13. The compound comes from Rigel Pharmaceuticals Inc.

"It will show how SYK inhibitors compare to JAK inhibitors and whether they potentially have fewer side effects," Kraft noted.

Among the European mid-caps, ThromboGenics N.V. has a July 26 FDA panel meeting for its ocriplasmin intravitreal injection to treat symptomatic vitreomacular adhesion.

"This will no doubt be closely watched here in the Benelux," said Muijrers. "They struck a very good deal a few months ago. That company has really managed to develop that asset in that indication in a very nice way."

In March, ThromboGenics partnered ocriplasmin with Novartis AG. It received €75 million ($98.4 million) up front and is eligible for €90 million ($118 million) in near-term milestones, plus royalties. ThromboGenics said additional milestone payments would bring the total upfront and milestone value to up to €375 million ($491.8 million).

A pair of lipid-lowering agents have PDUFA dates around year end. Dec. 29 is the PDUFA date for small cap Aegerion Pharmaceuticals Inc.'s lomitapide to treat homozygous familial hypercholesterolemia (hoFH). The compound is a small molecule microsomal triglyceride transfer protein (MTP) inhibitor.

Mid-cap Isis Pharmaceuticals Inc. has a Jan. 29 decision date for its Kynamro mipomersen to treat hoFH. The second-generation antisense inhibitor of apolipoprotein B-100 (APOB-100) mRNA is partnered with Genzyme Corp., a unit of Sanofi (Euronext:SAN; NYSE:SNY).

Small cap sentiment

Among small caps, investors are awaiting cancer and HCV milestones. They also see some bargains among European biotechs.

In 4Q, Clovis Oncology Inc. and partner Clavis Pharma ASA will have top-line Phase II data on overall survival for CO-101 to treat newly diagnosed, advanced pancreatic cancer. The compound is a lipid-conjugated form of gemcitabine which, unlike gemcitabine itself, does not depend on the transporter protein ENT1 (solute carrier family 29 nucleoside transporter member 1; SLC29A1) to enter cells.

"We don't have anything other than gemcitabine in this indication," Aghazadeh noted. "The potential market is enormous compared to the current valuation."

Also in advanced pancreatic cancer, Threshold Pharmaceuticals Inc. will have Phase IIb data on OS this half for TH-302. It reported positive progression-free survival (PFS) data in February and March.

The compound is a hypoxia-activated cytotoxic 2-nitroimidazole prodrug of the DNA alkylator bromoisophosphoramide mustard. It is partnered with Merck KGaA.

Ziopharm Oncology Inc. will have Phase III data for ZIO-201 to treat advanced sarcomas, and Wilex AG will have Phase III data for Rencarex girentuximab to treat clear cell renal cell carcinoma (RCC). The former is a stabilized formulation of the active metabolite of ifosfamide, and the latter is a chimeric mAb against carbonic anhydrase IX (CAIX).

HCV continues to play out as a theme for investors, but not because of data.

"We are big believers in Idenix and to some extent Achillion for IP reasons. I wouldn't be shocked to see further business development activity," said Aghazadeh.

Bailard's Selena Chaisson also said she thinks acquisitions or partnerships will continue.

Muijrers added Medivir AB to the HCV biotech roster. "We haven't given up on protease inhibition. At the beginning of the year, a lot of data was coming out on an NS5A with a nuc, so quite a few people may have given up on second-generation protease inhibitors."

Medivir and partner Johnson & Johnson will report top-line data from three Phase III trials in 4Q12 for TMC435, which is an HCV NS3/4A protease inhibitor.

Muijrers also had a handful of small cap European picks.

He noted antibody play MorphoSys AG will have Phase Ib/IIa data this quarter for its most advanced proprietary program, MOR103 to treat RA.

He also likes Galapagos N.V., which granted Abbott Laboratories an option in February to develop GLPG0634, a JAK-1 inhibitor in Phase II testing for RA.

Galapagos got $150 million up front. If Phase II RA studies meet agreed-upon criteria, Abbott will license the program for a further $200 million. Galapagos, which retains co-promotion rights in Benelux, is eligible for up to $1 billion in additional milestones, plus tiered, double-digit royalties. Galapagos expects to deliver the Phase II data package to Abbott in 2014.

Evotec AG was Muijrers' final European small cap pick. He noted the company's shares have eroded along with broader European sentiment. The biotech focuses on discovery and development work almost exclusively for partners, so the risk isn't quite as binary as it is for a typical small cap, he said.

Its most advanced project is DiaPep277, which is in Phase III testing to treat Type I diabetes. Andromeda Biotech Ltd. gained rights to DiaPep277 in 2007 from DeveloGen AG, which was acquired by Evotec in 2010. Andromeda is a subsidiary of Clal Biotechnology Industries Ltd.

"Small- and mid-caps are so cheap in Europe, for us this creates opportunity," he said.

COMPANIES AND INSTITUTIONS MENTIONED

Abbott Laboratories (NYSE:ABT), Abbott Park, Ill.

Achillion Pharmaceuticals Inc. (NASDAQ:ACHN), New Haven, Conn.

Aegerion Pharmaceuticals Inc. (NASDAQ:AEGR), Cambridge, Mass.

Amarin Corp. plc (NASDAQ:AMRN), Dublin, Ireland

Amylin Pharmaceuticals Inc. (NASDAQ:AMLN), San Diego, Calif.

Arena Pharmaceuticals Inc. (NASDAQ:ARNA), San Diego, Calif.

AstraZeneca plc (LSE:AZN; NYSE:AZN), London, U.K.

Biogen Idec Inc. (NASDAQ:BIIB), Weston, Mass.

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Novato, Calif.

Bristol-Myers Squibb Co. (NYSE:BMY), New York, N.Y.

Celgene Corp. (NASDAQ:CELG), Summit, N.J.

Clal Biotechnology Industries Ltd. (Tel Aviv:CBI), Tel Aviv, Israel

Clavis Pharma ASA (OSE:CLAVIS), Oslo, Norway

Clovis Oncology Inc. (NASDAQ:CLVS), Boulder, Colo.

Elan Corp. plc (NYSE:ELN), Dublin, Ireland

Eli Lilly and Co. (NYSE:LLY), Indianapolis, Ind.

Evotec AG (Xetra:EVT), Hamburg, Germany

Forest Laboratories Inc. (NYSE:FRX), New York, N.Y.

Galapagos N.V. (Euronext:GLPG; Pink:GLPYY), Mechelen, Belgium

Genzyme Corp., Cambridge, Mass.

Gilead Sciences Inc. (NASDAQ:GILD), Foster City, Calif.

Human Genome Sciences Inc. (NASDAQ:HGSI), Rockville, Md.

Incyte Corp. (NASDAQ:INCY), Wilmington, Del.

Idenix Pharmaceuticals Inc. (NASDAQ:IDIX), Cambridge, Mass.

Ironwood Pharmaceuticals Inc. (NASDAQ:IRWD), Cambridge, Mass.

Isis Pharmaceuticals Inc. (NASDAQ:ISIS), Carlsbad, Calif.

Johnson & Johnson (NYSE:JNJ), New Brunswick, N.J.

Medivation Inc. (NASDAQ:MDVN), San Francisco, Calif.

Medivir AB (SSE:MVIR B), Huddinge, Sweden

Merck KGaA (Xetra:MRK), Darmstadt, Germany

MorphoSys AG (Xetra:MOR; Pink:MPSYF), Martinsried, Germany

Novartis AG (NYSE:NVS; SIX:NOVN), Basel, Switzerland

Onyx Pharmaceuticals Inc. (NASDAQ:ONXX), South San Francisco, Calif.

Pfizer Inc. (NYSE:PFE), New York, N.Y.

Rigel Pharmaceuticals Inc. (NASDAQ:RIGL), South San Francisco, Calif.

Sanofi (Euronext:SAN; NYSE:SNY), Paris, France

Threshold Pharmaceuticals Inc. (NASDAQ:THLD), South San Francisco, Calif.

ThromboGenics N.V. (Euronext:THR), Leuven, Belgium

United Therapeutics Corp. (NASDAQ:UTHR), Silver Spring, Md.

Vivus Inc. (NASDAQ:VVUS), Mountain View, Calif.

Wilex AG (Xetra:WL6), Munich, Germany

YM BioSciences Inc. (TSX:YM; NYSE-M:YMI), Mississauga, Ontario

Ziopharm Oncology Inc. (NASDAQ:ZIOP), New York, N.Y.