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12:00 AM
Oct 03, 2011
 |  BioCentury  |  Finance

Value verification

Biotech specialists see a handful of data milestones driving returns in 4Q11

Buysiders are looking for strong data from a handful of high-profile compounds to drive their returns this quarter and to improve their 2011 performance.

Infectious disease company Pharmasset Inc. provided a head start on the last day of 3Q when the American Association for the Study of Liver Diseases (AASLD) published an abstract for Phase IIb data from the company's ELECTRON study for PSI-7977 to treat HCV

Investors will be watching for the presentation of the detailed data at the conference in San Francisco on Nov. 4-8. On the abstract alone, Pharmasset added 7% on Friday (see B23).

In September, the company got a 10% bump when it reported additional positive Phase IIb data from patients infected with genotype 1 in the PROTON study. Pharmasset had already reported positive data from that study for patients with genotype 2 or 3.

Last quarter, Pharmasset started the QUANTUM trial testing PSI-7977 in combination with PSI-938, which the company noted was the first interferon-free, all-nucleotide study with a sustained virologic response (SVR) endpoint.

Pharmasset was one of the only big winners in 3Q, gaining 47% on top of steep gains in the first half. "Pharmasset has got a lot of momentum," said David Pinniger of International Biotechnology Trust. "It's positioning itself to steal Vertex's lunch much more quickly than people realize."

Sven Borho of OrbiMed Advisors agreed. "Pharmasset seems to be unstoppable," he said.

He's also was cautious on big cap Vertex Pharmaceuticals Inc., even as he noted the company's launch of Incivek telaprevir has beaten expectations.

"The Vertex launch has been a success. The stock has traded up. But at some point, Pharmasset and other second-generation HCV companies, if they continue to develop really good data, will have superior products," Borho said.

He expects those next-generation products could start competing with Vertex around 2014 or 2015, which he likens to a patent cliff. "Then it becomes a show-me stock," Borho said.

"AASLD is going to be very interesting," he added. "Everybody's trying to look at what can be the next Pharmasset."

Infectious enthusiasm

Pinniger is also looking for Phase I data this quarter for a next-generation HCV protease inhibitor from Achillion Pharmaceuticals Inc. In hepatitis C, investors consider early trials as highly predictive of later results.

Pinniger argued that Gilead Sciences Inc. should buy Achillion to catch up in HCV. He's skeptical that the long-anticipated Quad regimen for HIV will provide a sufficient revenue boost to stave off losses to patent expiries.

"I'm not yet 100% convinced that Quad is enough. The recent Phase III datasets suggest it's possible to make the argument that it's a superior product to Atripla, but is it meaningfully so? The challenge will be determining the pricing strategy and getting physicians and patients to switch," he said.

Last quarter, one Phase III trial for the fixed-dose Quad regimen containing elvitegravir, cobicistat and Truvada emtricitabine/tenofovir showed non-inferiority to Atripla emtricitabine/tenofovir/efavirenz, while another demonstrated non-inferiority to ritonavir-boosted Reyataz atazanavir and Truvada. Gilead expects to submit an NDA for the Quad regimen this quarter.

Gilead markets Truvada and co-markets Atripla with Bristol-Myers Squibb Co. Bristol-Myers also markets Reyataz.

Several investors also noted Gilead's high level of sales into U.S. government agencies, which makes it particularly vulnerable to budget cuts.

Cancer and neurology company Medivation Inc. also will be in play for its interim Phase III data for MDV3100 to treat prostate cancer. After the Phase III failures of Dimebon in Alzheimer's disease (AD) and Huntington's disease, investors are pinning the company's $592.7 millionvaluation on MDV3100.

"The interim data should be out any day," noted Kurt von Emster of venBio. "That will position it with Zytiga, which has a $200 million plus run rate already. It's a very large and well-established marketplace."

Johnson & Johnson markets Zytiga abiraterone acetate, which it acquired when it bought Cougar Biotechnology Inc. for about $1 billion in cash in 2009. In 2Q11, J&J said Zytiga accounted for just under 1% of its $6.2 billion in pharmaceutical sales.

"Medivation is becoming a momentum stock," said Borho. "The consensus is probably more that the data are good."

Big cap bellwethers

Expectations are even higher for Biogen Idec Inc.'s BG-12 to treat MS. The company reported positive Phase III data in April, and this quarter Biogen will present data from a second Phase III study, plus detailed results of the earlier study. The latter will be presented at the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) meeting Oct. 19-22 in Amsterdam.

"If BG-12 holds up, that's obviously going to have a big impact on Biogen Idec," said Joep Muijrers of LSP.

"The consensus there is that it's a slam dunk," said Borho. "Biogen Idec is the only major biotech left with real new product momentum."

Celgene Corp. remains a perennial favorite among buysiders.

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