12:00 AM
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Oct 07, 2013
 |  BioCentury  |  Finance

4Q Financial Markets Preview: Totally baked

Some 4Q13 milestones priced for success: biotech investors see downside risk

The fourth quarter will see buysiders focused on news in cancer and HCV from big clinical meetings and expected PDUFA decisions, as well as several large cap commercial launches. But investors warned some milestones are priced for perfection, raising potential downside risk.

In cancer, major conferences like the American Society of Hematology (ASH) meeting and the San Antonio Breast Cancer Symposium - both in December - will provide milestones of interest (see "4Q13 Milestones," A11).

Investors are hoping to see detailed data from the Phase III FIRST (MM-020) trial of Revlimid lenalidomide from Celgene Corp. to treat newly diagnosed multiple myeloma (MM). In July, the company reported top-line data that showed continuous treatment with oral Revlimid plus low-dose dexamethasone until disease progression met the primary endpoint of progression-free survival (PFS) vs. a combination of melphalan, prednisone and thalidomide.

Joep Muijrers of LSP-Life Sciences Partners said he's looking forward to additional data for Arzerra ofatumumab in first-line chronic lymphocytic leukemia (CLL) at ASH given that last month FDAgranted breakthrough therapy designation for Arzerra in the indication.

In May, Genmab A/S and partner GlaxoSmithKline plc reported top-line data from the Phase III COMPLEMENT-1 trial in first-line CLL that showed Arzerra plus chlorambucil met the primary endpoint with a 9.3-month improvement in PFS vs. chlorambucil alone (22.4 vs. 13.1 months, p<0.001).

On Oct. 4, the partners submitted a regulatory application to EMA to expand Arzerra's label to include first-line CLL. The human mAb against CD20 is marketed in the U.S. and Europe to treat refractory CLL.

In prostate cancer, Medivation Inc. and partner Astellas Pharma Inc. are expected to report interim data this quarter from the placebo-controlled Phase III PREVAIL trial comparing once-daily Xtandi enzalutamide plus standard of care vs. SOC alone in 1,717 patients who have failed androgen deprivation therapy but not had chemo.

"Expectations are considerable, so it is going to be interesting how the stock reacts. But I think the clinical outcome is going to be a positive one," Janus Capital's Ethan Lovell told BioCentury.

Andy Smith of Mann Bioinvest said he would be looking for any news on cancer immunotherapies, in particular programs targeting PD-1 receptor (PDCD1; PD-1; CD279).

The most advanced such program is nivolumab, a human mAb from Bristol-Myers Squibb Co. and Ono Pharmaceutical Co. Ltd. It is in Phase III testing to treat melanoma, non-small cell lung cancer (NSCLC) and renal cancer.

Programs in Phase II development that target PD-1 receptor or its ligand include CureTech Ltd.'s CT-011, Merck & Co. Inc.'s lambrolizumab and Roche's RG7446.

Downside risks?

Multiple investors noted a few examples of 4Q milestones where perfect clinical or regulatory outcomes are already baked into valuations. Money managers were viewing these as primarily downside risks.

One such upcoming milestone is for Gilead Sciences Inc.'s sofosbuvir, a single isomer form of a nucleotide analog HCV NS5B polymerase inhibitor.

On Oct. 25, FDA's Antiviral Drugs Advisory Committee will discuss an NDA for sofosbuvir to treat chronic HCV infection, including in combination with ribavirin as an all-oral therapy to treat HCV genotypes 2 and 3.

The PDUFA date is Dec. 8.

"Sofosbuvir is the one where I see the most potential for downside risk," ClearBridge's Marshall Gordon told BioCentury. "HCV better be everything people dream it will be to sustain that valuation."

"There is real downside risk there," said Andrew Bogan of Bogan Associates. "I wouldn't expect it to be anything but perfect - but if it is, the stock will take a little bit of a ding."

Gilead closed the quarter valued at $96.2 billion.

Investors also said they are awaiting the next sets of data for various all-oral HCV combinations that are expected to be presented in November at the American Association for the Study of Liver Diseases (AASLD) meeting.

Expectations also...

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