March Madness For Biotech Traders
We all know what March symbolizes for die-hard college hoop
fans, and I include myself in this fanatical group. However, March is also the
beginning of a hectic three-month stretch that offers great opportunity for
biotech traders. For the next three months, many biotech companies will
experience sentinel events surrounding their potential new drugs, events that
usually translate into acute stock price moves.Â
These events will mainly
consist of the release of phase III clinical data at major medical meetings over
the next several months and upcoming key decisions by the FDA. Of these, the
decisions on new drug marketability made by the FDA provide the most volatility
in stock prices, volatility that can ultimately translate into opportunity for
traders.
Up until now, the FDA has been relatively inactive in deciding on new drug
applications, only meeting a few times over the last two months. However, that
is all about to change. In the month of March alone, various FDA Advisory
Committees meet on at least four occasions to decide the fate of many new
drugs.Â
It all starts on Tuesday,
March 4 with a
meeting of the FDA’s Anti-Infective Drugs Advisory
Committee. The complete will discuss the New
Drug Application (NDA) of a drug called Factiver to treat community-acquired
pneumonia and acute/chronic bronchitis. Factiver is a new type of antibiotic
that is aimed at a fairly large market. The interim data released so far shows
the drug to be effective for its targeted disease. It is produced by LG Life
Sciences, the biopharmaceutical arm of the South Korean Conglomerate LG. Now, I
understand the logistical difficulties in trying to trade a stock on the South
Korean Stock Exchange. However, there is a collateral company that may be
affected by the news and provide an opportunity for traders.
Parexel International
(
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on the Nasdaq and is the US sponsor of this new drug as it goes up for FDA
Advisory Committee approval. If approved, Parexel’s stock may experience an
acute move upward in response to the news because the market for Factiver is
large. In addition, there is always room for a new class of antibiotic in a
physician’s bag because of the ongoing battle of drug-resistant bacteria.
On the same March 4,
the FDA Arthritis Advisory Committee will also meet to provide a safety update
on the currently approved drugs to treat rheumatoid arthritis. Rheumatoid
arthritis is a debilitating disease of the joints with no cure. The disease is
a result of the body’s immune system gone awry, mistakenly attacking its own
bone and joint tissues. The drugs on the market that will be discussed include
Johnson & Johnson’s
(
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(
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approved Humira (Abbott Labs/Cambridge Antibody (CATG). The one thing these
drugs all have in common is their mechanism of action. All three act to inhibit
a protein called Tumor Necrosis Factor (TNF). TNF is deeply involved in
stimulating our normal immune system and part of problem in patients with
rheumatoid arthritis. By inhibiting TNF in this immunologic disease, the drugs
mentioned suppress the uncontrolled inflammatory response responsible for joint
destruction.
Why specifically is the FDA going to discuss in regard to the safety of these
TNF-inhibiting drugs? There are some reports in the medical literature linking
the drugs to treat rheumatoid arthritis to an increased risk of cancer,
specifically lymphoma. In some ways, this link does make medical sense.
Normally, our immune system is constantly in surveillance mode, monitoring our
system for cells that have the potential to turn cancerous. If identified,
these cells are destroyed before ever reaching their cancerous potential. If
drugs, such as those used to treat rheumatoid arthritis alter this delicate
surveillance, then the risk of cancer could be increased in the long-term.Â
Johnson & Johnson’s Remicade and Amgen’s Enbrel have been around the longest, so
the FDA should have more comprehensive data on their potential link to the
development of lymphoma. Abbott Labs’ Humira was recently approved and will be
included in the mix when any safety conclusions are made at the end of the
meeting. If the FDA singles out one drug over the other two in regard to
increased risk, this could adversely affect the bottom line and future revenue
projections of that company. I suspect the FDA will find all three drugs safe
for use. However, keep an eye on these companies once the meeting is over,
because any adverse conclusions by the FDA will have a significant impact.
On March
5, the FDA Arthritis Advisory Committee
will also discuss the safety of
the drug Arava for the treatment of rheumatoid arthritis. This drug is produced
by Aventis
(
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However, its mechanism of action differs from the big three mentioned earlier
and may not be affected by any conclusions made by the TNF-inhibitors.
On a final note,
Nexmed
(
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on the company’s crucial phase III clinical trial testing a new drug to treat
erectile dysfunction (ED). The drug is a topical gel consisting of the active
ingredient found in the blockbuster drug Viagra. The company expects to release
the data from its phase III clinical trials either at the end of this quarter or
early next quarter. The phase II clinical data looks promising, especially in
those patients not responsive to Viagra. The release of this data has all the
makings of a major stock price event. Keep this company on the radar screen.
Paul
Ruggieri, MD, FACS