Alimera Implosion Analysis, What Is Next (ALIM, PSDV)

November 11, 2011 · Filed Under Diabetes, fda · Comment 

Alimera Sciences, Inc. (NASDAQ: ALIM) is the latest of the drug implosions and this one looks even worse than just severely damaging.  The FDA’s complete response letter is really a request for additional data.  This is almost as bad as it could be, short of an outright rejection with an order of termination, for its diabetic macular edema (vision-loss for diabetics) drug candidate called ILUVIEN. 

The reason the stock was down so much (almost 75%) is because we can’t see how the company can adequately fund the next trial and the next trial after that.  One trial, maybe. Two, no way.  The company had less than $39 million in cash on hand as of the end of September and its quarterly loss was $6.5 million in the last quarter even though its R&D expenses were lower. 

This killed co-development partner pSivida Corporation (NASDAQ: PSDV) as well as the intravitreal insert was aimed at providing a therapeutic effect delivering a sustained release of the drug.  pSivida was down 48% at $2.02 on the news as is supposed to get 20% of the profits. Alimera would have owed an additional milestone payment of $25 million to pSivida had ILUVIEN been approved.

We hate to see companies with drug candidates that are so needed fail.  This is one of those cases where a new treatment could really come in use.  Sadly, unless this drug has some very clear cut benefits on other indications, this could be the beginning of the end.

Alimera has only been public for a year and a half.  Welcome to the biotech stock market.   This stock fell 73% to $1.96 on Friday and it still has a $61 million market cap.  A 73% drop is never a good thing unless you are a short seller.  Alimera has a very tough road ahead.

JON C. OGG

Implosion Analysis For Targacept… What Lies Ahead? (TRGT, AZN)

November 8, 2011 · Filed Under Depression, R&D · Comment 

Tuesday has been an awful day for shareholders of Targacept Inc. (NASDAQ: TRGT).  The company shares lost more than half of their value on news that initial test results from the Phase III antidepressant (TC-5214) failed to meet their endpoints in treating major depressive disorder.  Targacept is covered under a co-development pact with AstraZeneca PLC (NYSE: AZN) in the United Kingdom and this is supposed to be an add-on treatment for patients where primary treatment was not adequate.

Effectively, this was the first of four Phase III trials and more data on all of the results should come by the first half of 2012.  What is amazing is that the companies have said that they still hope to file for FDA approval in the United States during the second half of 2012.  Depression treatment is such a toss-up that a company’s primary endpoints might be well above what a minimum threshold is for FDA approval. 

Investors are speculating that Targacept does not die on the vine here.  Targacept is down almost 57% today but the stock is still at $8.25 and the market cap is still $275 million.  Shares hit a new 52-week low today and the new 52-week range is $7.93 to $30.47.  To show just how much optimism has been wiped out, the Thomson Reuters pre-news consensus price target was just above $30.00.  AstraZeneca ADRs are down 2% at $46,34 in New York trading.

The hope is that there could still be approval.  We won’t endorse that, but we did want to see what else Targacept has up its sleeve in the pipeline other than TC-5214:

  • TC-5619 for Residual Symptoms in Schizophrenia, Alzheimer’s Disease and ADHD 
  • AZD3480 – ADHD 
  • AZD1446 – Alzheimer’s Disease

As of June 30, 2011, Targacept had nearly $189 million in net tangible assets. If you just look at cash, cash equivalents, short-term investments and long-term investments, the figure is more than $290 million before backing out liabilities.

JON C. OGG

Rare Analyst Calls With Huge Upside in Vical and VIVUS (VICL, VVUS, BMY)

November 4, 2011 · Filed Under analyst calls, Cancer, Diabetes, Heart, obesity · 19 Comments 

Vical Inc. (NASDAQ: VICL) and VIVUS, Inc. (NASDAQ: VVUS) are both running higher this Friday on news that Credit Suisse initiated both biotech outfits with “Outperform” ratings.  What matters more than the call are the price targets and the inferences made in the research calls.

Vical Inc. (NASDAQ: VICL) is rarely given huge analyst calls due to what is a small $250 million or so in market cap.  The team at Credit Suisse initiated Vical with an “Outperform” rating this morning but more important is its price target of $7.00 per share.  This represents more than a 100% move compared to the $3.45 close on Thursday.   What was more impressive was the $7.00 price target versus a $3.45 close before, indicating just over 100% upside.

Credit Suisse noted that Vical’s lead product Allovectin is in a Phase III trial for the treatment of metastatic melanoma but noted that it also has a pipeline of other vaccine product candidates. The firm’s discounted cash flow target is based solely on Allovectin, which the firm noted “makes Vical a high risk investment because Allovectin still needs to successfully complete Phase 3 and the FDA approval process.”  The firm went on to note impressive Phase II data with overall survival of chemo-naïve and experienced patients as being 18.8 months.  It further noted that the drug did even better in chemo-naïve patients with a median overall survival of 22.5 months versus 11.2 months from Bristol-Myers Squibb Company (NYSE: BMY) Yervoy+DTIC in chemo naïve patients. 

VIVUS, Inc. (NASDAQ: VVUS) was also started as “Outperform” with $15 target at Credit Suisse.  The firm noted the title “The Road to a New Obesity Drug Is Tough, but
It Ain’t Over ‘Til the…”  The firm believe that VIVUS’ weight loss pill Qnexa will be approved in the United States as a drug to treat obesity with a restricted label in the second quarter of 2012 and then will be approved in Europe in the third quarter of 2012.  Credit Suisse’s discounted cash flow based target price is driven entirely by Qnexa.  The firm went on to note, “which makes Vivus a high risk investment because our target price is dependent on US approval.”

Vical is up 5% at $3.62 on normal trading volume and VIVUS is up 4.5% at $9.92. Bristol-Myers Squibb Company (NYSE: BMY) is down 1.5% at $31.26 on the day.

JON C. OGG

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