Avalanche Biotech (NASDAQ:AAVL)
Shares of Avalanche Biotech fell as much as 40% in after-hours trading on June 15, 2015 after the company announced results from its phase 2 wet-age related macular degeneration — wet-AMD — trial. The drop is huge but many investors should be assured that the drop was justified because the results were mediocre at best. In addition if Avalanche’s treatment with AVA-101 was the only available therapy then the share price could have possibly surged. But this is a big biotech world and in biotech world you have a lot of other competitors that sometimes have better treatments already available in the targeted space.
In this case Lucentis which comes from Roche (OTCMKTS:RHHBY) and Eylea which comes from Regeneron Pharmaceuticals (NASDAQ:REGN) have better efficacy than these results seen to date from AVA-101 this past week. Although Avalanche claims that this trial wasn’t powered for efficacy since it only recruited up to 32 patients that were age 55 and older. Matter in fact Avalanche set up its primary endpoint in the clinical trial as being the safety of the drug compound.
In terms of safety it passed with flying colors as the drug was safe, but the problem lies with the efficacy of the drug in these phase 2a results. In terms of best corrected visual acuity — BCVA — AVA0-101 patients saw a mean improvement of 10+ letters with about 23% of these patients and the placebo in the trial saw a 0% improvement with 10+ letters. The problem with this is that the placebo in the trial was Lucentis and typically Lucentis allows patients to gain about 10+ letters as well. Why did the placebo do this poorly in the trial? Historical control shows Lucentis performing better.
In addition there was one other problem with the AVA-101 drug. The other problem was that patients that took the AVA-101 gene therapy drug saw a +25 mm increase in retinal thickness, while the placebo saw a -56 mm decrease in retinal thickness. This indicates that patients taking AVA-101 could have made their vision worse by seeing an increase in retinal thickening. Avalanche though states that it is too early to know why this occurred. The hope for Avalanche now is to wait for the rest of the phase 2a data to come in and then determine the best course of action for the phase 2b trial.
The only huge positive, if you wanna call it that, is that patients taking AVA-101 gene therapy drug saw two fewer rescue injections over the course of the 12 months compared to Lucentis. Is two less injections to doctors and patients worth dropping Eylea or Lucentis as treatment options? At this point in time investors voted no with their wallets as the stock plummeted on these results. Regeneron had already moved in prior to these results to protect its Eylea patent estate by allowing itself to have the option to buy rights to AVA-101 if it chose to do so. We believe that it is too soon for this to occur now and if Regeneron is to buy this option later on then it probably won’t do so until better phase 2b results are achieved.
On June 17, 2015 Allergan announced that it would acquire Kythera Bio (NASDAQ:KYTH) for $2.1 billion dollars. Allergan is already well known for its Botox drug which helps patients defeat frown lines and other facial skin problems. Now with the acquisition of Kythera it hopes to be able to capitalize on a new skin market that targets a problem known as “double-chin”. The shareholders of Kythera will receive 80% of the transaction in cash and then the remaining 20% will be paid in shares of Allergan’s common stock.
This double-chin drug known as KYBELLA was approved by the FDA on April 29, 2015 with a few other territories pending approval as well. Such other territories awaiting for approval of KYBELLA are: Australia, Canada, and Switzerland. Another name for “double-chin” is submental fullness and this facial problem makes people appear to be much older than they really are. About 67% of patients that suffer from “double-chin” are worried about their appearance. That means that there is a huge market for this indication and Allergan definitely wanted a piece of this market.
Although all biotechnology companies always want to look toward the future. Allergan probably didn’t acquire Kythera just for its “double-chin” drug, because it also got the entire pipeline as well. Another big candidate Kythera has is a drug known as KYTH-105 which is targeting male pattern baldness. In addition Kythera has many other pre-clinical dermatological targets as well that could also potentially build long-term value for Allergan as well.
Aeri Pharmaceuticals (NASDAQ:AERI)
On June 15, 2015 shares of Aeri Pharmaceuticals soared as much as 42% in after-hours trading after the company reported that the FDA would allow the company to change the clinical endpoints on both the Rocket 2 and the Rocket 3 trials. This news is very huge for Aeri because a few months ago it failed to meet the endpoint in its Rocket 1 trial in patients with glaucoma using its Rhopressa drug. Matter in fact after announcing these poor phase 3 results shares of Aeri tanked about 70% in one day.
The good news now is that the FDA has moved the clinical goalpost endpoints on both the Rocket 2 and Rocket 3 trials. This means that if Rhopressa performs the same as Rocket 1 results in the other two phase 3 trials then it can succeed in seeking FDA approval for patients with glaucoma. Many analysts predict that this glaucoma drug, if approved, could produce about $1 billion dollars in revenue. Investors should be especially cautious going forward though because these other phase 3 results must be similar to the results of Rocket 1 in order to succeed.
If the results are not the same as Rocket 1 and are worse then there will be an additional sell off in the stock. Investors are especially lucky here because the FDA is not known to move clinical endpoints like it did in this situation. Quite frankly it is actually unheard of for the FDA to be this lenient when it comes to a disease like this that already has so many treatment options. Some of these drugs already approved for glaucoma are known as prostaglandins: Xalatan from Pfizer(NYSE:PFE), Lumigan from Allergan, and Rescula from Novartis (NYSE:NVS). These drugs work by blocking the intraocular pressure in glaucoma patients and allowing fluids to flow more freely in the eyes.
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