The Morning Report
San Diego news and info
you need to take on the day.
Monday, Feb. 23, 2009 | Venture capital funding is non-existent, layoffs are commonplace and the number of companies with fewer than six months of cash on hand is scary. Times are bad for the biotech industry in 2009. Really bad.
Amongst all these dark clouds two San Diego biotechs face a make-it-or-break-it year.
San Diego-based Arena Pharmaceuticals is on track this year to have results from two Phase 3 trials on its obesity drug that has the potential to be a Viagra-like blockbuster. Results from the first trial are due out at the end of March.
And local stalwart Amylin Pharmaceuticals, which has suffered through a streak of bad news with Byetta, its type 2 diabetes drug, is poised to file a new application to the U.S. Food and Drug Administration for a new version of Byetta — called Byetta LAR — that patients would only have to take once a week. This would give Amylin a big leg up in the crowded marketplace for diabetes, and could change the way people cope with the chronic illness.
If these two drugs pan out, they have the potential to be two of the biggest hits in San Diego biotech history.
“I am very confident that we will have positive results,” said Arena CEO Jack Lief of his company’s drug, lorcaserin. So confident is Lief that he all but guaranteed that lorcaserin will be on its way to FDA approval by 2011.
Amylin CEO Daniel Bradbury wouldn’t comment for this story. But in the company’s year-end conference call he said the expected submission will give Amylin a leg up on the competition in 2009 and beyond. “Having the opportunity to leverage the knowledge gained through the development and commercialization of an existing product is a real advantage.”
Yet both companies are banking on drugs that face intense scrutiny from the FDA. The regulatory agency sets significantly higher bars for drugs that treat chronic illnesses — like diabetes or obesity — than it does for drugs that treat life-threatening illnesses like cancer. Amylin was rocked in 2007 by an FDA warning of a possible link between Byetta and pancreatitis, a condition in which a person’s pancreas becomes inflamed.
And after being burned a decade ago by the weight-loss drug fen-phen, which was found to damage the heart valves in a significant percentage of patients using it, regulators are especially tough on so-called fat pills like lorcaserin.
“If the diabetes hurdle is 10-feet high, the obesity hurdle is 20-feet high,” said John McCamant, editor of the Bay Area-based BioInvest.com. “In chronic disease you have to be super, super careful — you can’t be killing people when you are really not saving their life.”
The possibility that lorcaserin could come out of the trials anything less than squeaky clean led UBS Investment Research to downgrade the stock last week to “neutral” from “buy.” The stock, which has been a high flyer in recent years, closed Friday at $4.86, down 25 percent from its closing price the previous Friday.
“Although we remain positive on the outcome of the [trials], until final data is available the potential for negative efficacy and safety results cannot be eliminated,” UBS analyst Jeff Elliott said in a note to investors, according an Associated Press report. Elliot added that the FDA is taking a more conservative approach as it examines new treatments.
Also, the potential for blockbuster revenues means there is a lot of competition — as many as 20 companies are developing obesity drugs. And two of Arena’s biggest competitors are in San Diego. La Jolla-based Orexigen Therapeutics is in late-stage trials with a drug called Contrave. And Amylin announced last year that it is working on an obesity drug. Plus, one of the side effects of Byetta is weight loss.
Nonetheless, Arena CEO Lief said he is confident that his drug will win out. Mainly because lorcaserin is farther along than the others, and it is an entirely new compound, meaning that it does not have the same association with the previous obesity drugs that caused health problems. “We are the only ones with completely new drug in late stage clinical testing,” Lief said.
Previous obesity drugs like fen-phen targeted receptors in the hypothalamus that control appetite, but they also hit receptors that controlled heart vessels. The key to lorcaserin, Lief said, is that it selectively targets the hypothalamus and leaves the heart vessels alone.
In clinical trials, a third of the participants who took a lorcaserin pill twice a day lost 5 percent of their body weight without diet and exercise, Lief said. If the results from the Phase 3 trials come out like Lief said they will, than FDA approval may come as early as late 2010, and doctors would be prescribing the drug by 2011.
If Amylin can complete its FDA submission for Byetta LAR during the first half of 2009, which it is planning to do, it could have FDA approval and be marketing the drug by next year. If so, then the company will not only have three approved drugs (Symlin is the other) for diabetes, but it will offer patients a once-weekly therapy. This is a tremendous advantage over drugs that diabetics have to take as often as two or three times a day, said McCamant of BioInvest.com.
But Amylin will also have to avoid the bad luck and bad public relations decisions that have hurt its reputation and bottom line in the past couple years. The company’s stock soared following the approval of Byetta in 2005. But then came the FDA warning in October 2007.
Although studies ended up showing that the incidence of pancreatitis among patients taking Byetta was rare — less than 0.2 events for every 1,000 hours of exposure to the drug — it was enough to spook both doctors and investors.
Sales of Byetta dropped, and Amylin shares plummeted from around $46 in 2007 to less than $7 late last year. It closed Friday at $10.47. The disappointing sales of Byetta were among the main reasons given for the company’s decision to lay off 340 of its employees, a quarter of its workforce, in November.
The consensus among industry watchers is that Amylin mishandled its response to the FDA warning. Rather than get out in front of the news, the company hunkered down, analysts said.
“It doesn’t help when news like this dribbles out in a 10Q (a Securities and Exchange Commission filing) instead of being forthrightly and clearly communicated in a press release — it doesn’t inspire confidence,” Jonas Alseanas, an analyst with Leerink Swan, told The Union-Tribune in November.
Amylin was in the news again earlier this month when famed corporate raider Carl Icahn bought an 8 percent stake in the company. And Eastbourne Capital Management, which owns 12.5 percent of Amylin stock, announced a push for a shake-up of the company’s board of directors.
But despite these developments, Alseanas and other analysts are now confident that the company has largely overcome the pancreatitis issue, and consider its current share price undervalued. “The Byetta filing appears on track,” Alseanas said in his latest research note. He added that the “pancreatitis concerns should be easing.”
McCamant, who said he doesn’t own shares of the company, said Icahn’s interest shows the underlying strength of the company. “They have made mistakes to some extent, but no game-changers,” he said. “They’ve got two approvals, and we have confidence that they will get a third.”