Gumshoe BioDimSum II: Corralling the “A” Biotechs Plus a New Long Selection

by DrKSSMDPhD | March 16, 2015 4:15 pm

[Ed. Note: Dr. KSS writes for our Irregulars about medicine and biotech stocks. As always, he has agreed our trading restrictions, and his words and opinions are his own. You can find all of his previous articles here[1]. And now, for some dim sum….]

Greetings Irregulars, and welcome to Stock Gumshoe’s festive second BioDimSum shindig, a periodic round-up of need-to-know updates on selected stocks and news relevant to biotech investing. We’ll try to make a point of sneaking in a new biotech long pick at each BioDimSum, and while some of the material here has been mentioned briefly in the threads, I want to keep all Irregulars, even those who don’t keep up with the discussion posts, informed and on board. Any graphic artists out there? We need a cool BioDimSum logo for future columns.

We’re not having typical dim sum fare tonight. It’s cold where many of us are, and you need something to warm you and stick to your ribs. El jefe Alan Harris has donned his pinafore, and’s in the kitchen making fish tacos from blue corn tortillas, Chilean sea bass, avocado, orzo, baby spinach, lime and salsa. I am making an infamous kettle of tom kha gai, a hot jungle porridge that I crave and learned to make in Thailand: chicken sauteed in extra virgin olive oil, coconut milk, shiitake mushrooms, lemon grass, Thai peppers and secret ingredients (including fresh galangal). My tom kha gai is so filling you’ll need a nap before you head home. Alan’s serving blackberry crepes with cream cheese for dessert, and I’ll be competing with him by passing around parmigiana ice cream sandwiches. We’ll have espresso and lattes from Costa Rican beans.

As March rolls along, I find myself with much in mind about several of our “A” biotechs.

Agios ($AGIO)

I recently liquidated my position in $AGIO for a 50 percent gain after a few months. Why this change in position? I am basing it on information trickling in from diverse sources. We’ve never fully discussed Agios in a column, however, and so a deeper look may be timely. Where am I going with this? Frankly, I am considering shorting $AGIO now. I want a main objective of Gumshoe Biotech to be the affording of timely insight…perspectives on biotech you are unlikely to find elsewhere, served up before others arrive at the same insight.

Agios is a $4B NASDAQ-listed biotechnology house in the Boston-Cambridge smart belt. Though CNBC’s Jim Cramer has touted Agios aggressively, more analysts now have hold than buy recommendations, and short interest, now at around 12 percent, is creeping up. Insider selling has not been notable: executives exercising options and selling, as part of their income. I suspect that will soon change. How does a start-up biotech with no asset beyond phase I attain a market cap of $4B? Especially when some of the blowback about its studies is not what people dreamt of.

joined de bono books2[2]In discussions at Gumshoe I have often spoken of “modes” of cancer treatment. Certain readers here may be aware of the work and fine books of Maltese Rhodes scholar Dr. Edward de Bono, globally regarded as a master of different modalities of thinking, and widely sought as a consultant to corporate boards. De Bono is alive and kicking at 81. When boards are wrangling over issues about a company’s future, de Bono will often have board members don colored hats, each color representing a specific style of thinking about corporate issues (clinging to the past and concerned with legacy issues, tech savvy, organic growth-oriented, international, bottom-line-only and so forth). De Bono is a physician and has written 57 books, now translated into 34 languages, about how to think, about the components of a successful session of thought. He is widely revered for his concept of “lateral thinking,” an approach to creativity that I can attest affords fierce, vibrant results. His work is not pop psychology, and has advocates in both top companies and the world’s best universities.  I have read two of his best books (see photos) many times and about a dozen others at least once. Next time you are grappling with a major personal decision, let de Bono help you (seriously).

Along lines of de Bono’s colored thinking hats, I have suggested that drug therapy for cancer occurs in four modes: black, red, white and green. The black mode is the oldest mode: highly toxic drugs that tend to kill all cells, but that are relatively selective for cells that are rapidly replicating, as cancer cells are. This category includes nucleoside analogs, and contains agents that harm recipients, sometimes permanently. Before his reputation went permanently to the dungeon, Lance Armstrong famously reviled MD Anderson Cancer Center because doctors there proposed to treat his testicular cancer (which had spread to his brain) with a bleomycin-based regimen. Had Armstrong agreed to this, he’d never have been a competitive biker because of how bleomycin scars lungs. Other horrorshow “black” modality cancer drugs would include agents like adriamcyin and mitoxantrone (very cardiac-injurious), cyclophosphamide (causes bladder hemorrhage), and methotrexate, which causes the bowel wall to slough, or can, and is unkind to liver. These agents kill both cancer and patient, sometimes in nearly equal measure. Black is funereal.

When I first began writing for Stock Gumshoe a year ago, I was intensely critical of the company Cyclacel ($CYCC) because people were swooning over its lead agent, sapacitabine. Sapacitabine is nothing more than an old-fashioned nucleoside analog, mere black mode chemotherapy. How could this be considered an advance, even remotely? Nucleoside analogs for cancer are a dime a dozen. I was attacked vigorously for not seeing that Cyclacel was obviously the Next Big Thing, but held firm. At this point, I see no future for this drug or this company, and share price, hammered horribly over the last year, reflects that.

In my definition, red mode cancer therapy is using drugs that specifically target oncogene proteins. Red is vibrant and acute. Most cancers involve the action of oncogenes, either previously slumbering and now awakened, or else created by mutation and aberrant gene splicing. Oncogene proteins are proteins active only in cancer, and if one can inhibit them, doing so quells the cancer. The first red mode cancer therapy was imatinib (Gleevec, Novartis, $NVS), which inhibits a specific kinase present in Philadelphia chromosome-positive chronic myelogenous leukemia. 20 years ago a physician colleague the same age as me was diagnosed with CML, and all of us who were his friends had begun to prepare for his death, including making commitments that we would see that his three children were looked after.  He was among the very first patients to go on Gleevec, and is alive and well now, working for a biopharma company many here are invested in, and has never come to stem cell transplant.

For me, white mode cancer therapy is immuno-oncology: new tricks to unleash the immune system to fight cancer. This ranges from anti-cancer therapeutic antibodies like rituximab to failed-and-failing approaches like dendritic cell vaccines ($GALE, $NWBO, $DNDN and very possibly $CLDX). Checkpoint inhibitors like nivolumab (Opdivo) from Bristol-Myers Squibb ($BMY) and a slew of others coming from brilliant companies like my personal long favorites Trillium ($TRIL) and TG Therapeutics ($TGTX) remove functional force fields around cancer protecting them from immune attack. Finally, all the great CAR-T plays like $KITE, $JUNO, $BLCM, $NVS, and $BLUE are white mode immuno-oncology approaches. If you don’t own at least one CAR-T stock, you really owe it to yourself to pick up some shares: you’re an Irregular! You’ll do well with any, though on valuation considerations, Bellicum looks particularly appealing here.

I am defining green mode cancer therapeutics as approaches that restore the natural tendency cancer cells have to apoptosis. Apoptosis is a quick tidy thrifty process of cell suicide that every cell in your body is amply equipped for and will to carry out when signalled to do so. Gumshoe biotech faves TetraLogic ($TLOG) and KaryoPharm ($KPTI) have agents that reconstitute normal pathways for apoptosis in cancer cells, and at least one other tiny company on my radar, one I will probably introduce in the spring, is getting its act together to provoke cancer cell apoptosis.

For a time, I had begun thinking a blue mode of cancer therapeutics was at hand, blue like the corporate logo and webpage colors of Agios. Its two lead drugs, AG221 and AG120, both inhibitors of alleles of isocitrate dehydrogenase,  seem to offer a new avenue for controlling cancer by firing magic bullets at energy metabolism pathways unique to cancer cells. No other cancer therapy works in this way.

Prof. Dr. Otto Warburg[3]

Prof. Dr. Otto Warburg

Jump cut to Berlin 1931. A Ph.D. chemist named Otto Warburg, trained by the extraordinary chemist Emil Fischer (known to one and all chemistry majors) wins the Nobel Prize in Medicine or Physiology for what would become known as the Warburg Hypothesis. Warburg’s ideas that cancer cells, growing as they do rapidly, need turbo-charged  sources of energy were plausible and revered and supported by elegant data that he generated. And they were almost utterly forgotten for 50 years or so until work that led into the founding of Agios revisited the mantle of the Warburg Hypothesis.

Most readers feel comfortable with the concepts of aerobic and anaerobic metabolism. Aerobic metabolism is the highly efficient oxygenative top-end performance of mitochondria, performed when the heart is beating vigorously, blood supply is ample, and oxygenation of blood is exuberant. When we exercise vigorously, we tend to start out in aerobic mode, for which one’s capacity is enlarged by training. With continued running or pedalling or swimming, however, aerobic capacity is bested, and the muscles lapse into anaerobic metabolism: they keep chugging by fermenting glucose sans oxygen, and accumulate lactic acid as a byproduct of the anaerobic metabolism. Muscles in which lactic acid has built up are sore, and remain so until the lactic acid is excreted by the kidney. An anaerobically exercising muscle churns out lactic acid, while an aerobically exercising one burns it.

Even in Warburg’s day, doctors recognized that one of the hallmarks of cancer is how the growth of a cancer induces exuberant angiogenesis, blood vessel formation that feeds the cancer. Cancer is rapidly replicating, spreading, all the while burning energy with reckless abandon, and needs blood, oxygen and nutrients for its empire-building aims. Angiogenesis is such a hallmark of cancer that mere arteriography, squirting dye into the arterial circulation feeding a tissue, is considered diagnostic of cancer when a mass if found to have induced snarly, reduplicating, Medusa-like vessels as if jealously to feed itself.

All well and good, except that this theory didn’t jive with what Warburg found in experiments. He showed that many cancers were gobbling up glucose and fermenting it despite their robust blood supply, almost as if they were starved of oxygen though they had plenty. His hypothesis was that this aberrant kind of metabolism was not only a feature of cancer but actually a cause of it…that somehow cancer masses had discovered Satanic verses for how to execute perverted thermodynamics to let them grow without bound. Stifle aerobic glucose utilization by tumors, he suggested, and this will stifle the cancer. Glucose is usually burned anaerobically, but cells were using both it and oxygen at the same time, almost like aerobic glucose utilization. It made little innate sense to Warburg, as either should shut off the other, and he postulated cancer cells had devised a cheating screwball way of functioning.

We could here get highly technical, but finding a molecular basis for Warburg metabolism in tumors, which resides in an enzyme called isocitrate dehydrogenase, and designing small orally available molecules to inhibit this, were the premise on which Agios was founded.

Phase I trials in drug development are primarily to look for evidence of toxicity, and at what doses toxicity may be dose-limiting. Even though occasional cancer drugs such as Cellceutix’s ($CTIX) Kevetrin and those of Agios are hypothesized to be harmless to patients without cancer, tradition in American drug development has it that drugs being developed for cancer are trialled only in patients with cancer. In phase I trials in patients with hematologic cancers, Agios has observed evidence of what I might call tumor stultification: cancer cells in treated patients don’t die, but take on a less malignant appearance and show downshifts in their consumption of nutrients. Despite this, trial investigators discussing the effects seen at meetings are divulging that the effects don’t last.

For me, upon reflection, this is hardly surprising. One of the reasons people within medicine get irked when lay people speak of “curing cancer” is that cancer is thousands of different illnesses. Cancer doesn’t arise as a result of one mutation in a cell or even two, as was once hypothesized. Think of a cocktail: a list of ingredients combined in a unique way to afford a tasty beverage. Every cancer represents cells that have taken on a cocktail set, often unique to them, of acquired genomic and epigenomic changes, changes that afford them the ability not only to grow like crazy, but also, as we have described in several columns, accomplish the critical tasks of immune system avoidance and of bypassing apoptosis triggers in cells. In this way of thinking, an Agios drug is thus only addressing one small part of cancer (the energy aberrations) but not the oncogenes, the histone deacetylases run amok, the tyrosine kinases misbehaving, the molecules that dupe the checkpoint pathways, and the cellular tricks that chloroform the caspases of apoptosis. Cells are stymied for a time, and then revert to again behaving as nasty as they want to be, provoking angiogenesis, growing matrix, popping off into circulation, and causing havoc.

Agios has been dogged from day one by concerns that its agents may have little effect on solid tumors. Clinical trials of course are not the only form of scientific research, and much cancer laboratory investigation is based on cell culture studies. Normal human cells are extremely difficult to grow in culture, while malignant, transformed lines, because of their immortality-seeking aggressiveness, are reasonably easy to grow if given adequate nutrients. Cancer researchers often write to companies like Agios and request small supplies of unapproved drugs so that they may examine those drugs for effects on cultured cells, and since such studies are likelier than not to depict the novel cancer drug in a favorable light (negative studies don’t get published) drug makers are happy to oblige.

Colleagues at various US institutions have recently alerted me to disquieting instances in which Agios agents that inhibit isocitrate dehydrogenase have been observed to stanch solid tumors for a time, whereupon the tumors seem to mutate “around” the drugs. This is occurring in multiple unrelated kinds of tumors. And it may be some time before these studies appear in print if they appear at all. I haven’t heard yet of a single instance in which an Agios agent behaved as anything more than a kind of oncological party trick: give this drug, and in a nifty way, the cancer doesn’t guzzle glucose….for a time. Most all life sciences PhDs are de facto cancer researchers at some time or another in their careers, and I believe most of us will tell you the same thing: the only good cancer cell is a dead cancer cell. The only way to countenance cancer is to kill it. Agios drugs attempt to rehabilitate cancer, reason with it, and get it to mend its ways, but a thriving cancer has too many molecular tricks laying in wait, too many ways to defeat the agents. Some years ago working with hepatocellular carcinoma cells in culture, my work called for treating those cells with cis-retinoic acid, a growth differentiating agent. I noticed again and again: the cells so treated would change morphology rapidly and extensively, and soon they looked like normal liver cells. This led to me proposing clinical trials in liver cancer patients of retinoids, the idea being that if we could not kill their tumors, we could cause the tumors to differentiate away from being malignant.

Embryogenesis is generally a process of fairly undifferentiated cells becoming more and more specialized, more and more differentiated, as the organism matures. As a theme, cancer represents a process in which cells become more primitive, in which they de-differentiate. Usually the aggressiveness of any specific cancer is inversely proportionate to how differentiated or specialized the cancer cell is. The poorer the differentiation, the deadlier the cancer is. When we tried giving liver cancer patients agents to drive differentiation of their tumors, some tumors did shrink…..but this was only a brief reprieve followed by a resumption of malignant behavior, possibly more aggressive than before. Some readers may be aware of the use of arsenic trioxide and all-trans retinoic acid as therapy for hematological malignancies  like acute promyelocytic leukemia. These try to differentiate or force maturity in the cancer cells….and they work for a time. Eventually, the old malignant behavior reasserts itself mightily. Such will likely be the fate of cancers treated by the Agios recipe.

The only rational approach to treating cancer is killing it. At this juncture, it’s far from clear to me that Agios agents will thus find a place in the cancer armamentarium: they kill nothing, and show no evidence now of being able to participate usefully in the four main modes of cancer therapy we have depicted. I like the company and admire the science and management, but it’s not clear to me what Agios will do for phase 2 and phase 3 studies. I worry that they have accomplished something dizzying, attention-getting, but that really won’t end up helping patients. As such, and in view of the plateau at which Agios shares have been for many weeks, I have liquidated my position in Agios. I’ll continue to watch the company, but $4B is wildly excessive market capitalization for drugs with no clearer future than those of Agios have.

It’s important to me that readers realize that this is not some coquettish about-face on Agios. The science is exceptional and novel. The company may learn things about their drugs that warrant re-appraisal. But the most dangerous long thesis is the one whose tires you do not brutally kick at regular intervals. When I spoke last week with a colleague from UT-Southwestern  about an alarming talk with negative data in which Agios agents had shown near-worthlessness, I decided it was time for me to act. I am uncomfortable remaining in Agios here, and have rung the register for a 50 percent gain. The leaders of Agios are not asleep at the wheel, but it’s time you realize they face serious headwinds not apparent in the celebratory melee wrought by their data last year.

Saving Tom Brokaw

In one commencement ceremony years ago, I received both MD and PhD degrees. It was a big day, and so even if I wanted to, I’d not be able to forget who the speaker was: Tom Brokaw, then at the pinnacle of his career as NBC Nightly News anchor. Then as now, Brokaw is someone about whom credibility and integrity issues have never come up.

Brokaw had flown in for the weekend, and had not contrived some oracular peroration for his talk. He was plainspoken, and in fact rather frank about his past: that during his first try at undergraduate education, “I thought beer was food,” and that under its influence, he’d been quite a skirt-chaser. Things didn’t end well til he changed schools, adjusted his  attitude, and decided to apply to his life the South Dakota plains common sense with which he grew up.

A rare picture of Brokaw at NBC in the 80s.[4]

A rare picture of Brokaw at NBC in the 80s.

Some speakers reach you with what they say, and others with how they say it. Brokaw has a basso voice that resonates unusually through clear, open sinuses, and when this is coupled with a personality with no need for self-preening, the result is something that places him squarely in the pantheon of icons NBC has become known for: regardless of the lunatic state the world is in, people like Brokaw, like David Brinkley, like Chet Huntley, like Johnny Carson, like David Letterman (whose best years were with NBC) somehow through their ability to countenance it with gracile poise and humor, have let you know everything will be OK. They tacitly telegraphed to you a certain semiotic message that no matter the problem of the day, a certain American decency in dealing with it meant all would end well and that you could sleep soundly. I remember almost nothing of what Brokaw said, but I remember him speaking vividly, and remember wondering if a WWBD? mentality might serve me well. I thought of how Brokaw might have broken bad news about a serious diagnosis to a patient: equanimity, no hysteria, good eye contact, delivered in a way that conveyed both empathy and an expectation of you giving it your best shot without whining.

In August 2013, Brokaw, now 75, was diagnosed with multiple myeloma at Mayo Clinic. He has responded well to chemotherapy, and is on maintenance treatment with Celgene’s ($CELG) Revlimid. The official story is that Brokaw’s cancer is “in remission.” Though that’s accurate, as Irregulars you have come to expect the full story. Brokaw’s multiple myeloma will reassert itself. It might be three years. It might be five. It will return, however, and when it does it will claim him….unless: one company we have spoken of in the threads but never formally presented has science that could cure Brokaw, and may even come to fruition in time to help him.

Many of you know the name of the company, but before I mention it, let me provide some color about one of its advisors, Elihu Estey, MD.

Years back, I was at an interdepartmental case conference. Difficult cases were being reviewed. Estey was there, and as usual was dressed in a red plaid flannel shirt that could have been a pajama top and jeans, and was reading a sophisticated maths text on statistical analysis. The case of a young woman with apparent acute lymphoblastic leukemia was being haggled over. I was there to present how I had rescued her from impending liver shutdown incurred as a result of a chemo drug she had gotten. Her cytogenetics were horrible. Her prognosis was grim. The group agreed she was coming to hematopoietic stem cell transplant, but that she needed it so soon her prognosis was grave because finding a good match was unlikely.

The meeting was about to end. Suddenly Estey stood up. He was holding a folded piece of paper. “Anyone care to guess what’s on this piece of paper?” No one took the bait…this was a well-known Estey stunt.

Estey dramatically unfolded the paper as if it were a writ. “It says, ‘_____,'” and he read the name of the patient with acute lymphoblastic leukemia.  “Then it says, ‘VITAMIN B12 LEVEL: NOT DETECTED.'”

One could hear subliminal oohing and aahing, with people shaking their heads in dismay. Profound vitamin B12 deficiency can be mistaken for leukemia. It causes blood smears and blood counts that are just like leukemia, but that revert quickly to normal as soon as the patient’s vitamin level is restored. And that stay normal after that.

The patient’s primary physician took the podium. His face was livid. “Well……let’s give her a shot of B12 and…and send her home today.”

But Estey wasn’t finished. He spoke in staccato like Martin Scorsese, who he resembles: “Hey, why is it me, who’s not even involved in the care of this patient who was the only one to notice that her vitamin B12 level was zero?!” He was correct. The patient was on the verge of being steamrollered into a stem cell transplant she didn’t need, one that could permanently harm her if it didn’t go according to plan.

If you come away with the idea that Estey is fiendishly clever, ruthlessly intelligent, a patient advocate, an advocate for truth, and doesn’t mind irking colleagues when they aren’t thinking, you have a valid image of him. He isn’t vicious, and can even turn his disdain on himself. Soon after 9/11, I ran into Estey on an elevator; he was headed to the airport. “You’re not worried about terrorists blowing up the plane are you, Eli?,” I asked, being only half-sardonic.

“A plane I’m on? Hell no! Terrorists know I will kill 10 times as many people as they could if they just let me live and practice medicine!” It’s not of course that Estey is cavalier with patients. “Most of the evil in this world is done by people with good intentions,” wrote T.S. Eliot. People outside medicine often don’t realize the shakiness of the dogma according to which doctors practice: adhering to what we have been taught, our nostrums and procedures may well kill you, and yet we’ll move to the next patient and carry them out again….all awaiting a day when more critical minds come along and devise studies that shatter dogma we wallow in as if our feet were in concrete boots. In a chapter for Encyclopedia Britannica, I once wrote: “Which of our present-day remedies will eventually prove to be as ludicrous as the drenches, purges and bloodletting fleams of yesteryear?” Medicine is right now at war within itself over very simple things like when to transfuse: we cannot agree on how anemic you have to be before you warrant it. And yet for how many decades have we been blithely transfusing?

Estey, now at Fred Hutchinson Cancer Research Center in Seattle, is an advisor to Actinium Pharmaceuticals ($ATNM). ATNM appears to warrant nearly a special situation now for biotech investors in that despite its horrible one year chart, shares appear finally to be nearing a bottom from which they can move considerably higher.

actinium chart[5]

Actinium One-Year Chart

A person younger than 65. A person older than 65. Who’s likelier to get a blood cancer, indeed any cancer? Being over 65 is not capital-O old, but being older as it implies places patients at considerably higher cancer risk. The patient has lived longer to accumulate mutations, and moreover we gradually lose immune function as we age, meaning that immune surveillance for “brushfire” cancers that we all form daily starts to slip up and miss tumors.

The definitive fix for hematological malignancies, sometimes casually called “liquid tumors,” is hematopoietic stem cell transplantation—-finding the pluripotent undifferentiated seedling cells we all have in trace quantities and letting them repopulate all lineages, including red cells, platelets and all forms of immune cells (lymphocytes, neutrophils, macrophages and so forth). The catch is what stem cell transplantation requires; it requires the killing off of, the purging away of, all present blood and bone marrow cells. Accomplishing this requires lethal doses of chemotherapy drugs sufficient to kill everything in blood and marrow, and then supporting the patient with transfusions of blood and platelets as needed while the newly transplanted cells engraft and begin to replicate. The purging is called induction chemotherapy, and it is among the most horrifying things a human can experience or witness. Patients hover between life and death for days on end, vomiting, with diarrhea, in pain, often getting infected with bacteria, viruses and fungi because their immune systems are not working.

How often do patients get blood cancer but then succumb because they cannot undergo induction? Most centers estimate that two-thirds of their liquid tumor patients are either too enfeebled, too vexed with co-morbidities to survive induction in the estimation of treating physicians, or else hear what induction entails and decide not to pursue it. Physicians and patients only rarely disagree on this, and many patients over 65 are forced to accept that they have a lethal illness that can be subdued by cycles of drugs now and again but not cured. Acute myelogenous leukemia (AML) a growingly common problem as people live longer, has one of the worst prognoses: perhaps 24 weeks of survival from time of diagnosis in a patient not felt to be a candidate for induction and stem cell transplant. And while stem cell transplantation is no cakewalk—patients generally have to contend with an element of graft versus host disease affecting liver, skin and/or GI tract—it’s a procedure that elderly patients can reasonably undergo and get through.

Actinium has a great alternative and in fact the only alternative. The reasoning behind its method is that since radiation can be so deadly to cancer, why not harness it to accomplish the work of induction, and thereby induce patients for transplantation without chemotherapy? Alpha particle radiation is felt to be an extremely good choice for this because it involves emission of positive-charged particles from a radioactive nucleus that are highly energetic but have very short average path lengths.

Alpha irradiation shouldn’t be overly frightening. The smoke detectors in your house rely on americium-241 to give off a constant stream of alpha particles to a sensor. If smoke enters the detector, it softens the alpha signal and thus activates the alarm.

In several biotech columns, we have discussed a useful critical utensil for evaluating any new biotechnology method: has nature, via mutation or by accident, ever tried to pull off what the biotech company aims to do? Recall the Russians with Chuvash polycythemia, people who have a mutation that is the equivalent of them receiving Akebia’s ($AKBA) erythropoiesis drug at all times[6].

Another lesson from the Russians. On 23 November 2006, Aleksandr Litvinenko, a fugitive Russian secret service officer, died of acute radiation poisoning. He’d been staying at Millennium Hotel at Mayfair, London (Millennium is a nice business hotel, upscale but not bank-breaking, if you visit London). While Litvinenko was not precisely wearing a white hat, he had compelling evidence linking Vladimir Putin to Moscow apartment bombings in 1999 and the Kremlin to unseemly goings-on in Chechnya.

Aleksandr Litvinenko in full health (left) and dying a short time later in London (right)[7]

Aleksandr Litvinenko in full health (left) and dying a short time later in London (right)

A corrupt member of the bar staff at his hotel, working at the behest of Kremlin agents, placed polonium-210 into a cocktail that Litvinenko ordered. Polonium-210 is uniquely deadly in that it is an alpha emitter with a half-life of 138 days, and also in that it decays into lead. Litvinenko was dying proof, a living experiment that validated ATNM’s objective: marrow obliteration from alpha radiation has never been so definitively demonstrated as it was when Litvinenko lay dying. The toxicity was enough to wipe out Litvinenko’s bone marrow but also keep him from being rescued by stem-cell transplant, in that transplant couldn’t be performed and expected to take root until radiation had abated. Litvinenko first fell ill on 1 November with nausea and vomiting, and was hospitalized at University College Hospital, London, from which he was discharged in a body bag. Aside from supportive—and futile—transfusions and symptom control, nothing could be done for him because of the choice of radioisotope by the Russian spies targeting him.

Actinium is a rare soft silvery radioactive metal that tends to glow a soft blue because of the ionizing radiation it emits. It occurs in several radioisotopes, of which $ATNM intends to use actinium-225, an alpha particle emitter with a half-life of just 10 days. If isolated and quickly coupled to therapeutic monoclonal antibodies that will direct it to all lines of hematopoietic stem cells, actinium-225 can purge those cells, kill them off, but also disappear in a quick enough period of time to let doctors swoop in and reconstitute the patient’s bone marrow with stem cells. Actinium-225 is gone rapidly enough that patient toxicities from it in early stage trials are rumored to be quite mild.

All the way back in 2005, Actinium Pharmaceuticals, collaborating with the National Cancer Institute, began a phase 1 study[8] at Memorial Sloan-Kettering in New York City. The study sought to enroll, over several years, 18 patients with advanced myeloid cancers such as AML and myelodysplastic syndrome. This study, which wrapped up recently, was to treat the patients with a humanized monoclonal antibody to a cell-surface protein called CD33. CD33 is expressed on the surface of all cells of myeloid lineage. The antibody was coupled with special molecular linkers to actinium-225 with the idea of this as a strategy to ablate, to nuke, malignant cells.

This idea might strike you as not terribly dissimilar to the efforts of a company like Seattle Genetics ($SGEN), which is to say the making of antibody-drug conjugates. $SGEN bolts the cytotoxin vedotin onto therapeutic monoclonal antibodies to make a search-and-destroy anti-cancer agent whose only drawback is that vedotin occasionally leaches free of the antibody and causes toxicity by acting systemically. Actinium didn’t begin with the idea of purging bone marrow but rather of controlling diseases like AML by some means other than traditional chemical chemotherapy. They expended considerable effort to determine doses only to realize this wasn’t the true destination they had in mind. Sometimes you climb a mountain only to realize the true summit lies beyond, and that first you have to descend again to get to the zenith. Which is where Actinium now finds itself. Actinium’s first trials were with what is now known as lintuzumab, the anti-CD33 monoclonal, now trade-named Actimab-A.

Actinium’s goldmine lies with Actimab-B, a monoclonal antibody directed against CD45 and connected via linker to actinium-225. CD45 is a molecule expressed on the surface of all hematopoietic lineage cells and so could be used to purge or induce a patient for stem-cell transplantation by first ablating their marrow. Actinium plans to move this soon into phase 1. Actinium’s present pipeline is depicted below.

Actinium graphic new[9] Actinium graphic new[10] Product-Pipeline-V2[11]

Though I cringe at using the hackneyed term “Holy Grail,” for hematologic malignancies, Actimab-B is it and is backed intellectually by a supreme group of physicians. These aren’t some of the best minds in stem cell transplantation. These are the best minds in it, in the entire world: Richard Champlin, MD, of MD Anderson; Sergio Giralt, MD, formerly of MD Anderson and now at Memorial Sloan-Kettering; Estey; Hagop Kantarjian, MD, chairman of the leukemia department of MD Anderson. I have shared patients and publications with all of them, and all have a shared attribute: it’s almost impossible to get them interested in or excited by anything because they have seen so many would-be fabulous ideas come and go. That ALL are clustered as the godparents of Actinium constitutes the most auspicious basis a biotechnology company could possibly have.

Actinium is also quite interested in exploring antibody-radioisotope conjugates as targeted therapies for other forms of cancer, and this will be fruitful. While I don’t anticipate any of these will radicalize oncology, I anticipate these approaches taking their place as part of combination regimens for cancers.

I iterate patience and long sentiment on $ATNM, and would recommend considering entering or adding when a genuine share price nadir has established itself. I would caution that the database at is not a good place to follow Actinium developments as the company, much as I like it, has not done a good job keeping that site informed and current with its plans. Scuttlebutt within the industry is the Sloan-Kettering, MD Anderson and the Hutch are all keen on Actinium’s progress and are likely to invest endowment funds into it as it progresses.

And I sincerely hope this comes to fruition in time to help Brokaw. There’s a good chance it will. Kerouac a few weeks ago…Brokaw now. Is there some other celebrity we can reckon through a biotech investing lens and somehow rescue from the fogbank of history? Indeed there is.

Saving Flannery O’Connor

She was a doyenne for Southern literature, especially Southern Gothic, and in fact recent news of a second Harper Lee novel coming to press has done little more than summon O’Connor to mind. She was a person whose reclusiveness (she never left her dairy farm) oddly freed her and empowered her to make incisive, trenchant, piercing observations about people, motives and situations, almost as if her disinclination for life’s chatter allowed her to channel the essence of the chatter more clearly. O’Connor was born in Georgia in 1925 and permanently never fit in because she was a Roman Catholic in Baptist Dixie. If she was dowdy, she was not cranky: O’Connor was usually drop-dead funny. A screaming-red zinger from her:“Everywhere I go I’m asked if I think the university stifles writers. My opinion is that they don’t stifle enough of them. There’s many a best-seller that could have been prevented by a good teacher.” 

She dated little if at all, never married, and kept her mother as her closest company throughout her life. Pace O’Connor, when I hear people mindlessly discussing politics, I love to snark off, “A good mandate is hard to find,” but few get my thrust.

Flannery O'Connor, with "moon facies" from her lupus regimen already apparent[12]

Flannery O’Connor, with “moon facies” from her lupus regimen already apparent

O’Connor’s life was short: she died in 1964, only 39 years old, in a hospital in Milledgeville, Georgia. She was comatose. What went so horribly awry? Although what is written about O’Connor’s death is vague and tangential, it’s fairly easy to infer that as a result of systemic lupus erythematosus, O’Connor developed lupus nephritis, an inflammatory process that gradually claims kidney function and that befalls about half those with lupus. Although hemodialysis had recently been invented and put into clinical use, it’s unlikely to have been available in early sixties rural Georgia. Moreover, the medical dogma about dialysis at the time was that it should be used only as a temporizing measure to get people through acute renal failure that they were otherwise expected to survive. O’Connor would have needed lifelong dialysis and so would have been told she wasn’t a candidate for the new machine…so went the reasoning of the day. She likely became uremic, and from that comatose, whereupon she was let to pass in peace.

As of the late eighties and early nineties, rheumatologists treating lupus patients (nearly all of them poor women: lupus is disproportionately a disease of low socioeconomic class women, in whom it is felt to be triggered by excessive exposure to pathogens in an unclean environment) became activist about preventing kidney failure from lupus nephritis. This involved admitting patients for a “pulse” dose of the chemotherapeutic drug cyclophosphamide, very toxic to lymphocytes, and then aggressively loading the patient with iv fluid to prevent bladder bleeding from the cyclophosphamide. Lymphocytes, addled by lupus and attacking the kidney for no reason, cause lupus nephritis.

Mary Anne Dooley, MD, MPH, lead lupus nephritis investigator for Aurinia Pharmaceuticals[13]

Mary Anne Dooley, MD, MPH, lead lupus nephritis investigator for Aurinia Pharmaceuticals

While most patients with lupus nephritis can either be prevented from going into renal failure, or else have that renal failure delayed by decades, with immunosuppression, how best to accomplish this with existing drugs is a work in progress. I spoke above about my graduation. Several months before I graduated, I had completed PhD work and had to return to medical school to complete a few clinical electives. At the time, I was considering a career in rheumatology and autoimmune disease, and so first  took a four-week elective in that. It was then that I met Mary Anne Dooley, MD, MPH, a clinical instructor and rheumatology fellow, my mentor for the month. Dooley has gone on to have a renowned career and to be honored for the difference she has made in the lives of women with lupus. She has been a virtual one-woman army, and though trained at aristocratic schools like Yale, has always been especially capable of being as highbrow or as down to earth as whomever she is interacting with. Poor uneducated women have found her accessible, caring, and able to explain their illnesses to them in ways they grasp and remember. Dooley is the so-called triple threat in medicine: good at teaching, good at patient care, good as a researcher.

Dooley has devoted her career to lupus nephritis, and I recently discovered she is leading a major lupus nephritis study for a company that has my attention as an investment: Aurinia Pharmaceuticals ($AUPH). $AUPH is a $140M NASDAQ-listed Canadian company that owns global rights to voclosporin, an immunosuppressant with a compelling dossier.

Like its cousins cyclosporine A and tacrolimus (FK-506), voclosporin is a so-called calcineurin inhibitor.

Calcineurin is an enzyme with a pivotal role in lymphocyte-mediated immunity, and calcineurin inhibitors are among the strongest immunosuppressants medicine has. A short clinical anecdote will convey to you just how powerful they are.

Two weeks after I had officially become an attending physician, I was in charge of a massive inpatient hepatology service, all of the patients acutely ill and highly complex. On the service was a thirty-something Indian woman recently returned from visiting family in India. She’d begun getting jaundiced while there, and by exhaustive work-up clearly had aggressive autoimmune hepatitis. In essence, her body was rejecting her own native liver. She was on heavy doses of prednisone and azathioprine, but was deeply jaundiced and had recently lapsed into a coma from portosystemic encephalopathy for which she was getting purged with lactulose (see our column “Saving Jack Kerouac[14]” for a discussion of this biology). She wasn’t getting better. She was getting worse, and I rounded alone on her one evening so I could think without the distraction of my team. I genuinely worried she was at death’s doorstep: she’d not recognized anyone for 10 days, had been unresponsive for five days, and though she was stooling like mad into the bed, the case seemed hopeless. It would look bad, very bad indeed, if she died on me in my first month on the job.

I needed a trump card. I needed an ace in the hole. I needed a miracle. Even though it hadn’t been tried for autoimmune hepatitis, I felt as if I’d seen a burning bush. I grabbed her chart, did some calculations and ordered an iv loading dose of cyclosporin A for her. I was going to napalm her autoimmune disease.

The next morning, my team and I went in to round on her around 8:30. I told them I’d changed up her regimen, but that I wasn’t optimistic. We were by now accustomed to her torpor, her  eyes-shut wordlessness.  Each morning we went through the motions of addressing her  as if she could hear us, just in case.

There she lay, motionless, inert, jaundiced. I placed my mouth near her ear, and lightly touched her shoulder. “Good morning Mrs Chandra! How are you?,” I blared. I expected nothing.

She jolted awake; in an instant  she started in with the lovely circular nod with which Indians communicate. “Fine doctor! How are you?,” she blared back. She smiled and waved at me as if she were exuberant about being summoned back into this life.

My eyelids peeled back over my eyeballs and I dashed out of the room. Whoa! The team followed me. All of us stood outside her room, sealed the door, and belly-laughed riotously. It was the last thing we’d expected and so became among the very funniest things I have ever seen. Remember that line from The Blues Brothers?: “Glue?! Strong stuff!” Never forget it: cyclosporine A and drugs like it are strong stuff! They can raise the dead!

Cyclosporine is far from perfect and though now mostly supplanted by tacrolimus, it’s not perfect either. Both drugs have fussy kinetics. They have to be taken precisely at 12 hours intervals lest their peak and trough levels get askew. Women hate cyclosporine as many grow beards on it, while men tend to like the hair regrowth when they take it. A major issue with both is that when levels are too high, kidney function falters, a serious issue in any solid organ transplant recipient. Cyclosporine tends to favor gallstone formation. It also boosts blood lipid levels, while tacrolimus favors the development of type II diabetes. Voclosporin, a clever new drug belonging to Aurinia, is just as good an immunosuppressant, but cannot be fingered with any of these drawbacks.

In nearly every way in terms of side effects and ease of administration, voclosporin, a calcineurin inhibitor that differs in structure for cyclosporine by only one amino acid, is superior[15], both to cyclosporine and to tacrolimus. What a difference a single amino acid makes.

Let’s come down to brass tacks here. Irregulars, as I see this little-known company, now with a brilliant late-stage asset, it should now be commanding a market capitalization of $250M. The point is not so much that it is developing voclosporin for lupus nephritis, it is that it is choosing the most straightforward way to get the drug to market for any indication. Compared with running trials in organ transplant recipients, a lupus nephritis management trial is thrifty and speedy. Once voclosporin attains marketing approval for one indication, it can thereafter be prescribed by physicians for any indication, and managing immunosuppression with voclosporin is so much easier than with the other two calcineurin inhibitors, I can see voclosporin replacing them and raking in billions for Aurinia. The company estimates that voclosporin use in lupus nephritis alone could command  $3B in revenue by 2019! The management of patients on voclosporin is simpler: blood levels are not warranted, and patients no longer need to be fussy about taking a pill at precisely, say, 7 am and 7 pm (erring by even 15 minutes can thrown off pharmacokinetics). Voclosporin is dosed twice daily, but is forgiving and doesn’t have to be taken every 12 hours.

We’ve discussed Aurinia in the threads, and for those not yet invested, I recommend reviewing the company’s March 2015 presentation[16] with its many helpful graphics and tables.

Aurinia’s present clinical trial began enrolling in the summer of 2014[17]. It seeks 222 patients to be randomized to either of two doses of voclosporin or placebo, and this treatment will be against a background of treatment with the immunosuppressant mycophenolate mofetil (CellCept) and prednisone. The study is enrolling at 56 sites, and while most are in the continental U.S., host countries also include Bangladesh, Belarus, Bulgaria, China, Georgia, South Korea, Poland, Russia, Serbia, Singapore, Spain, Sri Lanka, and Ukraine. While I am none too keen on the Russian and Ukraine sites, where medicine can seem medieval, this is a big enough array of patient ethnicities to validate voclosporin and a large enough number of sites that this trial should progress quickly. Dwell time in the study is 24 weeks to the primary endpoint, and to my knowledge Aurinia has not yet given an enrollment update.

For sake of full disclosure, I feel it is fair to mention that other companies have other agents in development for lupus nephritis, but instead of belaboring them let me summarize them: none have the general immunosuppressive applicability of voclosporin, and marketing authorization for voclosporin in lupus nephritis is the low hanging fruit for Aurinia. Their goal is to get voclosporin to market. Most physicians have not heard of voclosporin, but when they hear of an agent as effective as cyclosporine A and tacrolimus but with none of the side effects for patients and headaches for physicians, they will become “early adapters.” Voclosporin will soon find its way into transplant management. I reckon Aurinia to be an underappreciated, little talked about Canadian company just sitting there, waiting for canny Irregulars to grab shares and hold them til the broader market wakes up. It’s like a shiny bauble in your favorite store of top quality, one on which the clerk has erred and placed far too cheap a price sticker. Say you heard about it first at Stock Gumshoe. Remember, voclosporin has already shown effectiveness in phase 2a. It’s just coursing through phase 2b to settle on the best dose. Nothing in biotech is for certain, but this play has far less risk associated with it than most.

Seven Reasons to Stay Long in Achaogen ($AKAO)

Lawrence McKenna, a J.D. Irregular who truly helps keep this site spinning on its axis, oriented and bustling by being relentlessly clear and logical, recently posed a few questions about carbapenem-resistant Enterobacteriaceae (CRE). I found this useful because the context of clinical problems like this often means there are things some of us here know that others don’t know. Those who do know don’t realize the others don’t, and may come across as functioning in coded secrets. Which is a shame and not intended.

If you read enough media assertions about CRE and about antibiotics and the bugs they are intended to kill, you can come away with a sense, a false one, that this is an American problem brought on by American bloated excess, a mindset nicely critiqued by satirist Cintra Wilson in her irreverent, funny commentary on American life  A Massive Swelling. But the American medical system has spent the last decade really getting its act together on antibiotic overuse, and three major hotspots for CRE come to mind: India, Brazil and Greece…all famous for non-transparent ways, and places where antibiotics are prescribed with extreme casualness by doctors. India and the Indian subcontinent are a region of immense poverty and infrastructure inadequacy. Let’s be blunt: Enterobacteria are gut bacteria, and CRE are gut-dwelling bacteria that have become resistant to everything. The UN and WHO have estimated that because of global poverty, one billion of the world’s seven billion people defecate in public, in the open, and not in toilets every day. CRE is increasingly being isolated in public waterways in India and Brazil.

In talking about resistant bugs, however, let’s walk back one possible misperception many have. Resistant bacteria are rarely more virulent bacteria. Bacteria that are drug resistant are not necessarily intrinsically more deadly to the person infected. They are harder to kill and so act longer, but rarely do they have genetic markers encoding more of the tricks that bacteria have to be highly pathogenic (such as encoding destructive proteinases). Hackles rise at the mention of MRSA, but it’s not necessarily more infectious or destructive to tissue than sensitive  Staphylococcus aureus is.

Medicine now desperately seeks iv antibiotics to kill CRE, and such antibiotics do affect the GI bacterial population to a degree because they tend to get excreted, at least partially, via feces. Despite this, however, an antibiotic definitive for CRE is still likely to leave the GI tract colonized with CRE, possibly permanently, and that’s OK. The membrane lining the GI tract makes all the difference: on THAT side of the gut wall, they are part of the biome and harmless, and on the other side of the gut wall, they are deadly, often in minutes, whether they resist carbapenems or not. Hospitals are very imperfect environments, and sick people often have to be bedpanned for defecation. This process will always sow fecal bacteria on the bed, onto skin, onto instruments, onto iv tubing. When the subject of hygiene comes up, I suggest to people that if they defecate in the bathroom where they brush their teeth, that the toothbrush remain covered or in a drawer lest it get colonized with fecal bacteria. Left out, it always does. If I ever have a made-to-spec home, I will insist that its facilities be designed with certain European sensibilities: a true water closet that contains only a toilet (a true loo, in other words), and shower and sinks placed in a separate room.

Which leads me to Achaogen ($AKAO), the San Francisco antibiotics developer in which I have had a long position since last spring. Shares have underperformed, and many have lost faith. I am staying in and here is why.

(1) I recently reviewed the company’s basic science again. I iterate that I predict success for plazomicin against CRE. Plazomicin is an aminoglycoside, a deadly class of antibiotic limited usually by the fact that it harms the host’s kidneys and ears in high doses. Plazomicin has none of these dose-limiting toxicities. It can be given in high doses, high enough to kill any insolent Gram-negative.

friedland of achaogen[18]

He da man. Ian Friedland, MD, Chief Medical Officer of Achaogen.

(2) Want to predict the future? Shakespeare wrote that past is prologue. Chief Medical Officer Ian Friedland, MD, has a history of success, task accomplishment, and goal achievement in developing antibiotics. He was the secret to Cubist’s enormous success, and decamped from there for Achaogen in the run-up to Cubist’s sale to Merck ($MRK). Friedland was a creator of shareholder wealth at Cubist.

(3) The company’s present phase 3 trial will be assessed by special protocol at the FDA, which means that success in this trial is sufficient for marketing authorization. BARDA, a development arm of HHS, has already reviewed plazomicin, predicted success, and given $AKAO massive cash for one reason: to get plazomicin to market. Folks, there’s not a lot of “resistance” among agencies and factions for this drug getting to pharmacies.

(4) The comparator antibiotic, colistin, is an inferior and badly-tolerated drug. Imagine a Snidely Whiplash-style cartoon in which the villain says, “James, bring us The Compound,” and the victim screams, “Oh no! Not The Compound! Anything but The Compound!” I shouldn’t be making light of it. One Irregular family lost someone dear to CRE last year in India, but maybe some levity will help discharge the claim upon them that their grief holds.

(5) This study is open-label. It is not blinded. This places AKAO in the unique position of being able to shepherd each plazomicin-treated patient through….AKAO can check in on them daily at the study sites, anticipate problems and try to stave off difficulties. Friedland is an infectious disease physician who can review drugs, doses, labs and imaging studies and micromanage the trial patients. Does this give the plazomicin patients an unfair advantage? You bet it does! This trial CANNOT be blinded, but ethically since it is open label, it’s in the patient’s interests, part of Good Clinical Practices guidelines, to see to it that study patients (especially overseas) get the best care. Friedland can intervene as an invisible hand, and he will have biases toward seeing that plazomicin-treated patients are managed with kid gloves. This is just the nature of the game in open label trials.

(6) Since the company recently openly acknowledged that enrollment is lagging, they are clearly at least considering adding more sites. Goes a saying: Many are called, few are chosen (bowdlerized by an undergraduate friend of mine into “Many are cold, few are frozen.”). Finding CRE-infected patients is not difficult, but finding suitable patients for this trial is. The company must identify patients likely to survive if the CRE is subdued, which means that their comorbidities are limited. I’ll be monitoring databases to see if new sites are added.

(7) No promises, no guarantees, but I feel that the prospects for plazomicin are auspicious enough that when the company does an interim analysis (say, after 50 percent enrollment), they may find it so distinctly superior to colistin that continuing the trial is not ethical. Trial is halted. NDA goes to FDA. $AKAO shares explode. Irregulars, already a happy lot, make merry, crack wise about having known it all along.

Back to Larry’s original point: we may be entering an age when people being hospitalized for whatever reason need feces assessed–upon arrival— for whether they are already CRE-colonized…in order perhaps to anticipate trouble, invoke sturdier hygiene, have lower thresholds for antibiotic wariness in treating them if they become septic. All worth pondering in that we now routinely manage inpatients colonized with MRSA differently.

Unveiling a New Baby Biotech for your Consideration

I want Gumshoe Biotech to be a banquet for investors, and spend an enormous amount of my personal time sifting through biotechnology companies and developments to find new situations that warrant your attention. Don’t feel left out if you don’t invest in every long situation that interests me, but at the same time follow the threads and keep powder dry. I want you to learn the biology of disease, and I want you to become a discerning reviewer of biotech plays. I will not rest until this is the best biotech forum on the internet. But above all else, I want you to profit, to make rewards for your learning efforts. And I think I’ve found another new novel long idea.

This choice veers off the scripted beaten path in that it’s a veterinary pharma play. Moreover, it may put you off when you hear of its home country, a place most of us are observing a moratorium for investing in. But hear me out. This story has considerable merit.

Among the commonest reasons pet owners visit veterinarians is for treatment of canine osteoarthritis. This is degenerative wear-and-tear disease that afflicts a majority of dogs as they age, many of them predisposed to it because of hip dysplasia. While many will assert that animals can’t tell you about their discomfort, in fact they do a fine job of it via their behavior, via gait, via what they avoid, even via eating habits, which fall off with major discomfort.

People with badly osteoarthritic joints can have them replaced. Moreover, osteoarthritic knees can be viscosupplemented with injected “lube” agents like SynVisc,  treated with intra-articular steroids, or managed with novel durable anti-inflammatories like the agent in development by Ampio Pharmaceuticals ($AMPE), based on an immune-suppressing peptide derived from serum albumin. None of these are options for dogs, however, who cannot be counted on to cooperate for injections into joints and for whom such methods have only been explored to limited extents. Dogs with osteoarthritis pain are mostly managed with agents like the NSAID carprofen (Rimadyl). Dogs sometimes get benefits from the same nutritional supplements that people take for joint disease: glucosamine, chondroitin sulfate. These two substances are so-called glycosaminoglycans, an interesting class of  “slick ’em” molecules that have structural features of both proteins and carbohydrates, and are often laden with water-solubilizing moieties life sulfate groups.  If you put a dab of glycosaminoglycan between two fingers, it would be ultra-slippery, mildly viscous, not oily, and would enable you to stretch out a thin bead of it between the two fingers.

Pentosan polysulphate is an interesting synthetic carbohydrate polymer (see structure) that has been shown in dog studies to have three major properties:

(1) it limits the breakdown and atrophy of joint cartilage by inhibiting a cartilage-destructive enzyme called aggrecanase.

(2) it promotes growth of new, remodeling cartilage into osteoarthritic joints

(3) it helps synovial fluid in the osteoarthritic joint revert from being watery and thinned down back toward a more thick, gooey state that eases joint pain.

Pentosan polysulfate[19]

Pentosan polysulfate

Pentosan polysulfate’s proprietary name is Zydax, and Parnell Pharmaceuticals ($PARN), a NASDAQ-listed Australian veterinary company with market capitalization around US$60 million, owns major global rights to it. Zydax is administered by subcutaneous injection, and in Australia and New Zealand  is in heavy veterinary use for arthritis in dogs and racing horses. A brief Zydax informational video is on this Parnell webpage[20].

In September 2014, Parnell reported results[21] of a proof-of-concept phase 2 study of Zydax. Approval processes for veterinary agents vary among nations. In the US, they are in the wheelhouse of the FDA. In view of the FDA’s perennial allowance of use of antibiotics and beta-agonists in livestock, one may rightly wonder the extent to which the FDA sticks to safety and efficacy considerations for animal drugs, but it’s fair to say there’s a semblance of it, perhaps not as staunch as for human agents where the financial stakes are higher.

$PARN shares 1-year chart[22]

$PARN shares 1-year chart

Parnell IPO’d in June 2014, and frankly since then its chart (see image at left) has been ugly. But this is not intrinsically the case with veterinary plays: look at the chart of Zoetis ($ZTS), up roughly 100 percent in the past year. Parnell’s chart may be bottoming here, especially in light of upcoming news, making now an attractive entry point. Of those who would say that $PARN is problematically a <$100M market cap company, here is what you need to know: Population of Australia 2014: 22.9 million. Population of United States 2014: 318.9 million. Read ahead and you’ll grasp why this is relevant for Parnell’s market cap and near-term share price.

In May 2015, Parnell will announce data from its pivotal American study of Zydax for canine osteoarthritis. Despite what you have read about the Coriolis effect, I have photos and video from my travels proving that water swirls the drain no differently in the Antipodes from here. Put another way, I don’t think it is asking to much for you to accept that the physiology, the nature of disease, in Australian dogs is similar to that of American dogs. Which means that Parnell’s data will be positive enough to support marketing authorization in the US by the FDA, with a tentative American launch of Zydax in early 2016.

Curious about the practical economics of Zydax and giving it to dogs? I was, and I spoke with two veterinary clinics Down Under to get their take on it. When a veterinarian in Australia diagnoses a dog with osteoarthritis, (s)he now raises the prospect of dosing with Zydax. The pet is generally “loaded” with the drug via four weekly injections. Each injection costs about A$40. The pain relief of this lasts anywhere from four to six months, whereupon the animal owner is recommended to get another round of three to four injections. More cumulative relief accrues with time on Zydax, and overall, about 80 percent of Australian dogs treated with it get enough relief to justify continuing Zydax, and that dog owners are genuinely satisfied with it. I wasn’t able to get clear data on price mark-up for the injection, but veterinary mark-up ranges from 1000 percent for vaccination to 100 percent for expensive drugs. Veterinarians do, of course, have some vested interest in recommending Zydax. I tried to get a clear sense of the extent to which Zydax use supplants a need for other agents like Rimadyl. The answers were that this has to be taken case by case and that many dogs on Zydax might be Rimadyl-free in the summer but in need of Rimadyl for additional relief during winter….this varies considerably, and no data are published on it. Zydax is safer than Rimadyl without question: as with NSAIDS in people, dogs can get gastric ulcers and renal insufficiency from it. Zydax seems to have no side effects.

My contention is that accession to the American market with Zydax can easily push $PARN market capitalization to five times its present level. An improving, stabilizing American economy with cheap petrol has pet owners with more disposable income. Parnell itself is in none-too-shabby shape, moreover, as regards its pipeline. The company has interests in large-animal medicine and veterinary breeding. While I realize that some readers may view Parnell as not in the big leagues of human biotechnology plays, I would contend that veterinary medicine is a dollhouse version of human medicine, and that Parnell is uniquely suited to surge from here, especially as a share price nadir forms. Whether small-cap or mid-cap or large-cap, a five-fold expansion in market cap is a five-fold appreciation in your investment.

Parnell Pharmaceuticals pipeline[23]

Parnell Pharmaceuticals pipeline

You may well be wondering: if Zydax works well for dogs and horses, is there a reason it wouldn’t help humans? This is an excellent point. In a 2010 Japanese study[24], it helped 20 Nagasaki patients with bum knees to regrow cartilage. We have on hand here a certain irony that I am sure is not wasted on you: a Australian veterinary company that may be making better inroads into human medicine than Antipodean biotechs proper are (not that beating those would be hard!). Others who read here are more adept at sussing out patents and who owns what rights to what indication, but from my view, Parnell would certainly benefit if it chose either to pursue a human indication or to license the same to another firm. When I assess a biotech for investing in it, I want to see a trifecta of solid sound molecular data (that pentosan polysulfate should help with degenerative joints…this makes good sense), clinical data (we have said it here many times: Mother Nature can be a total b-word rhyming with rich and can never be predicted: not all the glitters in a lab is clinical gold), and actual clinical need. An osteoarthritis indication? Whether you’re man or beast, that plays in Peoria, and Parnell is a great place to park a parcel of speculative pounds.

Disclosures: My column are journalism leavened by opinion, not personal investing advice. Of companies mentioned today, I have long positions in $ATNM, $AUPH, $BLCM, $BLUE, $KITE, $KPTI, $JUNO, $NVS, $PARN, $TGTX, $TLOG, $TRIL. I have no short positions or options, and will refrain from trading in any named stock for at least 7 days after this column appears. Although I endeavor to present all relevant facts material to making an investing decision, space considerations and technical complexity mean than not all I know about a company can be presented. Private questions may be directed to me via No creatures great or small were harmed during the production of this Gumshoe Biotech column.

  1. here:
  2. [Image]:
  3. [Image]:
  4. [Image]:
  5. [Image]:
  6. Chuvash polycythemia, people who have a mutation that is the equivalent of them receiving Akebia’s ($AKBA) erythropoiesis drug at all times:
  7. [Image]:
  8. phase 1 study:
  9. [Image]:
  10. [Image]:
  11. [Image]:
  12. [Image]:
  13. [Image]:
  14. Saving Jack Kerouac:
  15. is superior:
  16. March 2015 presentation:
  17. enrolling in the summer of 2014:
  18. [Image]:
  19. [Image]:
  20. Parnell webpage:
  21. results:
  22. [Image]:
  23. [Image]:
  24. study:

Source URL:

What These Icons Mean