Positive Phase II Data From CDX-110 In Glioblastoma Results In High Expectations For Celldex (CLDX); Analyst Expects A Double Into ASCO 2010
April 7, 2010 - The Wall Street Transcript has just published Biotechnology & Pharmaceuticals Report offering a timely review of the Pharmaceuticals sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Dr. Jonathan Aschoff, Ph.D., is a Senior Equity Analyst at Brean Murray, Carret & Co., LLC. Prior to joining the firm in 2003, he held positions as a Senior Biotechnology Analyst at Friedman, Billings, Ramsey & Co., Inc., and at what is now RBC. He also served as an Analyst at Sturza Institutional Research. Prior to Wall Street, Dr. Aschoff was a Research Technician at New England Medical Center. He earned a Ph.D. in molecular biology and microbiology, as well as a B.S. in biology from Tufts University.
TWST: How important to you is company management?
Dr. Aschoff: The earlier the assets, the less I care. But it matters more when it comes to commercializing something, and then I care more. Early on it is only about what the drug does, and that's in the hands of the patients and the people at the clinical trial sites. Management then gets more involved as you get into writing up the application efficiently and considering if management is likely to give a good retort to anything that might be argued against them at an FDA panel. Are they now likely to get a partner on good terms? Can they actually sell this treatment alone or with a partner? That's really what brings more to bear on management. The pivotal data, relatively speaking, is more out of their hands.
TWST: Any other stocks?
Dr. Aschoff: There is a company called Pozen (POZN) that I like quite a lot. I think that partner Glaxo (GSK) will sell Treximet much more aggressively than before, given the new material financial incentive in place for Glaxo's sales force, and therefore it will no longer be a flat-selling drug. I think that there will be an unexpectedly increasing sales ramp and therefore my peers will have to raise their estimates. On April 30 the FDA should easily approve arthritis pain drug Vimovo, a drug that is partnered with AstraZeneca (AZN), and this event will trigger a $20 million milestone payment. A month or two later, Europe should also approve Vimovo, and those three events, should they all go the way I think they'll go, will create a material change in the company's value.
TWST: Are there other companies you want to mention that you have positive ratings on?
Dr. Aschoff: There is Celldex (CLDX) and Keryx (KERX). Celldex is a company with several cancer vaccines as well as antibodies for cancer. It's fully an oncology company; they are going to have a lot to show at this year's ASCO, and the stock has done remarkably well into the last two ASCO conferences due to positive Phase II data from CDX-110 in glioblastoma. This is about a $5 stock that hit $20 into the 2008 ASCO, $14 at last ASCO, and I'm looking for at least a double from here into ASCO 2010, when they show their best cancer results generated between last year's ASCO and the current. Buying CuraGen was a useful acquisition, mostly for the cash it had but also for one Phase II antibody for breast cancer, and there's also a whole bunch of pre-clinical antibodies. And maybe they will develop some, but more likely and hopefully they'll try to partner some because their clinical plate is rather full at present with CDX-1307, CDX-011 and CDX-1401.
TWST: Tell us about Keryx.
Dr. Aschoff: I've covered Keryx for six years and it's really nice to see perifosine, their Akt-inhibiting cancer drug and main value driver, find two niches where it had positive data in multiple myeloma and in third-line colorectal cancer. In multiple myeloma patients who are failing Velcade, the most widely used drug in multiple myeloma, perifosine resensitizes them to Velcade. Perifosine is also in third-line metastatic colorectal cancer, where it beat Xeloda in a head-to-head trial.
So after looking for a niche for this drug ever since I knew the company in early 2004, they have found two really definable areas where perifosine is likely to have a measurable benefit that's worthy of approval, and both trials have received an SPA from the FDA - multiple myeloma Phase III is ongoing; Phase III in third-line colorectal cancer will start soon. Perifosine is the more valuable of their two drugs, and clearly the market cap of Keryx does not capture the success of just perifosine. So that's the upside because $153 million in market capitalization does not capture the upside. Keryx also has an SPA for Zerenex, its hyperphosphatemia drug, which will start Phase III soon. Importantly, Keryx has enough money to fund these three Phase III trials.
TWST: What factors do you look at when selecting companies you want to follow?
Dr. Aschoff: I generally seek companies having a relatively near-term catalyst and a stock that is not efficiently priced given the outcome I expect. It's got to be undervalued for a positive event I think is coming or overvalued for a negative event. It doesn't matter if it's going to be a good event or a bad event, as long as it's inefficiently priced and there is a meaningful catalyst coming within a time frame that appeals to investors.
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