December 16 Biotech Update

We have a decent news morning but I want to focus on three and can do so with a Western theme: the good, the bad, and the ugly.
1. The good: Clearly this is AMRN. We got an early Christmas present with an expanded label. They did not get the primary prevention but also seemed to get a little more than the base case. The way I sort of think of it was that they received secondary prevention in the broader population but primary prevention among diabetics. So better than expected but not the best case. As I have been saying for awhile this is really not as important as it has been billed. The FDA really only approves where a drug can be actively marketed and not where it can be prescribed. Revlimid was selling billions in front line MM before it was ever approved in front line MM. The EU is different as it curtails where it can be sold. So if doctors want to prescribe in primary presentation and insurance covers it, then it is fine. Clearly it would be better if they could actively market in primary prevention but at this point most everyone knows about the drug and so we will likely see some off label use in primary presentation even with this label.

2. Where does AMRN go from here? I think people are going to focus IP issue and the EU plan. An IP settlement would likely revalue the stock higher as it removes the last real overhang of the stock and I think that happens at some point but the timing is never clear. We still need to know their EU plans. Will they expand the salesforce and market themselves (better for longer term valuation but not near term) or will they sign a partnership for the EU (worse for longer terms but better near term). Again I am not sure the timing of this but we likely get definitive information some point in the next 6-12 months. Other than that it is simply watching revenues move higher.

3. The bad: BGNE. They failed their head to head trial against ibrutinib in WM. This has been touted as a big catalyst even though I never saw it as such. A head to head trial in an indication where the ORR is 80%+ and you are looking for superiority is really difficult. Zanu did what I expected which was numerically better but not statistically significant. There also seemed to be a safety benefit with fewer discontinuations due to AEs (4% vs 9.2%) and fewer fatal AEs (1% vs 4.1%). So overall the drug looks marginally better in terms of efficacy and safety but for some reason they set up a really high bar in trying to get statistical superiority and they failed. The stock has been selling off into this release so I suspect this has been suspected and so the stock reaction is relatively muted. This might actually be decent level to add or start a position but I need to look into the catalyst flow in the next 12 months before doing anything.

4. The ugly: WVE. They failed their DMD trial. I think people have been assuming that the protein expression bar is low and easy to meet in DMD and WVE showed that it is not the case. They did not present a lot of details but we know it must not even be close as they are stopping development of the drug. This is good for SRPT as it would have been some competition in the exon skipping market but now SRPT has a large lead can basically own the space. In terms of WVE they still have an HD trial to read out but now people are thinking about the read-through given the failure in DMD. While it is clearly a different disease (HD versus DMD) one has to lower the HD odds a bit if not a lot.
I will end it here and hope that everyone is having a good start to the week.

Disclosure: Long AMRN, BGNE, and SRPT.

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