Convert Catalysts into Profits: Sagient Research's Edward Stopke

Source: Peter Byrne of The Life Sciences Report  (1/22/15)

The biotech sector is teeming with companies racing to bring the hot new drug or therapy to the marketplace. But realistically assessing the therapeutic potential of pipeline products is the healthy approach for selecting a winner. In this interview with The Life Sciences Report, Edward Stopke of Sagient Research unveils his list of companies with catalytic moments in the making.


The Life Sciences Report: What types of catalysts affect biotech stocks?

Edward Stopke: The primary catalyst affecting a biotech stock is trial data, especially large Phase 3 trials that test the compound against a comparator. The other main catalysts emerge from regulatory interactions with the U.S. Food and Drug Administration (FDA) or the European Medicines Agency. Product safety rulings can drastically affect the trajectory of a biotech stock, of course. But investors need to watch a company's interactions in meetings with the advisory committees serving the governmental agencies. These interactions can presage whether or not the agency will eventually approve the drug.

TLSR: Are there economic catalysts that affect the life sciences sector as a whole?

ES: Pending changes in pricing policies for therapies can catalyze shareholder actions. Historically, many companies have been able to price high without too much backlash from payers. Companies have typically charged less for treatments with large patient populations, and the more expensive treatments target smaller numbers of patients. But during the last year, some high pricing became less sustainable. I am thinking of Gilead Sciences Inc.'s (GILD:NASDAQ) pricing for Sovaldi, its treatment for hepatitis C virus (HCV), which caused quite a stir with insurers and governments alike. Companies generally argue that high prices are in line with previous treatments and that the products offer superior efficacy. But the sheer number of eligible patients for a high-priced drug can strain entire healthcare systems. I predict that during 2015 payers will force prices downward, not just for highly prevalent diseases such as HCV, but in all therapeutic markets, stem cells included.

TLSR: What catalysts are coming up for stem cell companies in 2015?

"Athersys Inc. completed enrollment in its Phase 2 stroke study before the new year, so the first 90-day results will emerge in Q1/15E."

ES: Cytori Therapeutics Inc. (CYTX:NASDAQ) is developing a stem cell therapy from fat-derived stem and regenerative cells. It has Phase 1/2 data for heart disease slated for release in Q1/15. Vericel Corp. (VCEL:NASDAQ), which recently changed its name from Aastrom Biosciences Inc., has Phase 2 data expected in H1/15 on tissue repair cells for heart failure. Athersys Inc. (ATHX:NASDAQ) is developing a stem cell product called MultiStem.

TLSR: What are the projected applications for MultiStem?

ES: Athersys is studying MultiStem in human trials for stroke, myocardial infarction (MI) and graft-versus-host disease (GvHD). It is in Phase 2 development for stroke and early Phase 1 for MI and GvHD. The firm completed enrollment in its Phase 2 stroke study before the new year, so the first 90-day results will emerge in Q1/15E. Athersys plans to progress its MI program into Phase 2 in Q1/15. The company is looking for a development partner to further its program. Announcing a partnership deal would signal investors that experts have faith in MultiStem, and Athersys' stock price would respond positively.

TLSR: Who else do you like in the stem cell space?

ES: bluebird bio Inc. (BLUE:NASDAQ) is developing its Lenti-D product, which is more of a gene therapy product, but does consist of the patient's own stem cells. These are modified by the lentiviral vector to deliver genetic material into the cells themselves. There is a lot of hype floating around this company. It is currently in Phase 2/3 studies for a rare genetic disease, adrenomyeloneuropathy, which is similar to multiple sclerosis. Hopefully, we will see data for that pipeline product next year.

TLSR: What other therapeutic spaces do you like for strong catalysts in early 2015?

ES: Neuralstem Inc. (CUR:NYSE.MKT) has a major depressive disorder product in clinical trials code named NSI-189. It is an oral compound designed to stimulate neurogenesis of the hippocampus, which could potentially reverse the atrophy seen in depression and schizophrenia. So far, we have only seen earlier preclinical and Phase 1 data, but those results have shown meaningful reductions in both cognitive and depressive symptoms in patients who are on active therapy. And the treatment has been well tolerated.

TLSR: How does Neuralstem's product differ from competitive products?

"The research synergy with Gilead and Merck could prove fruitful for Rexahn Pharmaceuticals Inc. in terms of acquisition potential."

ES: There are many treatments on the market for treating depression, of course. Most of these products, however, are small molecules. They work by inhibiting the reuptake of a combination of norepinephrine, serotonin and/or dopamine. Neuralstem's treatment uses the patient's own neural stem cells to protect against damage to the nervous system itself, and to repair existing damage, too.

TLSR: What expertise do Neuralstem's managers bring to the marketplace?

ES: Neuralstem's chief scientific officer and senior vice president of research previously worked at the National Institutes of Health's Laboratory of Molecular Biology, where they researched the isolation of human neural stem cells.

TLSR: Do you see any other potential catalysts for Neuralstem?

ES: If all goes well, Neuralstem's NSI-189 product will move into Phase 2 development in Q2/15, so that is a good advancement opportunity. We should see topline results in the early part of this year for the firm's other stem cell products, including NSI-566. That treatment is currently being studied in a Phase 2 trial for Lou Gehrig's disease.

TLSR: Who is making waves in the cancer treatment space?

ES: There is a lot of excitement surrounding the chimeric antigen receptor (CAR) T-cell immunotherapies that engineer the patient's own immune cells to target tumor-specific molecules. Kite Pharma (KITE:NASDAQ) is developing its CAR T programs for hematologic cancers, and its KTE-C19 program has shown high response rates in earlier Phase 1/2 studies. Kite just bought a licensing deal with Amgen Inc. (AMGN:NASDAQ). The deal is related to the next generation of immunotherapies based on Kite's cell therapy platform. Celgene Corp. (CELG:NASDAQ), Novartis AG (NVS:NYSE) and Juno Therapeutics (JUNO:NASDAQ) are working on similar programs.

Rexahn Pharmaceuticals Inc. (RNN:NYSE.MKT) has a couple of clinical-stage oncology candidates. Its most advanced compound is known as Archexin. It targets the PI3K pathway and is being studied in a Phase 2 trial for renal cell cancer. While we have not yet seen data yet from this compound, last year the FDA approved Gilead's Zydelig for lymphoma, which has a similar mechanism of action. Other large pharma companies, such as Novartis and Merck & Co. Inc. (MRK:NYSE), are studying similar compounds in various oncology indications. The research synergy with these big firms could prove fruitful for Rexahn in terms of acquisition potential.

TLSR: I see that Rexahn recently appointed Richard Rodgers to its board. What does Rodgers bring to the company?

ES: He brings experience with in- and out-licensing, as well as mergers and acquisitions. He was previously with Abraxis BioScience Inc. until it was acquired by Celgene. He was also with MGI Pharma Inc., which was acquired by Eisai Inc. (ESALF:OTCPK).

TLSR: What types of specific catalysts are likely to affect Rexahn's stock price?

"If all goes well, Neuralstem Inc.'s NSI-189 product will move into Phase 2 development in Q2/15, so that is a good advancement opportunity."

ES: If Rexahn can harness Rodgers' experience to secure a licensing deal for Archexin, its stock price would obviously respond positively. It has a few other early-stage compounds in various tumor types. If any of these products survive later-stage studies, the market will provide rewards. We could see some Phase 1 data from Rexahn's RX-5902 and RX-3117 compounds in the near future. These are being studied for very solid tumor indications.

TLSR: What other biotechs with emerging catalysts do you follow?

ES: I like quite a few smaller companies, like Raptor Pharmaceutical Corp. (RPTP:NASDAQ), Celator Pharmaceuticals (CPXX:NASDAQ), Sarepta Therapeutics Inc. (SRPT:NASDAQ), Celldex Therapeutics Inc. (CLDX:NASDAQ), PTC Therapeutics Inc. (PTCT:NASDAQ) and Rockwell Medical Inc. (RMTI:NASDAQ). Each of these has a unique pipeline.

TLSR: Can you synopsize where each of these companies is at in the pipeline?

ES: Raptor Pharmaceutical's main compound is Procysbi. It is already on the market. It was approved in 2013 to treat cystinosis, and it is one of only three such treatments approved in the U.S. Raptor is also studying Huntington's disease and nonalcoholic fatty liver disease, the latter being of notable interest due to its large market size and connection to obesity. Raptor is expecting results from its larger Phase 2b study in H1/15.

Celator Pharmaceuticals is developing CPX-351 for leukemia. It began Phase 3 development in late 2012 with about 300 patients. The first results from this study are expected sometime in Q2/15.

Sarepta Therapeutics has a number of compounds. The most advanced is eteplirsen, developed for a type of muscular dystrophy. We have seen clinical data on it, and it is fairly good, although taken from a small subset. There is a lot of speculation about whether the FDA will accept Sarepta's new drug application (NDA) and what kind of data the agency will require for approval. Sarepta expects to file around the middle of this year. A successful filing and acceptance could move the stock price nicely.

PTC Therapeutics is developing its ataluren compound for muscular dystrophy. The company submitted a rolling NDA to the agency in late December. It is not yet a complete application, but it does allow completed portions of the application to be submitted and reviewed on an ongoing basis. PTC hopes to complete the application in late 2015. We should see the first results from its larger Phase 3 study toward year-end 2015.

Celldex Therapeutics' most advanced candidate is rindopepimut, which is being developed for glioblastoma, brain cancer. Topline results for a large Phase 3 are expected in the middle of this year. If the results prove positive, Celdex shareholders will benefit, as rindopepimut is the firm's main compound in a large treatment space.

Rockwell Medical has a single compound called Triferic. It is being reviewed by the FDA as a treatment for iron deficiency in chronic kidney disease patients. The agency is expected to give a decision on provability by the end of this month.

TLSR: Aside from handicapping the pipeline products, what qualities do you look for in a firm?

ES: It is vitally important to understand the capital structure of a company. As far as a company's potential staying power, I look at the general platform. Is it a stem cell platform? Is it a genetic therapy type of platform? Is it a completely new mechanism of action? Is it something that could be used in various types of diseases?

TLSR: Sounds good, Edward. Thank you for speaking with us.

ES: Thank you, Peter.

Edward Stopke Edward Stopke is a financial analyst with BioMedTracker and has been with Sagient Research for three years. He is responsible for day-to-day analysis with the BioMedTracker analyst team, and works with the scientific analysts to determine the financial and market impact of early-stage drugs. In his time with Sagient, Stopke has gained an understanding of the pharmaceutical and biotech development process to better develop revenue models for various indications. Stopke received a bachelor's degree in economics from San Diego State University.

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1) Peter Byrne conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Rexahn Pharmaceuticals Inc., Neuralstem Inc., Athersys Inc. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Edward Stopke: I own, or my family owns, shares of the following companies mentioned in this interview: Gilead Sciences Inc., Sarepta Therapeutics Inc. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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