Nektar Therapeutics: Old Company, New Drugs

Near the end of March 2017, Nektar Therapeutics ($NKTR) will present data from their most recent Phase 3 trial. Nektar has already brought two drugs through the entire FDA process, so this is not their first rodeo.

As I’m sure you’ve heard, prescription drug abuse is becoming a huge problem across the world. Nektar’s newest drug, under the working title NKTR-181, is supposed to be an abuse-resistant opioid. If things go well, NKTR-181 will start to take market share away from drugs like oxycodone and morphine.

The success or failure of the NKTR-181 Phase 3 trial will hinge on two things:

  1. Whether it is at less risk for abuse than other opioids
  2. Whether it can significantly decrease pain (versus a placebo)

With that in mind, let’s dive into the data.

Question 1: Is NKTR-181 less likely to be abused?

The short answer to this question is “probably.” The ultimate answer to this question can only really come from seeing how the public reacts to the drug, but the researchers have done what they can by testing rats.

In the NKTR-181 Phase 1 trials, the researchers found that NKTR-181 probably enters the central nervous system (or “CNS”) much more slowly than drugs like Oxy or morphine. The idea here is that the “high” feeling from oxycodone comes from how rapidly it hits the CNS. If NKTR-181 takes hours (instead of minutes) to hit you, you’re much less likely to feel high from it.

NKTR enters the CNS much more slowly than oxycodone
From “NKTR-181 efficacy in multiple preclinical models of pain”, Choi et al.

The researchers also found that rats will stop trying to get NKTR-181 at about the same time that they will stop trying to get saline. Graph A below shows that if you make a rat press a lever more than 25 times to get NKTR-181, the rat will give up. For oxycodone, on the other hand, the rat will keep pressing that lever. Graph B shows that if you take a rat trained to press a certain lever when it “feels” oxycodone, the rats will only start pressing the correct lever once they get a pretty high dose of NKTR-181. That’s a bit dense, but essentially it means that it takes a lot of NKTR-181 to make a rat feel like it does on just a little Oxy.

Rats are much less likely to keep self-administering NKTR-181
From “NKTR-181 efficacy in multiple preclinical models of pain”, Choi et al.

On the whole, these are all reasonable ways for researchers to say that NKTR-181 is probably less prone to abuse and addiction than oxycodone. Self-administration and drug-discrimination studies are both very common in behavioral research. On to question 2.

Question 2: Does NKTR-181 significantly decrease pain (versus a placebo)?

This is where I got a little more worried.

The Phase 2 study design was a little curious, but not unusual for opioids. Every patient in the study started by taking the drug to establish how much of the drug they needed to decrease pain. After this short “titration” period, some of the patients switched from the drug to placebo. This is called a “withdrawal” study, because the researchers withdraw the drug and replace it with a placebo.

NKTR-181 failed the Phase 2 trial. It failed because when patients withdrew to the placebo, their pain never came back. This was great for the patients, of course, but not great for the researchers at Nektar Therapeutics. Such an event is actually not uncommon in Phase 2 opioid trials, as the trials tend to be pretty short and the patients don’t have a chance to rebound.

To their credit, the researchers noted all of this and doubled the length of the Phase 3 trial. Making the trial twice as long gives patients a lot of time for their pain to come back, and should take care of the issue that tanked the Phase 2 trial. However, the Phase 3 trial is also testing a different type of pain.

Low-back pain – the type of pain being treated in the Phase 3 trial – is probably the trickiest type of pain to treat. In many cases, patients who have real, measurable lower back disorders like bulging discs will be completely pain free. In other cases, patients who have no discernable pathology will suffer from chronic lower back pain. As such, low-back pain is also one of the most responsive types of pain to placebo treatments. I can remember at least one recent study (Carvalho et al., 2016) which found that giving patients a placebo and telling them it was a placebo still had a measurable beneficial effect on lower back pain.

All of that makes me worry that the final study is going to have the same placebo problem that caused the Phase 2 trials to bomb.

Conclusion: The NKTR-181 Phase 3 study will probably be long enough

I’m a little worried about the Phase 3 study, since they are using low-back pain and following the same withdrawal design that flummoxed the Phase 2 study. However, doubling the length of the trial will probably be enough to help NKTR-181 reach significance. I’m also encouraged by the fact that – as the researchers pointed out – only 3% of the patients in the Phase 2 trial were unable to achieve pain relief.

Prediction: Phase 3 Pass

Although I still have concerns about using lower back pain for the pivotal trial, a length of 12 weeks is probably enough to eliminate the weird placebo rebound issue that buggered Phase 2. With that, NKTR-181 answered both of my questions and I think there’s better than even odds of a pass.




Novan’s anti-acne drug has some effect, but is not worth investing in


Novan ($NOVN) is a company focused on using nitric oxide to treat skin conditions. Nitric oxide is a curious molecule with a ton of different effects in the body. It’s an incredibly potent vasodilator and has some use in the immune system (among many, many other things nitric oxide does in the body). It’s this immune system function that researchers became particularly interested in a few years ago. Eventually, scientists discovered that immune cells were using nitric oxide to kill disease-causing microbes. Novan is hoping that they can capitalize on the anti-microbial properties of nitric oxide. Their first attempt, a gel called SB204, is in Phase 3 trials for acne.

The Phase 3 data for SB204 should be released sometime in Q1 of 2017. Based on the research I’ve done, I think that SB204 will miss one of the primary endpoints in the Phase 3 trial. Moreover, even if SB204 makes all of the endpoints, I’m not confident that SB204 warrants approval by the FDA.

SB204 is mildly effective

First, I’ll talk about the good. The nitric oxide treatment had a very clear effect on the raw number of lesions (you and I would call them “pimples”). The 4% concentration (which is the concentration that will be used in the Phase 3 trial for SB204) significantly decreased both “inflammatory” and “non-inflammatory” pimples.

This chart shows that SB204 is effective at decreasing the number of pimples.
4% concentration of SB204 significantly decreased the number of lesions (pimples)

The treatment is safe enough. Some of the subjects suffered from the side-effects which are commonly associated with topical treatments — dryness of skin and things — but nobody had serious safety issues.

However, there’s some bad news as well. In the Phase 2 study, the researchers had each subject scored on a scale of 0 to 4, where 0 was “clear skin” and 4 was “severe” acne. The subjects were scored at the beginning of the study and 12 weeks later, when the study had concluded. Only 1 subject (out of 41) who was treated with SB204 had their score drop at least 2 points to “almost clear” or “clear”.

This is critical because the severity scoring is one of the three primary outcome measures for the SB204 Phase 3 trial. The Phase 3 trial is the same length and uses the same concentration (4%) of the drug, so I see no reason how that outcome measure could be successful.

My other issue is with the treatment itself. The researchers aren’t completely positive how SB204 works, but it’s probably by killing the bacteria on the face that are causing the acne. If this is the case:

  1. the treatment is a temporary fix
  2. there are no real advantages to SB204 over the myriad of other acne treatments on the market

The study didn’t check on the patients after the treatment stopped, so we can’t tell for certain whether the drug is a temporary fix.

Not worth the investment

Ultimately, this drug from Novan ($NOVN) just isn’t worth investing in. Novan has some other drugs in the pipeline, and maybe I’ll get a chance to update this post with due diligence on one of those. NOVN should be releasing Phase 3 data sometime this quarter, but I don’t have my fingers crossed for anything too exciting.

Prediction: Phase 3 Failure

SB204’s Phase 3 trial is testing an outcome which fell flat during Phase 2. In addition, the case for the treatment itself is not compelling.

Mesoblast’s heart failure drug works best on very sick patients

Mesoblast [$MESO] is a company developing a handful of stem cell therapies. Right now, they have Phase 3 trials running for heart failure, low back pain, graft vs. host disease, and rheumatoid arthritis. This article will focus on MPC-150, which is the treatment MESO is testing for congestive heart failure (CHF).

MPC-150 is currently in a Phase 3 trial. The trial is testing whether injecting  150 million stem cells into the heart can improve cardiac function. Specifically, the researchers will be monitoring to see how many heart-failure related major adverse cardiac events (HF-MACE) each study group suffers.

Data from the Phase 2 studies suggests that MPC-150 will probably get a pass in Phase 3, but there are some issues with the program overall which I’ll discuss below.

Effective at Treating HF-MACE

In Phase 2 studies, researchers found that a dose of 150 million stem cells was more effective than smaller doses. On the chart below, you should be able to see that the highest dose (labeled as “150M” on the x-axis) had the greatest effect. This chart is showing the “Left ventricle end systolic volume” (LVESV) and “left ventricle end diastolic volume” (LVEDV), which are measures of how much blood is left in the heart after it pumps. Less blood remaining means that the heart is stronger and pumping more efficiently.

Smaller doses were not statistically effective.
A dose of 150 million stem cells showed the greatest improvement in cardiac function

Here you can see that the control group had an increased end volume, whereas in the 150 million stem cell dose, end volume went down. That’s good news, and in Phase 3 the researchers are testing a dose of 150 million stem cells.

However, this treatment seems to work best in patients who are very sick. This next chart shows the difference in patients who had an end volume of less than 100 milliliters (“baseline LVESV < 100 mL”) and patients who had an end volume of more than 100 milliliters (“baseline LVESV > 100 mL”). Remember, less is better.

MCP-150 works best in patients with baseline LVESV of more than 100 mL.
Sickness of patients affects how well MESO’s drug works

As you can tell, the treatment seems to be more effective in the sicker patients. This isn’t necessarily a bad thing, but it’s important to know. What I would have liked to see here are some comparisons between treatment groups, instead of just showing that the treatment was more effective against the placebo. Still, the Phase 3 trial for MPC-150 is also going to be tested on the sickest patients, so this is again good news — and about 60% of patients fall into the “sickest” group.

And finally, over a 3-year period following the same group of sickest patients, 71% of patients treated with placebo had a HF-MACE event, while none of those treated with MPC-150 did. This last piece is the strongest bit of evidence for the efficacy of MESO’s drug.

No difference in cardiac function a year after treatment, did not improve other things

However, there are a few issues. First, while the Phase 2 trial produced some improvement in cardiac function at 6 months, at the 12 month mark the MPC-150 group was no longer statistically different from the control group. This fact was ignored during $MESO’s press briefings, of course.

Second, there was no significant improvement in any of the other measures that I had expected to see improve. The biggest of these was in functional exercise capacity. The MPC-150 group was no different from the placebo group in how far they could walk during the 6-minute walk test. Given that the treatment theoretically works by improving cardiac function and helping the heart regrow a bit, I had expected to see the walk test improve. This also means that there won’t be an improvement in quality of life for the patients.


Ultimately, I can’t argue with the result that MPC-150 is keeping the sickest group of patients from having HF-MACE events. Those data were excellent and hard to refute. However, the other issues mentioned above keep me from thinking that this is a slam dunk. Given that the Phase 3 trial is testing HF-MACE on the sickest group of patients, I think that MESO will probably get a Phase 3 pass. That said, I don’t like that cardiac function declined back to the control group at 12 months, and I don’t like that no other measures of effectiveness improved.

When I invest in a biotech, I prefer it to be something like $AKAO, where there’s no doubt in my mind that the treatment works.

Prediction: Probably Phase 3 Approval

Since the Phase 3 trial is testing the most successful parts of the Phase 2 trial, MPC-150 will probably get a Phase 3 pass. Still, my lingering doubts about the ultimate effectiveness of the treatment will keep me from investing in $MESO.

Chimerix’ drug brincidofovir should be viewed with skepticism


Chimerix [$CMRX] is testing the drug brincidofovir on patients who have received allogenic hemopoeitic cell transplants (HCT). In English, “allogenic hemopoeitic cell transplants” means “bone marrow cell transplants from another person.” Specifically, CMRX is testing their drug on HCT patients who have adenovirus infections.

The adenovirus is the virus that causes the common cold, but in patients with HCT, the adenovirus can be incredibly deadly. Patients who have received cell transplants are almost invariably on drugs to suppress their immune system so that their bodies accept the transplant. What’s worse, just like there’s no treatment for the common cold, there’s no real treatment for adenovirus infections, especially for patients with HCT. Chimerix is hoping to change that with their new drug.

The Problems

With all that in mind, brincidofovir seems to be a promising drug candidate — at least on the surface. I have a lot of issues with the research they’ve done so far. For me, the quality of the research tends to be the number one determining factor when investing in a biotech. It’s more than just a data thing, it’s an integrity thing.

With that said, here are the issues I have with CMRX:

The current trial of brincidofovir doesn’t have any sort of placebo control, and I haven’t found a good explanation why that might be. Previous trials were controlled, and for what’s ostensibly a Phase 3 trial I don’t see what the rationale for not controlling the data could be.

Second, the researchers compared the survival rates from their trials to historical survival rates for HCT patients with adenovirus infections and found no difference. CMRX mentioned that they think this is because they deliberately tested high-risk patients. This might be true, but it’s impossible to tell. Along the same lines, in the Phase 2 study (which was placebo-controlled) there was no difference in the primary endpoints between patients treated with placebo and patients treated with brincidofovir.

These adenovirus trials are not the first time brincidofovir has been tested. The last set of trials were on a different virus in the same clinical population. As you can probably guess, those trials were unsuccessful.  In addition, in some of the previous research I looked through, I saw methods that I really didn’t like. Chimerix did some things that I would generally consider “sketchy:”

If patients discontinued the study drug to start treatment for CMV infection or for other reasons, but the plasma CMV DNA level was 200 copies per milliliter or less and CMV disease was not confirmed, treatment with CMX001 was considered to be successful.

-Phase 2 Trial of brincidofovir

To provide some context, brincidofovir was supposed to prevent patients from getting a disease called CMV. What the researchers are saying here is that if people dropped out of the study to treat CMV, they were counted as “success” cases. In a lot of CMRX’s trials so far, we’ve seen what looks like a really potent effect on keeping virus counts down — but the patients are dying anyway. After seeing this kind of crap, I was a lot less surprised.

The Good

Chimerix has plenty of cash on hand – at the current burn rate, they can go about 3 more years before they run into trouble. That should be enough to either get them to success or conclusively determine that brincidofovir is not a viable drug.

As I mentioned above, CMRX’s drug seems to be doing something. The difference in virus counts for patients treated with brincidofovir is indisputable. The issue, of course, is that CMRX has yet to keep people from dying.


Chimerix plans to release the full set of data from the adenovirus trial in the first half of this year. After the data dump, I think it’s very possible that the drug will continue on to a comparative trial. Not because the results are that promising, but rather because the need for a safe treatment is so dire. And to be frank, I think CMRX is a bit desperate.

This is one of the cases where I would love to be wrong, because the adenovirus is killing a huge number of HCT patients. I would love it if brincidofovir ended up becoming a miracle drug — but I can’t in good conscience recommend investing in it.

Prediction: Phase 3 Failure

There are just too many issues with the data for me to feel good about Brincidofovir or Chimerix. I do not recommend investing. 

Eyegate Pharma’s Pipeline is Incredibly Exciting


Eyegate Pharmaceuticals [EYEG] has the most exciting pipeline I’ve seen in a long time. They currently have two very different products in the works, and both have the markings of success. The first product, currently titled “EGP-437,” is expected to submit a NDA in late 2017. The second product, “CMHA-S” (you have to love the way companies name their drugs..) is in what I would call Phase 1b trials right now, with data expected by the end of the year (so any day now.)

I don’t think it’s any secret that I tend to look at the science behind a drug first and foremost. I firmly believe that if the science is good — if a drug is truly effective — then the rest of the company will sort of fall into place. You can see this with our recent call on Achaogen Pharma. That drug was effective as all hell, so we predicted success, even though the company has some sales issues. If you had purchased AKAO’s stock on the day that article came out and sold it tomorrow, you would make over 150% profit.

I am hopeful that EYEG might be another Achaogen. Let’s talk about the drugs.

Drug One: EGP-437

EGP-437 is a corticosteroid (anti-inflammatory) designed to treat eye conditions. Currently, the standard of care is to use corticosteroid eye drops. Where EGP-437 differs is in the delivery. Instead of eye drops, EGP-437 uses something called iontophoresis. Iontophoresis uses an electric charge to gently “push” a drug through the surface of the eyeball. It’s not painful, and it means that patients don’t need to worry about the eye drops. Eyegate estimates that in a normal patient, the burden of treatment will drop from 154 eye drop treatments to 2 treatments with EGP-437.

EGP-437 is being tested on three different medical conditions. The first, anterior uveitis, is on the second Phase 3 trial. The first Phase 3 trial was a resounding success, with EGP-437 beating not just the placebo, but also the current standard of care — those eyedrops we were just talking about. (Probably because patients don’t take the drops as often as they’re supposed to.) The safety data looks good as well. At the risk of sounding too good to be true, EGP-437 actually looks a little safer than the eyedrops, because it doesn’t increase pressure in the eyeball as much (which is a common side effect of corticosteroids).

The second medical condition, cataract surgery, just finished Phase 1b/2a trials. Here, too, the drug is incredibly effective. 70% of patients were pain-free on the first day after surgery with EGP-437. 80% of patients on EGP-437 were completely recovered after four weeks. By contrast, 80% of the placebo group had to be rescued after two weeks. In this sense, “rescued” means that it was no longer safe for the placebo group not to be getting some sort of drug.

Trials for the third condition, macular edema, seemed to look good as well. The macular edema trials are in the very early stages, so all the researchers have done is to confirm that EGP-437’s delivery mechanism can safely get the drugs into the back of the eyeball. I won’t say more here, as I’m starting to get out of my depth, scientifically.

The caveat here is that in these latter two conditions EGP-437 hasn’t been directly tested against the standard of care yet. EGP-437 is performing better than the eyedrops did when they were being tested. And frankly, after the performance EGP-437 put in against eyedrops for anterior uveitis, I’m not too worried.

Drug Two: CMHA-S

CMHA-S is a totally different animal. What Eyegate has done here is make a sort of liquid eye-bandage. Initial tests were on dogs and cats, where CMHA-S was tested against a a type of eyedrop that’s probably most similar to those “liquid tears” eyedrops. CMHA-S was significantly more effective than the regular kind of eyedrop at helping the animals heal eye ulcers.

The second trial was with rabbits, and pitted CMHA-S against yet another type of regular eyedrops for treating chemical burns as well as abrasion (scraping on the eye). In this trial, the CMHA-S was even more effective than before – it beat the control in every measure.

The current study, from which we should see data soon, is on humans who have gotten PRK eye surgery. PRK is the predecessor of LASIK, and it’s still used by the military and by people who aren’t suited to LASIK.

If CMHA-S can successfully speed healing after PRK eye surgery, that would be a multi-million dollar opportunity by itself. If it can successfully speed healing after PRK, though, there will be a massive opportunity in helping to heal all kinds of traumatic eye injuries.

It’s very telling that the Department of Defense has given EYEG a fair amount of grant money (somewhere between $50k and $100k) to finish the development.


To sum up, there are a few big events coming soon.

CMHA-S should be reporting the results of the first human trial sometime in the next few weeks. The results from that study will determine the future of CMHA-S, and the animal trials leading up to it looked good.

Phase 3 confirmation data for EGP-437 should be out sometime next year, and if the second Phase 3 trial looks as good as the first Phase 3 did, the FDA has stated that they will support a new drug application.

Phase 2b trials for EGP-437 in cataract surgery should be beginning in the first half of next year.

EGP-437 — Phase 3 Pass 

The way EGP-437 kicked ass in the first Phase 3 trial leads me to expect another round of good data and a successful new drug application. 

CMHA-S — Initial Human Trial Pass

I’m still not really sure what “phase” to call this, but the great efficacy data from animal trials make me think this one will be a go.

Achaogen’s drug Plazomicin fights antibiotic-resistant infections; Phase 3 data due before 2017


Achaogen [$AKAO] is planning to release top-line Phase 3 data for their drug Plazomicin sometime before the end of 2016. Plazo is a new antibiotic designed to fight drug-resistant infections. Achaogen has been developing Plazomicin for a long time, and it’s good to finally see this drug getting closer to release.

The bottom line is that Plazomicin appears to be very effective and the safety data so far looks good. The biggest safety risks for most of these drugs are kidney toxicity and hearing damage. In the Phase 1 safety trials, there was no evidence of any kidney issues, which is good. A different study used monkeys to see if Plazo would work against a biological weapon, and there were no serious kidney issues in that study either.

AKAO might face some initial hurdles in making Plazomicin the standard of care, but I expect a Phase 3 pass and successful new drug application.

Plazomicin is Effective

There’s no doubt as to Plazomicin’s effectiveness. The drug works like crazy, against both regular and drug-resistant infections. This chart is comparing the effectiveness of Plazo and Levofloxacin in treating complicated UTIs. Levofloxacin is one of the most common antibiotics for treating complicated UTIs.


As you can see, Plazomicin is at least as effective as Levofloxacin against regular infections.

This next chart is comparing Plazomicin against a bunch of other drugs for drug-resistant bacteria. As you can see, it takes a lot less Plazo to beat the bacteria, and some of the drugs don’t even treat the bacteria at all. I’ve also circled the biggest competitor, Colistin. One of the Phase 3 trials pitted Plazomicin against Colistin, head-to-head, so it will be interesting to see what happens there.



Plazomicin is Probably Safe

Like I mentioned earlier, the biggest risk with Plazomicin is going to be kidney issues. I am hopeful on this front for two reasons. First, in the Phase 1 trials there were no severe kidney issues with Plazo. The authors had actually concluded that there were no effects at all, but I suppose I’m a little more cautious. A few of the participants had slightly elevated creatinine in their blood, which might mean that the kidneys were not filtering quite as much. No subject went outside of the “normal” range for creatinine, but there were definitely some trends in that direction. Even so, though, any potential issues were not serious.

The second reason I’m optimistic is the monkey study. The researchers dosed the monkeys with Plazomicin pretty heavily, and they didn’t see any serious kidney issues there either. A monkey study by itself doesn’t mean anything, but it’s nice to see a high-dose study alongside the (comparatively light) Phase 1 safety studies.

Other Stuff

Achaogen has about $61 million in cash or cash-equivalents on hand, which is more than enough to get them through the rest of the development period for Plazomicin. I expect that part of the reason they have more cash than is normal for a small-cap biotech is that a lot of the Plazo research ($124 million worth) has been funded by DARPA’s less-cool biologically-focused little brother, BARDA.

AKAO does estimate that they will need to put some serious sales efforts into making the drug commercially successful. I agree with that assessment. The problem with being a drug for special cases is that you don’t get used very often. However, antibiotic-resistant drugs are getting more and more press time. Five years ago, was anybody worried about MRSA? As the spectre of antibiotic-resistant drugs looms, Plazo and drugs like it will become more and more valuable. In fact, there are no drugs currently approved to treat the kind of infections Plazomicin is supposed to treat.


As always, there might be an unforeseen event which causes this drug (and this company) to tank. A serious safety issue with kidney toxicity might do it, for example. That’s the nature of investing — if it was sure money, it’d be called “working.” As it stands right now, though, I predict some good top-line data before the end of the year.

The company hopes for a New Drug Application (NDA) by mid-to-late 2017.

Prediction: Phase 3 Pass

Reasonable safety data and a very effective action make me think Plazomicin is a good bet for a Phase 3 pass.

Heat Biologics’ Phase 2 drug HS-410 is safe


On November 30th, Heat Biologics ($HTBX) plans to present the top-line Phase 2 data of their new drug HS-410. I read the data, and so far it looks good! HS-410 appears to be safe and the treatment makes sense. However, HTBX still hasn’t shown that HS-410 is actually an effective treatment — a Phase 3 pass might be difficult. For now, though, HTBX is a company worth watching.

The Drug

HS-410 is a drug designed to help the immune system fight cancer naturally. Normally I am very pessimistic about immune-oriented cancer therapies, but in this case it makes sense. HS-410 treats non-muscle invasive bladder cancer (NMIBC), and the current standard of care for NMIBC relies on the immune system as well.

Basically, the treatment for non-muscle invasive bladder cancer is to scrape the cancer cells out of the bladder, then put a bacteria that’s a lot like tuberculosis into the bladder so that the immune system comes in and fights any cancer that might be left over. This bacteria — called BCG — is supposed to activate a specific type of T-Cell (immune system cell) called CD8+. HS-410 is targeted to activate the same type of T-Cell, and the researchers seem to be hoping that the two treatments will stack.

The Research

Since HS-410 is activating the same type of T-cell as BCG, the researchers designed a multi-arm study, which is smart. Basically, it works like this: If a patient is going to get BCG, they get slotted into one of three groups. Group 1 tests a low dose of HS-410. Group 2 tests a high-dose of HS-410. Group 3 tests BCG by itself as a control group. Group 4 is for patients who won’t get BCG, to test HS-410 by itself.


Study Design
Study Design


There are a few ways that HS-410 could work. If 410 amplifies the response of BCG, that would be great! If 410 works by itself, that would almost be better, as patients would prefer to get an injection (HS-410) than get a drug pushed up through the urethra into the bladder (BCG). I don’t know about you, but that doesn’t sound like much fun at all.

The Results

Everything looks good, so far. The drug is looks like it’s quite safe. The researchers are reporting that recurrence-free survival (no cancer) was about 85% after a year, but didn’t mention which arm (or arms) that was. I took a look at some of the historical research behind BCG to see how that stacks up, and it appears to be about the same. We’ll have to wait for the complete data to see the differences between arms, but right now it looks like this is going to be a Phase 2 pass. The Phase 3 trial is where they will really need to demonstrate that the drug has an effect.

Potential Market

Bladder cancer is the 5th most common cancer in the United States. There are two paths to success for this drug: boosting the efficacy of BCG or being able to replace BCG. The FDA has granted HS-410 fast track status, which is also a good thing.

We will need to see the full set of Phase 2 data in order to make a prediction about Phase 3, but for now, a Phase 2 pass seems almost guaranteed.

Prediction: Phase 2 Pass

ACOR’s Phase 3 Drug CVT-301

Today we’re going to be doing some due diligence on Acorda Therapeutics’ [$ACOR] Phase 3 drug CVT-301. $ACOR actually has two drugs in third phase clinical trials, but we’ll cover the other one later. ACOR’s phase 3 data for CVT-301 is scheduled to be released sometime in Q1 of 2017.


The Phase 2 data for CVT-301 looked great. However, the Phase 3 trials are scheduled to be a lot longer, which will provide a lot more opportunities for safety issues and for the drug to stop working as well. I’m more concerned about safety issues than I am about the drug not working anymore; it’s not uncommon for patients to be on levodopa (what CVT-301 is) for a decade or more.

Ultimately, I’m going to go cautiously call this one a Phase 3 pass, but I wouldn’t bet the pharm on it (get it?).


CVT-301 is a powdered, inhalable form of the common drug levodopa, which is currently the most effective oral treatment for the symptoms of Parkinson’s disease.  Even while using the oral form of levodopa, however, people afflicted with Parkinson’s often suffer what are called “OFF periods,” which are periods when the symptoms (shakiness, etc.) flare up . These OFF periods become more and more common with age and time spent using levodopa, with about 70% of patients suffering OFF periods by the time they’ve been on treatment for 9 years. CVT-301 is designed to be used when one of these OFF periods begins, with the goal of controlling the symptoms. Think of CVT-301 like an inhaler, but for the symptoms of Parkinson’s disease.


The research behind CVT-301 looks pretty good, for the most part. The placebo was excellent (they used a lactose compound which had no effect but still had the subjects get a sensation in the lungs like the real drug did).

The design of the Phase 2 trial was relatively simple. The researchers gave the study group and the placebo group the drug inhaler, and told them to use it up to 3x daily when their symptoms flared up. At the end of each week, the researchers brought the subjects into the clinic, had a doctor confirm that they were in an OFF state, and then had them use the drug (or placebo) while recording the results for the next hour.

The effects of the drug were quite clear, which is a really good sign. In the first week of treatment, there was a significant difference between the real drug and the placebo at 10 minutes all the way through 60 minutes after use (when they stopped recording the results). In the fourth week of treatment, they used a bit more drug and the gap between the real drug and the placebo had actually widened, which is great. The treatment effect was really quite large, and the Phase 3 trial is testing the same measures, so a pass looks likely from that standpoint.

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Statistical power and the p-values both looked good. Safety data looked identical between the placebo and the real drug; a few people developed a cough from the drug but it wasn’t enough for anybody to stop taking the drug.

There was one major problem which hasn’t been resolved to my satisfaction. For some reason there was a significant difference in pre-trial levodopa usage between the study group and the placebo group. The study group was on a lower dosage of levodopa than the placebo group was. I have no idea why this happened.  It may have been intentionally designed by the researchers to try to get a strong effect, or it may have just been a quirk of the randomization. The fact that it wasn’t even discussed by the researchers suggests that it was probably intentional. Like I said, not great.

Upcoming Research

The Phase 3 studies are going to be a lot longer. Each of those studies is scheduled to last a year. In addition, the doses are being upped from a maximum of 3x daily to a maximum of 5x daily. As good as the Phase 2 data looked, the long duration and increased doses in the Phase 3 trial are making the risks of safety issues or efficacy issues much higher. As I mentioned above, I’m more worried about safety issues than I am about the drug not working anymore.


There’s been quite a lot of insider selling over the last year — 157,000 shares worth, to be exact. There are always a lot of potential explanations for insiders selling their shares, but it can suggest that the people close to the company don’t expect the value of their shares to skyrocket in the near term. In this case it appears that most (if not all) of the selling is automatic selling, so that isn’t as much of a concern.

The balance statements for the company look fine. Unlike most of the biopharma companies we do due diligence on, ACOR actually has a profit stream coming in! This means that the success or failure of this drug won’t be as much of a binary event as it usually is. In other words, if CVT-301 fails it won’t kill the company, and if it succeeds their stock won’t triple overnight.


As good as the Phase 2 data looked, there’s still something that feels a little off to me about CVT-301’s chances for a Phase 3 pass. I’m going to tentatively mark this one as pass predicted, but I can really see it going either way. If something comes up to change my mind, I’ll update this post.

Prediction: Possibly Phase 3 Approval

Aeterna Zentaris


Aeterna Zentaris [$AEZS] is developing a drug called Zoptrex (zoptarelin doxorubicin). The phase 3 results for Zoptrex should be due by the end of December.

After doing some due diligence, we predict with high confidence that the phase 3 trial will fail to meet primary endpoints. If we are correct, it is likely that the company will not survive.

  • Phase 2 results for Zoptrex in endometrial cancer were weak, even with a softball study
  • Phase 1 data appears to show that Zoptrex might be less effective than the drug it is trying to replace
  • Zoptrex trials were not completed in 3 other types of cancer
  • Aeterna’s 2Q2016 financial statement admitted they do not have enough cash to continue another year of operations

The Drug

Zoptrex’s research history does not look great. Aeterna has two terminated clinical trials for Zoptrex, one for TNBC (a specific type of breast cancer) and one for urothelial (e.g. in the bladder/urethra) cancer. Both of these clinical trials were terminated for not being able to recruit enough participants. Even more importantly, a trial testing Zoptrex on prostate cancer was suspended because they didn’t have enough of the drug.

The clinical trial that has proceeded is for endometrial cancer. Currently, they’re running a phase 3 trial which is comparing Zoptrex (Aeterna’s drug), to the standard treatment, doxorubicin. The primary endpoint is overall survival, which is fairly common. You may have noticed that the standard treatment (doxorubicin) sounds a lot like the clinical name for Zoptrex (zoptarelin doxorubicin). That’s because Zoptrex is essentially the standard treatment paired with a compound that’s supposed to “aim” doxorubicin at the cancer cells more effectively.

Is it going to work?

Well, in the phase 1 trial, Aeterna tried a range of different doses: 10, 20, 40, 80, 160 and 267 mg/m2. The patients only responded to 160 and 267 mg/m2, and Aeterna was forced to continue with an effective dose of 267 mg/m2 for the phase 2 and phase 3 trials. This is bad because with chemotherapies, more is not better. More is worse, actually, because the side effects get worse and worse.

Here’s the clincher: 267 mg/m2 actually works out to be more doxorubicin than the standard dose of doxorubicin by itself. So much for aiming at the cancer cells more effectively.

This may be beating a dead horse, but in the phase 2 trial for Zoptrex, there were also several points of concern:

  • Only 23% of the patients enrolled in the trial had had prior chemotherapy or hormonal therapy, so we would expect good efficacy from this first-time treatment
  • 50% of the patients in the trial received a different drug (carboplatin/paclitaxel) while undergoing treatment with Zoptrex
  • Only 23% of patients responded to the drug, even though it was the first time they’d had chemotherapy

All of the above is fine for a phase 2 trial, which is typically about safety and demonstrating the beginnings of efficacy. However, with such weak efficacy results in both phase 1 and phase 2, we have serious doubts about the ability of Zoptrex to beat out the standard treatment during the phase 3 trial.


Financially, AEZS is hanging on by its fingertips. In June 2016, the financial statement admitted that they did not have enough cash to continue for another year of operations. This comes after several years of struggling — they have issued several rounds of fundraising, and in late November 2015 AEZS was forced to issue a press release titled “Aeterna affirms fundamental strength of business.” This press release followed on the heels of a 100:1 reverse split, in which outstanding shares were consolidated from some 656 million to 6.6 million. In October of that same year, AEZS closed their office in Quebec City.

In an effort to develop some cash flow, AEZS put together a sales team and developed a program in which they worked as sales consultants for other biopharma companies, but this program has been struggling as well — their sales commissions dropped by almost 50% in the second quarter of the program.

How to trade on this prediction

Finally, the important part! We never recommend shorting a biopharma stock because of a simple equation: the potential upside (if the stock goes to zero) is limited, while the potential downside (if the stock goes to $100, for instance) is unlimited. That’s a bad day.

Instead, if you’re bearish on $AEZS, we recommend that you use an options strategy which will cap your downside. The simplest way to do this would be to buy puts. If we’re wrong at the stock takes off, the worst possible outcome is that your puts become worthless. If you had shorted AEZS, though, you could be on the hook for many times your initial investment.

We can’t say it enough: Never open a position with unlimited downside.

The better bet? Buy some puts with a strike date in late December / early January, after the Phase 3 data is supposed to be released.


It’s never fun to predict that a drug or a company will fail. If Aeterna shuts down, lots of people will lose their jobs, and investors will lose a lot of money. Still, we’re here to make sure that you aren’t one of the people losing money.

Prediction: Phase 3 Failure



Anthera Pharmaceuticals

In June 2012, ANTH announced that their Phase 2B trials of the drug Blisibimod failed to meet the primary endpoints, though it demonstrated a “trend towards significance.”

The pre-specified primary efficacy endpoint, clinical improvement at 24 weeks in the SLE responder index for the pooled blisibimod dose groups, was not met due to a lack of clinical efficacy in the 100mg weekly and 200mg monthly dose groups

Despite the failure, however, they elected to continue with Phase 3 trials, using only severely affected patients.

“The extensive data in the target severe population from our Phase 2 clinical program supports the initiation of a much smaller yet differentiated Phase 3 registration plan with the selected dose of blisibimod in patients with severe systemic lupus erythematosus.  We have prospectively demonstrated for the first time the possibility for a subcutaneously administered BAFF inhibitor to be used in the treatment of a severe lupus population.  The subgroup of severe patients from our Phase 2 study clearly identifies those patients most in need of therapy and most likely to benefit from our potent BAFF inhibitor blisibimod,” said Paul F. Truex, Anthera’s President and Chief Executive Officer. “Feedback from the EMA Scientific Advice process combined with an End of Phase 2 meeting in the third quarter will form the basis of our final phase 3 study designs.”

The data from this Phase 3 trial is due in Q4 of 2016.

I believe that Anthera moved to Phase 3 despite a lack of efficacy because the drug, Blisimibimod, is one of only two in their pipeline and that if the drug fails, the company crumbles with it. In the Phase 2B results, even the targeted subgroup (which they used for the Phase 3 trials) did not see a statistically significant effect from the drug.

To cap it all off, in the last 12 months, insiders have made 1 open market buy and 4 sales.

I do not recommend that you short this stock. Shorting a binary event leaves you open to catastrophic failure. Instead, purchase put options, which not only leverages your investment but also puts a cap on the total amount you can lose.

Prediction: Phase 3 Failure

Disclaimer: I hold puts on ANTH.