"‘Reports of Aslera’s death have been greatly exaggerated.’"
The following was posted on briefing.com modelstocks.com mid-day today:
smallcapsonline.com
GENELABS TECHNOLOGIES, INC. (GNLB)
Awaiting FDA ruling on Aslera for the Treatment of Lupus
"April 24, 2001
RECOMMENDATION: BUY
Daniel D. DiPietro
Genelabs Technologies, Inc. (NASDAQ: GNLB)
Though the Risks Have Increased, 'Reports of Aslera's Death Were an Exaggeration.' Reiterating BUY on 60:40 Chance of Approval
Price of Common Stock (04/23/01).......$2.72
Shares Outstanding (MM).................49.5
Market Cap (MM).......................$134.6
Average Daily Volume.................577,327
52-Week High/Low.................$8.78/$1.34
Price Target (1 year).................$13.00
Source: YAHOO! FINANCEAnnual EPS (FYE December)
2000 2001E 2002E 2003E
($0.07) $0.18 $0.24 $0.46
Revs. $17M $35M $52M $75M
Key Points:
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* Last week the FDA decided not to ask the Arthritis Advisory Committee to issue a recommendation on Aslera™, GNLB's lead product for the treatment of lupus. The FDA will rule on the NDA by June 26. The main points made by the Committee in forgoing a recommendation were 1) equivocal statistical data and 2) changes made to the trial protocol after commencement of the trial.
* Reports indicate that the Committee most likely would have been split had a vote been taken.
* GNLB has seen a massive sell off in the last several trading days, started in large part by a report by Bloomberg News on a medical reviewer's briefing document to the Arthritis Advisory Committee. The briefing brought up a host of questions related to the trial protocol and challenged the statistical robustness of the data.
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Committee Bifurcation: Statistics vs. Clinical Pragmatism. While statistical analysis found the trial data wanting, there appears to be sentiment among FDA clinicians that the drug should be approved to give patients and doctors options to treat lupus (BioCentury 9; 19). It has been forty years since a new drug has been approved for the treatment of lupus. Prednisone, the current treatment, has debilitating side effects....
....We and others speculate that the FDA's reluctance to reject the NDA-in the face of all the devastating statistical analysis before it-indicates that agency physicians are looking for a way to approve the drug. One likely reason for the agency's enthusiasm for approving Aslera is that if GNLB's formulation of DHEA is approved, the FDA would have a much easier time regulating or prohibiting the use of OTC DHEA, used for a variety of purposes, including the treatment of lupus, as a nutritional supplement. The FDA has been outspoken in its opposition to non-prescription use of steroids and approval of Aslera would enable the agency to make the case that DHEA should no longer be considered a dietary supplement....
....While the risk has increased, based on the 'split decision' of the Advisory Committee and the steroid OTC issues, we believe the chances of Aslera approval are slightly better than half. If our reasoning holds, we feel these approval odds are comparable to other products that have completed pivotal Phase III trials. A recent McKinsey study found that approximately 67% of products that complete Phase III are approved (2000 Nat. Biotech. 18; 719)....
....If approved, we expect Aslera to generate $37 million in 2001sales. We are projecting US and European sales will reach over $500 million in 2006. In our opinion, such impressive projected sales growth contributes to a favorable risk-reward profile for GNLB, leaving the stock in our BUY category as we await the FDA's ruling on Aslera.
Therefore, for investors tolerant of high risk and willing to take a calculated gamble, we reiterate our Buy recommendation. Based on a variety of valuation methods-all using the assumption of Aslera approval-we are setting a price target of $13/share (see below for detailed earnings model)...."
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