Rigel, Curis, Sonus, Cell Therapeutics, American Pharmaceutical
The news from some of the smaller capo biotechs continues to be interesting as valuations continue to plunge. Rigel (RIGL) announced the beginning of a clinical trial in the UK for a company owned product, R112, designed to interfere with IgE signaling through the mast cell. The drug, which is administered by nasal spray is designed for the allergic rhinitis market and is a first in its class. This is a huge market and is currently dominated by intranasal steroid preparations A US IND is planned by end of the year. An HCV (hepatitis C) drug is planned for IND filing next year and the ligase program should have a clinical candidate for the following year. Rigel is now transitioning from a functional genomics company to a drug delivery company. With $45 million in the bank and a few more deals they should be able to survive the current investment climate-the cash crunch is the downside for almost all smaller biotechs. I have disclosed in previous alerts that I have a substantial founders position in Rigel and I have not sold any of my position. In any sort of reasonable market this news would have caused the stock to move up instead some sellers sold on the good news. The early stage UK study should be done shortly and results will be used in the US filing. A near-term event would be good safety data and any hints of efficacy in the allergic rhinitis indication. News on the safety and efficacy of R112 should be forthcoming by early next year-positive news on both fronts will certainly push RIGL much higher. Another possible near-term event would be partnering the HCV program. In an ideal world RIGL would wait till Phase II data is in but under current conditions we might anticipate an earlier deal for less depending on the level of cash stress. Again I want readers to be aware about my founders position in this company. I think the stock is absurdly cheap at $1.94. If you are currently holding Rigel I would be patient. Potential investors can take the gamble now or wait for the early R112 results.
A few other small caps made news today including Curis (CRIS) and Sonus (SNUS). At current valuations I like both of these companies. I like the Sonus (Toscosol) Paclitaxel Phase II data that was just presented. The company looked at four different types of tumors and all patients had bad disease that was refractory to many of the current chemotherapy agents. The results were particularly striking in bladder cancer where 89% of patients had disease control (stable disease and partial remissions). All the patient groups were small with about 18 patients in each cohort so what we are really looking at are trends. No complete responses were reported in any group. Toscosol is a vitamin E encapsulated formulation of the best selling chemotherapy drug, Taxol. It appears to have inherent advantages of regular Taxol in that is less toxic and more efficacious (can be dosed higher). There may also be some theoretical advantage form inhibition of an efflux pathway. This is a crowded field with Cell Therapeutics (CTIC) and American Pharmaceutical (APPX) already in Phase III trials with Taxol knock-offs (clearly APPX has a very interesting product). The low valuation of Sonus and the possible increased efficacy make it an attractive early stage but very speculative investment. Sonus will have to raise money ($22 million as of 6/30) to fund further trials. To really make any of these drugs commercially viable trials will have to show efficacy in Taxol refractory tumors and so far APPX and Sonus both seem to have preparations that look promising. It will not be enough to just have a Taxol alternative that is easier to give and possibly less toxic. I think insurance companies will balk at a premium price (Taxol is now generic) unless you have a drug that is more effective.
Curis (CRIS) also had some interesting preclinical data further validating the importance of the sonic hedgehog pathway (Shh- see archives). The latest report shows that in a rodent model of Parkinson's disease treatment with Shh protects against neural loss and behavioral abnormalities. Other recent findings indicate that abnormalities in the Shh pathway drive a childhood brain tumor (medulloblastoma) and basal cell carcinoma. I continue to believe that this is a very important pathway in human disease and Curis is certainly in a good position to exploit it. Recent insider buying is also a positive. On the negative side are a high burn rate that is being corrected, management that hasn't delivered, and a deal with Elan for Shh (Elan is going through a very difficult period and will shed many of their partnerships and if nothing else will end up being a weaker partner). The question is will this company come through the cash crunch-insiders seem to think they will.
As a matter of disclosure I want all readers to know that I own many of the stocks I write about in my personal account and always maintain a long position. I also write about many of these stocks first in Biotech Insight, a web-based newsletter published at www.biotechinsight.com. The following is further disclosure: Dr. Garren is a member of Biotech Insight Management, LLC, a California registered investment adviser and the general partner of a hedge fund that invests in biotechnology companies, including some of the companies discussed in this newsletter (www.biotechmgt.com). Garren is a member of the advisory board of DBGI (Diversified Biotech Group, Inc.) and the chief biotechnology strategist. Garren also consults for following: 1- a second large hedge fund focused on the healthcare industry with a heavy emphasis on biotech. I recommend many of these same stocks to the investment funds mentioned above. It should be noted that hedge funds could go both long and short on any particular stock. Many of these disclosures were detailed in the fine print, which usually never gets read. The information in this column under no circumstances serves as a recommendation to buy or sell stocks. Please also see the disclosure about Biotech Insight archived on BioSpace.
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