Bullrider. I don't know about this Johnson guy .... but
I have Utmost respect for Rick Harmon who he mentions.
You may want to look into ICOS or some of the others Rick mentioned.
Message 4481623
Thanks, for bringing that to my attention.
I'll ask Rick about Johnson.
Ray
>>>====>
"TEARS FOR FEARS: USING SI TO FIND HOT
OPPORTUNITIES
Darci Kane
Richard C. Harmon, Ph.D.
It's not often that biotech investors will get excited about bringing tears to the
eyes of patients.
MGI Pharma (Nasdaq, MOGN) might prove to be the exception and
provides an example of how an astute investor can use SI to find that certain,
unique opportunity -- the elusive low risk issue for a speculative biotech
basket.
How do we use SI? We track certain individuals who have made rational
statements. It's easy, given the nature of biotech-related chatter at SI -- they
stand out as rare exceptions.
Rule number one for using SI to invest in biotech -- noise devoted to any
single issue is inversely related to long-term profit potential.
Rule number two -- find scientific rationale and innovative business plans by
"tracking" sincerity. Use those PeopleMarks!
We recently noticed an accumulation of sane individuals on the MOGN
thread. Furthermore, we noticed that many of them were known for sincerity,
a commodity found at even lower frequency than rationale.
CANCER, DAINIPPON and EUROPE
A recipe for relatively low risk? Take a quiet company with a new approval
under belt from Canada and throw in an investment advisor that is intent to
bail from a large holding. Wait until the "bail" is almost finished, and,
PRESTO!..... blue light special.
MGI Pharmaceuticals (formerly Molecular Genetics, Inc.) is a 16-year old
Minnesota company with a primary focus on licensing promising cancer
therapeutics and then developing and/or marketing them. They currently
market three products [Salagen(R) Tablets (pilocarpine hydrochloride),
INFeD(R) (iron dextran injection 50mg/ml) and Didronel(R) I.V. Infusion
(etidronate disodium)], with two additional compounds under development
[MGI-114 (6-hydroxymethylfulvene) and DHAC (dihydro-5-azacytidine)].
MGI has a market cap of only $65 million
With 14.1 million shares outstanding and a current stock price of around
$4.50, MGI has a market cap of only $65 million. This is comparable to, and
sometimes much lower than, that of companies that are years from having a
marketable product.
MGI not only has marketable products, but has exclusive rights to a potent,
unique (and patented) anti-tumor agent, MGI-114, which is currently being
evaluated in human Phase I clinical trials. MGI-114 (or HMAF,
6-hydroxymethylacylfulvene) is a synthetic analogue of the toxin illudin S from
the jack-o'lantern mushroom. Illudins, shown several years ago to exhibit
potent anti-tumor activity, are also extremely toxic to normal cells. Research
conducted by Dr. Trevor C. McMorris at the University of California, San
Diego led to the design of analogs known as acylfulvenes, which retain potent
anti-tumor activity while reducing toxicity to normal cells.
In animal studies, 29 of 30 mice implanted with human breast carcinoma
showed complete tumor regression following HMAF treatment. Animals
implanted with other cancers such as lung adenocarcinoma and colon
carcinomas also showed significant responses to HMAF (Cancer Research
57:279-283, 1997). According to Dr. McMorris, HMAF was more
efficacious than many standard chemotherapeutic drugs, including
doxorubicin, cis-platin and paclitaxel (Taxol). These results have now been
confirmed in other laboratories.
Efficacy has been observed at doses below those used in mice
MGI is currently seeking a European partner for MGI-114, and, according to
CEO Charles Blitzer, several large pharmaceutical companies are interested.
However, they want U.S. rights as well, a compromise that MGI is unwilling
to make. In 1995, Dainippon Pharmaceutical Co., Ltd., became MGI's
partner for MGI-114 development and marketing in Japan. Dainippon agreed
to pay $12 million (and purchased 750,000 shares of MOGN) for a drug that
had not yet entered clinical trials. Any prospective european partner has, by
now, seen some human clinical data. This should result in a much more
favorable agreement for MGI.
MGI initiated a Phase I trial in December 1995 and will start a second Phase
I trial later this year in order to expand the patient base and determine the
broadest spectrum of treatable cancers for the Phase II trial design. CEO
Blitzer has hinted that results so far have been encouraging while the maximum
tolerated dose of MGI-114 has not yet been reached; efficacy has been
observed at doses below those used in mice. The National Cancer Institute
has decided to fund and conduct Phase II clinical trials in the U.S. From a 26
July 1996 press release: "According to Edward A. Sausville, M.D., Ph.D.,
National Cancer Institute associate director of developmental therapeutics,
'The behavior of MGI 114 in the National Cancer Institutes' primary tumor
screening model is unique and the drug represents a valuable addition to the
current armamentarium of anti-cancer drugs. Our interest in participating in the
further development of MGI 114 is underscored by the favorable progress of
MGI PHARMA's current Phase I clinical trial.'"
Please note -- the drug is still in phase I testing. That means that it has not yet
been formally shown to be safe. One alteration in clinical protocol has been
discussed in the thread, a lengthened infusion time to avoid local irritation at
the site of injection. It would be wise to consider toxicity in humans as an
outstanding issue.
Sound good thus far?
MGI currently has 63 full time employees, with 27 in the sales and marketing
force. With an existing sales force experienced in the oncology field, the
company will be well-positioned to effectively bring MGI-114 to the market.
Currently, there are very few prospective treatments for those who fail Taxol
(paclitaxel) treatment; one drug, VX-710 (Vertex Pharmaceuticals), is in early
trials to see whether it can effectively reverse resistance to Taxol in breast
cancer patients. Most current clinical trials involve combining new agents with
the current chemotherapeutic drugs. MGI-114 is unique in that it apparently
works by a very different mechanism, so that patients who have developed
resistance to Taxol may now have another candidate for treatment. In
addition, at least one animal study has shown that liposome-delivered illudin
demonstrates comparable efficacy at lower doses (DepoTech, are you
listening?).
TEARS, SJOGREN'S, AND NEAR-TERM PROFIT POTENTIAL
Sound good thus far? O.K., now for the part that has us salivating -- Salagen
and the potential for a near-term, highly profitable business.
If you're a savvy investor, you were saying "just another biotech, long-term
promise, near-term hype" as you read the description above. Please read on.
Salagen was developed under Orphan Drug laws and is approved in several
countries, including the U.S., for the treatment of dry mouth following
irradiation for head and neck cancer. MOGN has filed a supplemental NDA
with the FDA to extend the U.S. market to dry eye and dry mouth associated
with Sjogren's syndrome, and an approval for this indication was recently
obtained in Canada. Salagen is also marketed by MGI partners Chiron
Therapeutics (Europe) and Pharmacia & Upjohn (Canada).
See the MOGN thread for more!
Conservative "thread" estimates for the number of Sjogren's patients in the
U.S. and Canada that would benefit from Salagen range from 30,000 to
100,000. We estimate that a U.S. approval could result in North American
revenues of approximately $30-50 million/year. For this small company, that's
talking big profit. See the MOGN thread for more!
Current price (closing ask, 9/12/97): 4 5/8
Market capitalization: $65 million
Approx. ratio, market cap to cash and equivalents: 4.6
Annualized sales (4X Q2 1997): $8 million
Annualized license revenue (4X Q2 1997): $2 million
Annualized cash burn (4X Q2 1997): $3.3 million
Exercise price for management's incentive options: largely > $4 3/8
Darci Kane and Rick Harmon are veteran biotech investors. They hold long
positions in MOGN."
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