To thread,
As you all know, I don't post that often, but when I do, my posts tend to be quite long. Well, this is going to be one of those long posts, so please bear with me.
I only post when I have some real info which can contribute, and I'm not about to discuss daily fluctuations (like the yahoo thread, which seems to be possessed with the daily fluctuations of the stock, they forgot that there is a company behind the ticker PARS). Last time I posted the stock was just over $1 1/2, and I reminded people that PARS is no longer an R&D company, that we have approved products and that Lotemax and Alrex alone justify a higher price. Today, as we approach the date on which PARS presents the phase II results, I'd like to talk a bit more about the most promising and mature compound in PARS's pipeline - HU211 (Dexanabinol).
In the past few weeks there has been a lot of speculation about the phase II results, many were quoting official documents and trying to put a positive or negative twist on certain words (this just shows how excited we're getting as the results near, like a horse coming to the final stretch). There have also been estimates on size of potential market, and even some posts about competing compounds. I'll discuss all these issues in this post, and than some.
First of all, are the results going to be positive ? and how positive are they going to be ? Well, only the good people at PARS and god know the answer to this question (you can try and ask god, as Yom Kipur is coming up). I believe the numbers are going to be very positive, I explained why on my previous post (total death rate, new IR firm, Seattle conference, insider buying etc.) I don't base this on some sentence/word from a document PARS submitted to the coming Seattle conference. I talked to people at Pharmos and they sound up-beat, but I'm not going to start analyzing their voices and body language to determine the results. We'll just have to sit tight for a little while longer.
We all agree that the most important issue right now is the results Pharmos will present. The second most important issue for HU211 is the corporate partner issue. I'll take the small risk and assume the results are very good ones, and tackle this issue, which we haven't discussed that much on the thread.
First of all, we must understand that Pharmos doesn't exist in a vacume, and a lot depends on what's happening in the pharmaceuticals world. So let's try and understand the environment around us.
When Pharmos started developing HU211, most of the large pharmaceutical companies had some stroke/head-trauma projects at some stage of development, this included Ciba (today part of Novartis), Upjohn (part of Pharmacia-Upjohn), Merck and others.
When Pharmos looked around for a potential partner at early stages, most companies showed no interest, as they had their own projects in that field (big pharma politics is serious business, we need to discuss at a latter time).
As time went by, the large head trauma projects started falling one by one, each failing at one point during the clinical trials. All the large pharmaceutical companies spent a lot of money on failed projects, and suddenly head trauma was no mans land, people stayed away. Pharmos's HU211 still looked promising (passing phase I with flying colors), but nobody wanted to put more money in such a "high risk" project, why would some small Israeli biotech succeed where big pharma failed ???
But now, Pharmos will already have phase II numbers. This takes a whole lot of risk out of the equation. HU211 will no longer be a nice compound with potential, it will have a lot of numbers behind it.
If we have good numbers, big pharma won't stay away too long, once Pharmos reduces the risk, these guys will see the potential and they will want in.
Pharmos is probably already talking with several large companies, but a lot of large corporations probably stayed away. After phase II numbers are out, more companies will enter negotiations, and we could even see a bidding war among big pharma. Pharmos will only gain from this.
There are many reasons for large pharmaceutical companies to court PARS. In order to justify their stock prices they need to continue showing high growth rates. Most of the large pharm. companies don't have exciting pipelines, and most don't have blockbuster candidates (HU211 is definately a potential blockbuster). On top of this, patents on several important drugs will expire in the coming 3 years, and big pharma needs replacements quickly (generic companies, like TEVIY, are already getting ready with cheap equivalents for all the blockbusters).
TBI is one of the only fields that has remained untreated, and thus there is a potential for a huge blockbuster here. HU211 could become a BIG BLOCKBUSTER and is way ahead of the competition (the threat from Cypros isn't that serious, I'll get to that in a minute).
Let's take a look at competing compounds, including failed projects, shall we.
Novartis had a project that failed, their drug had a lot of side effects and had do be received very soon after injury. Their candidate might save you from TBI, but that won't help, as you'd be dead because of all the side effects.
Upjohn - their candidate didn't even penetrate the famous BBB (Blood Brain Barrier). They had a theory, that during TBI the BBB opens up a bit, and so large molecules could go through. They refused to learn from data in fornt of their eyes, and threw out a lot of cash on a project that was doomed from day one. Project dropped at phase III.
Sterling - They too couldn't get passed the BBB, and like Upjohn they too went all the way to phase III and failed.
Cypros - A lot of talk about their compound Ceresine. In phase II they proved that they lowered the level of lactic acid in the brain. Well, that's nice, but did it help the people in the trial. They made no neurological tests to show a link between lowering lactic acid and the patients clinical situation after the lowering of the acid.
OK, so Ceresine lowers the level of lactic acid, but does it improve the patient's chance of surviving ? even Cypros doesn't know the answer to that (they claim they do, but they didn't prove it). So what, I claim that my moms chicken soup helps when I have the flu. Can I prove it ? NO did the FDA approve her soup as a drug ? You guessed it, NO !
To be honest, I think the FDA screwed up in this case. Cypros proved nothing, but the FDA lets them go into phase III, just so they can fail at a latter stage and waste money while they're at it. I don't think Ceresine will make it, it's a very high risk project.
Big pharma knows that HU211 is the most interesting compound out there, and they know chances are it will be first on the market. Any drug that will come after HU211 will have to prove not only high efficacy and safety, but it will also need to show superiority vs. HU211. Being first to market is very important, and it's another incentive which brings the large pharmaceutical companies Pharmos' way.
I believe Pharmos will have a strategic partner by early next year (January/February), if things move along faster we could have something by year's end, but I doubt it. As for Pharmos's cut, well that's open for debate. I hope they can get as much as 25% of revenues, but I think we'll get something more like 15% - 20% plus certain co-marketing rights (which is very nice too).
The potential market is huge, but nobody has exact figures, only estimates. There is no treatment for TBI, so we can only guess the size of the market. Currently there are 500,000 severe head trauma cases each year (someone on yahoo made a stupid remark, that a big portion of these die and can't be treated, well...duh, that was because there was no treatment until now). I'll stick with the 500K which is a known number. The price of HU211 will be between $1500 and $2000 per treatment. That gives us a market anywhere between $750 million and $1 billion, in the US alone. That's quite a big market, and with the right partner we could take quite a nice piece of this market.
I believe that once we get a strategic partner (will be a house-hold name), things will move very quickly. Phase III will be done in multiple sites across the US (many trauma centers allready showed interest in being part of such a trial, like I said many projects failed, so these centers are looking for new projects to be involved with). By late 2000 HU211 could be on the market, as we get closer to that date we'll see the stock moving higher and higher (heck, Silver's price target might even be reached).
Right now the street is completely discounting HU211, and is even discounting our ophthalmic products which are allready generating revenues. I believe that these are the last days in which we'll see PARS at such low prices, we'll be moving from the current zip code very soon, and hopefully we won't stay at the 2's for too long. Take a look at a quote, copy it and save it. A year from now, you'll look at this quote, and you won't believe PARS was trading at under $2 just two weeks before phase II numbers for HU211 were out. We'll all regret we didn't buy more, even people who have PARS as their #1 holding (we always want more, it's greed, but that's life). |
