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Biotech Beat: Valeant Pharmaceuticals Intl Inc (VRX), Clovis Oncology Inc (CLVS), KaloBios Pharmaceuticals Inc (KBIO)

by Terry Chrisomalis

Valeant Pharmaceuticals Intl Inc

On November 18, 2015, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) had received approval for two new indications of its popular Cystic Fibrosis drug. The two new approval indications expands upon the company’s current use of Kalydeco — Ivacaftor — for patients with Cystic Fibrosis. The two new approval indications for Europe are:

  1. Patients with Cystic Fibrosis between the ages of 2 and 5, who have at least one of the nine gene mutations
  2. Patients with Cystic Fibrosis that are 18 and older and have the R117H mutation

The share price of Vertex has a 52-week high of $143.45 per share, but currently trades at $132.39 per share. We feel this news could potentially carry the share price up to its 52-week high as investors realize the additional value that was added. In addition, any type of new analyst upgrades will more than likely send the share price higher in the coming months. Cystic Fibrosis is a huge unmet medical need, and many patients are probably happy to use Kalydeco to help them with their disease.

Cystic Fibrosis occurs when there is a mutated CFTR gene. This mutated gene causes a problem air flow because of proteins, therefore the CFTR protein becomes defective or missing. This loss of proper proteins causes patients to build up sticky mucus in the lungs of the body. Ivacaftor acts to correct this problem by adding the proper CFTR proteins to improve airways in the lungs. Vertex Pharmaceuticals for now has a huge hold on this market until another competitor can match the efficacy of their drug.

Clovis Oncology Inc

On November 16, 2015, shares of Clovis Oncology Inc (NASDAQ:CLVS) tumbled 70% after announcing that the FDA had delayed the filing for the company’s lung cancer drug Rociletinib. The company had already posted some pretty good results for their drug in a big late stage phase 3 trial. The problem? Well the problem is that the FDA notified Clovis that the response rates the company submitted were lower than anticipated from the NDA, which was filed in September.

The FDA is now requesting additional data for response rates at two other dosage levels. The huge drop makes sense because investors were banking on the fact that Clovis would have smooth sailing for the NDA that was filed a few months ago. Unfortunately, things have gone totally off track and now the launch will have to be pushed back for a long time until all the data gets sorted out with the FDA. Had everything remained on track, Clovis expected to launch the lung cancer drug, Rociletinib, by the first quarter of 2016.

Clovis receiving an NDA delay is bad news in itself. So why is this delay a bad thing? For starters, some investors like to take profits and the huge fall in the share price could have been profit takers. After all, the FDA didn’t state that the drug was rejected. The FDA just stated they needed some additional info and that the drug would be delayed. Unfortunately, many investors see this as a doom scenario and immediately sold regardless of the future potential.

Finally, AstraZeneca had already received FDA approval for a drug that treats the same lung cancer indication. This drug known as Tagrisso, was approved approximately two week ago. This is a negative for Clovis, because by the time they get their drug out on the market AstraZeneca will already have a nice head start lead on sales. Could there be an opportunity for Clovis? There might be, but it won’t happen until the FDA gives a green light. Although, once this happens then Clovis may possibly make a nice sharp move right back up.

KaloBios Pharmaceuticals Inc

Last week, I wrote how KaloBios Pharmaceuticals Inc (NASDAQ:KBIO) was winding down its operations and was looking to put itself up for sale. In an unforeseen event, Martin Shkreli took a big investment in the company sending the share price higher. Before I go any further let me provide a little backstory so that everyone can understand what happened. Kalobios had already failed two phase 2 trials, and even lost their partnership with Sanofi for the Cystic Fibrosis indication.

The company did have two early stage assets for rare blood cancers, but no money to continue to fund them. Well fast forward to November 18, 2015 Turing Pharmaceuticals, Martin Shkreli’s company, bought 1.2 million shares initially and then up to 1.6 million shares of Kalobios total. As soon as the initial filing was announced the share price soared 800% in one day on this news, which was quite remarkable for a dying company a week prior.

On November 19, 2015 Martin Shkreli along with two other hedge fund managers announced that they purchased up to 70% of the company. The very next day on Friday shares of Kalobios surged another 400% on this news. Shkreli made himself CEO, and everyone was named for the board of directors position. I would like to think that the run up would stop here but that isn’t the case here. On November 23, 2015 Kalobios surged higher by 116% as the momentum of the news continued to carry on. I don’t know how this will play out in the coming weeks, but this might see a pullback so it should be avoided for now after such a large run-up.

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