Looking Ahead in Biotech: Ariad Pharmaceuticals, Inc. (ARIA), Dynavax Technologies Corporation (DVAX), OncoGenex Pharmaceuticals Inc (OGXI)

Biotechnology companies release data on pipeline drug studies up update analysts and investors on the progress of a drug. Positive data releases have the power to send stocks soaring as they indicate the drug is one step closer to FDA approval. Y Katherine Xu of William Blair offers insight into a handful of biotechnology companies scheduled to release data updates including Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), Dynavax Technologies Corporation (NASDAQ:DVAX), and OncoGenex Pharmaceuticals Inc (NASDAQ:OGXI). Xu has a 63% overall success rate recommending stocks with a +18.6% average return per rating.

Ariad Pharmaceuticals

Analyst expects top-line data from the ALTA study of brigatinib; a pipeline drug therapy for lung cancer. The drug has already received Breakthrough Therapy designation by the FDA. Xu believes there is a 85% chance that the study will be successful and believes it will have a mid-sized impact on the stock. Xu is optimistic because “ALTA is a single-arm study with [overall response rate] as the primary endpoint, [therefore] the chance of success and approval is very high based on the available data to date.” The analyst expects these results to have a “modest impact” on Ariad shares.

There are currently three competing drugs on the market, but Xu belevies “brigatinib has so far produced the highest overall response rate.” Furthermore, “Brigatinib also posted the highest progression-free survival (PFS) of 13.4 months” versus the competing drugs survival rates of 5.7 months and 6.3 months. If brigatinib is ultimately approved, Xu estimates peak sales of the drug will reach $280 million. Xu notes the company is “seeking a partner to codevelop and commercialize brigatinib,” which will in turn dilute the profit derived from the drug. The analyst concluded, “Ariad has a cash runway that could sustain operations into 2018, when we expect Ariad to potentially become profitable.”

Y Katherine Xu currently has an Outperform rating on ARIA with an $11 price target

Dynavax Technologies

Katherine Xu expects Dynavax to release top-line data from the HBV-23 study towards the end of 2015. HBV-23 is a Phase 3 study on HEPLISAV, a pipeline vaccine for adults with hepatitis B. This is the final study for the drug, which investors hope will help clear the way for FDA approval in the United States. Xu is 90% confident the study will be successful and 80% confident the drug will be approved in the United States. The analyst estimates the data release from the study will have a fairly significant impact on the stock because “the market is already relatively confident in the success of the study.” Peak sales of the drug are expected to reach $600 million.

Aside from HEPLISAV, Xu also believes SD-101 is worth noting. SD-101 is an immune-oncology drug in Dynavax’s pipeline. The drug is currently is five Phase I/II studies and could produce meaningful data in 2016. If the data is “positive and promising,” Xu believes that SD-101 could be a much “bigger” product than HEPLISAV. The analyst provided commentary on the general stock and concluded, “Dynavax has a cash runway through mid-2016, and might need to raise financing in the near term.”

Y Katherine Xu currently an Outperform rating on DVAX with a $42 price target.

OncoGenex Pharmaceuticals

Xu expects to receive top-line data from the AFFINITY study by the end of 2015. AFFINITY is testing custirsen, a pipeline therapy for a chemotherapy companion in prostate cancer. Xu expects the data to have a profound impact on the stock since the AFFINITY trial is custirsen’s last chance to receive approval. Xu explains, “Custirsen failed the SYNERGY study in combination with frontline chemotherapy Taxotere two years ago, and AFFINITY is evaluating custirsen in combination with second-line chemo agent Jevtana versus Jevtana alone in late-stage metastatic castration-resistant prostate cancer (mCRPC) patients.” However, the FDA recently approved an amendment to ad co-primary endpoint to the AFFINITY test that might increase the chance for success. The new end-point proves that custirsen was more successful is sicker patients. Based on this amendment, Xu increased her probability estimates of the drug filing a NDA from 55% to 70%. Lastly, the analyst believes the peak sales for the drug could reach $225 million.

Y Katherine Xu currently an Outperform rating on OGXI with a $5 price target.

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