Peramivir sales in Japan

Shionogi announced Peramivir sales targets for their fiscal year ending March 31, 2010.

http://www.shionogi.co.jp/ir_en/news/detail/e_100126.pdf

Based on conservative estimates of 700,000 doses at $34 per dose to $64 per dose, Shionogi expects revenue of between $23.8 million and $44.i million. With an assumed 20% royalty split, BioCryst Pharmaceuticals (BCRX) revenue from Shionogi sales in Japan over the next two months is between $4.76 million to $8.82 million. These revenue figures flow straight to the bottom line, and with 38.2 million outstanding shares, the earnings per share from Japanese revenue over the next two months is significant.

Sales figures do not take into account milestone payments due BCRX, and do not include the manufacturing mark-up from sales of Peramivir Active Pharmaceutical Ingredient (API) to Shionogi.

As noted, Peramivir is gaining traction worldwide, as regulatory approvals and emergency use authorization (EUA) have been secured in North America, Asia, Europe, the Middle East, and Latin America.

See sidebar for disclaimers.

Disclosure: long BCRX shares.

Is a correction coming?

Shorts have been torched since the March lows, betting on a market correction as traders climb the wall of worry, waiting for the next shoe to drop. The problem is the Fed has flooded the market with liquidity, lending to banks at zero interest rates, encouraging the carry trade as these banks invest in equities, bonds, and commodities. Hence, the elevation in these assets, despite a lousy economy.

In essence, a cheapened dollar is bullish for other asset vehicles. The Fed, and now the G-20 countries, have declared easy money policies will be extended to at least mid-2010, when they may take the punch bowl away.

Having said that, I expect a correction in both equities and gold soon, albeit temporary, as the short dollar trade is getting really crowded. When a a consensus builds, it's usually prudent to take the opposing side--at least until sentiment becomes less lopsided. Additionally, as the dollar keeps getting trashed, foreign governments are becoming increasingly concerned at their stronger currencies vis-a-vis the dollar, making their exporting industries less competitive (although their consumers enjoy the weak dollar when they travel as tourists to the US).

So I believe their central banks will intervene in unison in buying dollars and selling their own currencies. It'll be a death race to the bottom---to see which countries can devalue their currencies the most, in order to stimulate their own domestic economies.

This (temporary) strength in the dollar will tank gold, commodities and stocks, in my opinion. This is what happened in Quarter 4 2008, although the dip won't be as pronounced this time around, as there are many more buyers to stem the decline, including big hedge funds and foreign central banks. The bullion shorts have more formidable opponents with deeper pockets now.

Obviously, President Obama, the Fed and US Treasury don't want a repeat of 2008, so they will keep printing dollars. After the correction, the dollar will resume its downward trajectory. The only question is WHEN this correction will occur.

I'm not selling everything, especially if I'm waiting for a biotech event, but I sold a small portion of my gold positions today. I will look to add to my gold position on any pullback. If it doesn't occur, I won't beat myself up. It's been a good run with the yellow and white metals already, up triple digits in the mining stocks. But when I see Bank of America forecasting $1500/ounce gold, and mainstream pundits predicting $3,000 gold, I get nervous.

Where were these analysts last year when gold was $675, and some of these mining shares were penny stocks? The answer was they were still in the major equities indices--and subsequently got hammered in the financial meltdown.

I'm not selling all my current positions in gold, because 5 years from now--or less, we could see $2500 gold. Trading in and out of positions is seldom rewarding. I'm just taking profits, only because I can, without running for the exits.

It's similar to when I sold some BCRX at $6.70 price per share (pps), after buying in the $2's and $3's after the initial swine flu outbreak earlier this summer. Do I regret it now that it's at $11? Yes, but after being honest about it, it was the right thing to do. I won't get rich on this one trade, but I'll be around to play another day. I still have house money on the table, and even added a little today on the dip, so I'm still in the game.

I'm not trying to optimize my returns--I'm trying to play the probabilities, and hedge my longs. Since the short dollar / long gold trade is too crowded, I'm stepping back from the cliff, but I'm not leaving the beach.

See disclaimers on the sidebar. Do your own due diligence. These are not specific recommendations on assets or positions. Good luck.

Disclosure: I am long gold and silver mining stocks, and long BCRX shares. But obviously, I am expecting pullbacks in both asset classes.

Just in: Peramivir receives competition

http://www.nytimes.com/2009/11/06/business/06drug.html?_r=1

But peramivir will soon have competition. The federal government said late Thursday that it had also ordered 10,000 treatment courses each of intravenous versions of Tamiflu and Relenza, with options to buy 30,000 more courses of each.

Those drugs could not be used, however, until they received emergency use authorizations from the F.D.A.

The government is paying an average of only $450 a course for those other drugs — only one-fifth of what it is paying for peramivir.

Right now, Dr. Lurie said, peramivir is the only drug that can be used intravenously so the government had to pay a high price. “I would say that one of the things that happens in the market when you have competition is that the price drops.”

It looks like the government wants to create competition and reduce the price of intravenous (IV) anti-virals. The problem is that Tamiflu IV and Relenza IV, have not even gone through Phase 1 or Phase 2 clinical trials yet, much less Phase 3. Receiving Emergency Use Approval (EUA) will prove to be a challenge, as BCRX receiving EUA for Peramivir has been challenging enough--even after years of clinical trials.

This is a case of two big foreign pharmaceutical companies fighting back to regain market share they've lost to an upstart US biopharmaceutical company. Tamiflu and Relenza are still effective in many cases against the novel H1N1 virus in their present form, oral and inhalant, respectively. But the seasonal flu is almost 100% resistant to Tamiflu, and starting to show resistance against Relenza.

IV Peramivir has shown to have 90% efficacy in saving lives of complicated cases of the H1N1 virus--when all other measures have failed. If and when Tamiflu IV and Relenza IV receive EUA, it remains to be seen whether they can show similar capability in saving lives.

Swine flu portfolio rally

Shares of BCRX, NVAX, SVA, HEB, and APT all increased double-digit percentages today. I keep expecting the overall market to roll over and have protective puts in place--hence, the hedges keep eroding in value. But I am not complaining, given triple digit gains on the aforementioned stocks.

Exit strategies for longs need to be in place. But after polling several experts in the field, the swine flu will be worse than general public expectations. Also, very few understand the five vaccines and the anti-virals available, either approved or under Emergency Use Authorization review. Unless, of course, they've been reading these blogs for a few months (pardon the temporary lapse in modesty).

The most recent update is that egg-based vaccines won't be available until October, due to lower than expected yields. With a 21-day duration between doses, and one more week thereafter before immunogenicity kicks in, most students and young adults won't be immunized until November at the earliest. As noted before, with schools already in session, the swine flu will peak in October, rendering many vaccines useless among the targeted population.

Anti-virals will have to step in, even though Tamiflu has tolerability as well as efficacy issues due to resistance. Inhaled Relenza has limitations, so intravenously administered Peramivir has BCRX longs excited about an imminent EUA stockpiling order.

Good luck to all longs, and good luck to those who will become infected with the novel H1N1 virus.

Disclosure: Long shares in BCRX, NVAX, SVA, HEB, and APT.

BCRX and NVAX receive positive news

Leerink Swann, an investment bank specializing in biotech and life science companies, upgraded their price target on BCRX from $5 to $10, on an estimated Emergency Use Authorization order of $394 million for US stockpiling of the anti-viral Peramivir. The report was curious in the exact amount of $394, as the specificity could be a telegraph that an order is imminent. In any case, longs have been anticipating EUA for weeks, so the waiting game continues, as longs and shorts battle for positioning.

NVAX received good news this morning, according to an article in Indian Times. Cadila, a NVAX partner for their vaccine-like particle (VLP) flu vaccine, announced they are the first pharma company to produce a vaccine for the novel H1N1 virus in India. NVAX, in addition to receiving milestone payments, will receive 20% royalties on sales of the vaccine in India, meaning revenue from the Cadila partnership will go directly to NVAX's bottom line, as Cadila picks up all clinical development costs. Approval is expected by the end of this year. See previous blogs for NVAX value proposition and our investment thesis, mainly higher vaccine yields, faster vaccine production, and lower in-border manufacturing costs. All of these benefits are due to not needing eggs to produce the VLP vaccine. Under- and un-developed countries will greatly benefit due to faster ramp and lower cost structure, as well as the ability to control domestic manufacturing capacity. They won't be held hostage to foreign healthcare resources.

In fact, in a bit of irony, with India fast-tracking NVAX's VLP vaccine, the US may be on the outside looking in if vaccine production falls short. That would be a travesty considering NVAX is a US supplier of vaccines. This is another shameful example of the FDA dragging their feet, partly due to insidious pressure from incumbent big pharmaceutical companies to impede progress of promising competitive solutions from innovative upstarts like NVAX.

Tamiflu-resistant swine flu

The US has a huge stockpile of Tamiflu and Relenza as anti-virals. Anti-virals are treatments for patients who have contracted the various flus already--they are not vaccines and hence, are not used as prophylaxis in prevention of said influenza viruses.

http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5816a6.htm

Read the editorial note, not just the article. Down at the bottom, you will see this:

Compared with M2 blockers, NAIs previously exhibited lower frequency of antiviral resistance during therapeutic use (16,19). However, during the 2007--08 influenza season, emergence and transmission of oseltamivir-resistant A (H1N1) viruses, with a H274Y mutation in the neuraminidase protein, was simultaneously detected in several countries in the Northern Hemisphere (4,20--22) and spread globally (7,9,23). As of April 2009, similar trends have been observed in the 2008--09 influenza season, with many countries reporting up to 100% oseltamivir resistance in A (H1N1) viruses

.

In case you were wondering, oseltamivir = Roche's Tamiflu, currently the anti-viral of choice for the nation's stock pile. It no longer works for avian or swine flus! So if you're sick from the swine flu enough to get admitted into a hospital, they will probably administer Tamiflu orally, as it is a pill. I have seen government data that up to half of admitted swine flu patients in ICU end up dead. One other possible reason for resistance (besides prevalence of Tamiflu in our sewage and water system) is oral consumption decreases and delays absorption of the compound. One of the members in this email thread used to work at Roche, perhaps he can add some color to this assessment.

The 2nd drug of choice is GlaxoSmithKline's Relenza, or zanamivir. It has maintained efficacy for treating various strains of flu, and is in the form of powder. If a patient is seriously ill enough to be intubated, that option is ruled out because Relenza can only be inhaled.

Which only leaves us with BCRX's Peramivir intravenous application as the only option. The share price has gapped up recently, despite only completion of Phase II clinical trials in the US. It is already approved for E-IND use, which basically allows individual doctors to administer it for individual patients as an emergency. But due to its efficacy, investors are waiting for Emergency Use Authorization, which allows national stockpiling, despite lack of FDA approval. This will translate to millions of doses, not just a few thousand.

Many investors feel this action is not just pending, but imminent. Vaccine manufacturers are scrambling to meet exploding demand--and they will still fall short, as best-case scenarios call for delivery in October. Unfortunately, school starts in August/Septemer, so we will unquestionably see a soaring number of cases this fall--rendering vaccines useless. Fortunately, most cases will be mild, and won't require hospitalization. But due to the high infectious rates, and sheer numbers of cases, hospitalization and death rates will be higher than seasonal flu cases by orders or magnitude.

http://news.yahoo.com/s/ap/20090724/ap_on_he_me/us_med_swine_flu

http://www.cbsnews.com/stories/2009/07/21/earlyshow/health/main5177452.shtml

Government health officials aren't in business to create unnecessary hype--quite the contrary--they aim to act quickly and decisively while attempting to not cause undue panic. They usually fail in both. However, they are on the hook to prepare for a worst-case scenario, and they will look awfully foolish if they don't take emergency measures as part of their contingency plans. In Japan and the rest of Asia, where sensitivity and awareness to infectious disease is high due to close living quarters, their FDA equivalent health agency has already completed Phase III trials, and results for Peramivir were positive. Approval in Japan will precede US FDA approval, and they will surely order millions of doses of Peramivir.

While FDA approval for Peramivir is further down the road, they will have to act soon in order to secure enough Peramivir inventory to prepare for a worst-case scenario. Because the public will not appreciate it if they find out their own US government is forced to stand in line--behind other countries because they didn't act quickly enough to protect their citizens.

I bought BCRX in the 2's and 3's in May and June, and it's currently bumping up against $10. I'm praying for a pullback to accumulate more shares, but I'm afraid the world is waking up to the severity and depth of the swine flu. It may keep increasing, as the big boys on Wall St. become more cozy with the investment thesis. However, with market makers, you never know, and they can force one more bear raid to help the shorts cover, and to help their friends at Goldman Sachs buy in at lower prices. Wall St. analysts usually don't get it right, so when they guess wrong, they have friends who come to their rescue to drive share prices down. Instead of complaining about it, we can use it to our advantage, buying at lower prices when the opportunity presents itself. But it can easily gap up into the teens upon arrival of the EUA. Let's hope all the fear-mongering ends up being a false alarm. On the other hand, I'm not betting on it. Good luck to all longs,

Disclaimer: This is not a recommendation. Do your own due diligence.

Disclosure: Long BCRX shares.

Why Tamiflu may not help

The season, avian and swine flu strains are developing a resistance to Roche's anti-viral Tamiflu. Here are the possible reasons why:

http://www.sciencedaily.com/releases/2007/10/071002213442.htm

GSK's Relenza has to be inhaled, so cannot be administered to intubated, critically severe cases.

Hence, BCRX's Peramivir may play a leading role, as late-stage clinical trials in Japan and the US show positive results when administered intravenously.

HEB

HEB shares dramatically dropped $0.92 to $2.40, giving up all the gains from the past several days. The conference call update on swine flu initiatives worldwide didn't impress investors, as they focused on the delays in FDA approval for Ampligen as a treatment for Chronic Fatigue Syndrome. Days like today are exactly why one should take partial profits on recent large gains, which we did yesterday. As this is all "house" money, I can afford to wait for further developments on either the CFS or swine flu adjuvant front.

BCRX and NVAX share prices were up modestly today after large gains in previous trading sessions, waiting in anticipation of tomorrow's FDA vaccine advisory committee meeting. Both are waiting for pending positive news on Emergency Use Authorization, which will allow them to manufacture doses for the national stockpile. NVAX's VLP technology cuts down the time to manufacture vaccines, which is becoming increasingly urgent as the pending swine flu season is expected in September when schools re-open.

BCRX's Peramivir is not a vaccine, but an anti-viral treatment that reduces the symptoms of the flu and shortens recovery time. EUA is expected for intravenous use in severe cases requiring hospitalization.

Both NVAX and BCRX are working with health officials worldwide, with especially intense clinical activity being performed in Japan and the US.

Swine flu plays resurface ahead of next FDA vaccine meeting

BioCryst Pharmaceuticals (BCRX) gapped up again 22% from yesterday's close of $6.21 to $7.58 today, up 22%, while Hemispherx Biopharmaceuticals surged almost 33% from $2.49 to $3.31. Both are up triple digits since we bought them in May (see June 4, 2009 "Swine flu revisited" blog).

BCRX's Peramivir is an effective intravenous anti-viral against seasonal flu, avian flu, and the latest swine flu (H1N1), shown to reduce flu symptoms in Phase III trials conducted by Japanese partner Shionogi. BCRX is also waiting for Emergency Use Authorization (EUA) by the FDA for severe cases requiring hospitalization. The EUA is required since Peramivir is not approved by the FDA. Peramivir has shown at least equal efficacy against the flu when compared to Roche's Tamiflu anti-viral in clinical trials.

HEB is having a conference call tomorrow to update the investment and medical communities on their clinical developments for Ampligen, a flu adjuvant. Studies have been performed worldwide for use of Ampligen as a booster alongside existing vaccines. Ampligen is also under FDA review for approval as a treatment for Chronic Fatigue Syndrome.

Novavax (NVAX) ended today's session at $3.19, up from $3.02. They also named John Trizzino Senior VP of International and Government alliances, in a sign that they are intensifying efforts with government agencies worldwide on getting approved for their vaccine-line particle (VLP) platform. With VLP, the time to manufacture a vaccine is cut in half--approximately 10-12 weeks, and yields are higher because they don't require egg-based cultures. Fixed costs are also lower due to disposable manufacturing systems.

This Thursday, July 23, the FDA Vaccine and Related Biological Products Advisory Committee will meet with vendors to discuss vaccines against the H1N1 virus: http://www.fda.gov/AdvisoryCommittees/Calendar/ucm170908.htm

This meeting is a sequel to the National Biodefense Science Board (NBSB) meeting held last month (see July 20, 2009 "BCRX potential" blog). The questions held at the NBSB will hopefully be answered this Thursday during the FDA Vaccine AC meeting. Shares of all 3 aforementioned companies jumped in anticipation of positive results.

As mentioned in previous blogs, the World Health Organization (WHO) raised the pandemic alert in June to Phase 6--the highest level possible, which last occurred 41 years ago. The foregone conclusion is that the H1N1 is spreading faster than previous pandemic flus. By the time it hits the US hard in the fall, it is estimated that 1 out of 3 Americans will contract the virus. So far, the mortality rate is lower than the avian flu, but should it mutate, the result strains could increase the severity as well as the virulence.

Two ships arrive overnight...

BDSI's cancer drug pain-killer finally gained approval yesterday, after an almost year-long delay regarding labeling issues against misuse and abuse. With a novel drug delivery system, along with a strong pipeline, and a low float of shares, this investment in BioDelivery Sciences is a winner.

http://www.reuters.com/article/marketsNews/idINN1643063420090716?rpc=44

BCRX shares shot up overnight, after partner Shionogi announced positive results in Peramivir Phase III trials in Japan and Korea. Peramivir is an anti-viral which competes against existing stockpiles of Roche's Tamiflu and GSK's Relenza. Due to mutation, viral strains are starting to show resistance to Tamiflu and possibly Relenza. Hence, the race to develop a new anti-viral.

We've known of this partnership for a while and the stock has more than tripled since we bought in May, but the shares should soar higher if and when the US assigns Emergency Use Authorization for stockpiling against a pandemic flu.

http://finance.yahoo.com/news/BioCryst-Pharmaceuticals-prnews-4103594572.html?x=0&.v=1

Swine flu revisited

In the bad news, good news category:

Bad news first: the swine is spreading rapidly, despite declining media coverage.

Good news: my two swine flu plays are doing well.

HEB has a history of FDA non-approvals, but is expecting a PDUFA decision from the FDA any day now, for approval of treatment for Chronic Fatigue Syndrome (CFS). CFS's acknowledgment as an official indication itself is controversial, and thus there are no current approved treatments for it. That's why HEB's Ampligen has so much potential, as patients and doctors in clinical trials swear by it. After being barely able to function, some patients on Ampligen have their lives restored.

But Ampligen is also being reviewed in Japan, Italy, and Australia (among other countries) for use as an adjuvant with vaccines to combat season flu, avian flu, and swine flu. Apparently, Ampligen in conjunction with other vaccines shows clinically significant efficacy.

I have sold 40% of my HEB holdings, locking up to 100% gains, and letting the rest ride in case they get approval for CFS. Any orders from the increasing threat of rising flu cases will provide further upside in the price per share.

BCRX is developing an anti-viral (vs. a vaccine) which shows efficacy in reducing symptoms for those with severe flu symptoms. Roche's Tamiflu is largely ineffective against some mutated influenza strains and GSK's Relenza has also been marginalized against resistant strains. BCRX's Peramivir intravenous dosage has been so effective against multiple flu strains in clinical trials that they are being evaluated for Emergency Use Authorization (EUA) despite not being FDA-approved (currently Phase II).

In Japan, they are in Phase III with fast-track approval targeted for 2010. Shionogi, their marketing partner, is working furiously to get approval in China, South Korea, Taiwan, and Hong Kong as well. East Asian countries are far more sensitive to influenza due to close living quarters and an aging population in Japan, which increases mortality and morbidity.

I believe WHO will raise the pandemic alert to Phase 6--the highest level soon. Despite the swine flu's rapid spread, confirmed cases are being under-reported for various reasons, whether political or just lack of testing facilities. For now, the H1N1 virus has been proven virulent, if not as lethal as its avian flu cousin (H5N1). But if they somehow mutate these winter seasons in the southern hemisphere, and then later in the northern hemisphere, we could have a strain that is both virulent AND lethal.

These are highly speculative investments, and these are not recommendations. Please do your own due diligence.

Disclosure: I am long BCRX and HEB.