Alnylam Pharmaceuticals' CEO Discusses ALN-TTRsc Phase I Clinical Data (Transcript)

Executives

Cynthia Clayton - Vice President, Investor Relations and Corporate Communications

John Maraganore - Chief Executive Officer and Director

Barry Greene - President and Chief Operating Officer

Akshay Vaishnaw - Senior Vice President and Chief Medical Officer

Analysts

Geoff Meacham - JPMorgan

Alethia Young - Deutsche Bank

Marko Kozul - Leerink Swann

Alan Carr - Needham & Company

Ted Tenthoff - Piper Jaffray

Stephen Willey - Stifel

Alnylam Pharmaceuticals, Inc. (ALNY) ALN-TTRsc Phase I Clinical Data Conference Call September 23, 2013 8:00 AM ET

Operator

Welcome to the Alnylam Pharmaceuticals conference call to discuss interim clinical results from their ALN-TTRsc Phase I trial. (Operator Instructions) I would now like to turn the call over to the company.

Cynthia Clayton

Good morning, everyone. I am Cynthia Clayton, Vice President of Investor Relations and Corporate Communications at Alnylam. On the call with me today are John Maraganore, our Chief Executive Officer; Barry Greene, President and Chief Operating Officer; and Akshay Vaishnaw, Executive Vice President and Chief Medical Officer.

For those of you participating via conference call, the slides we have made available via webcast can also be accessed by going to the Investors page of our website, www.alnylam.com.

During today's call, as outlined on Slide 2, John will provide some context on our ALN-TTRsc clinical results and what they mean for the program Alnylam and for the RNAi field. Akshay, who is on the call remotely, will then review the results of the ALN-TTRsc clinical study. Barry will review our upcoming milestones, and we will then turn the call over to you for your questions.

Before we begin, and as you can see on Slide 3, I'd like to remind you that this call will contain remarks containing Alnylam's future expectations, plans and prospects, which constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent quarterly Report on file with the SEC.

In addition, any forward-looking statements represent our views only as of the date of this recording, and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.

I will now turn the call over to John.

John Maraganore

Thanks, Cynthia. Welcome, everyone, and thanks for joining us this morning. As you can imagine, we are very excited to share with you these positive clinical data from our ALN-TTR subcu Phase I study.

These human data are the first to be presented for our proprietary GalNAc-siRNA conjugate delivery platform, which enables subcutaneous dosing of RNAi therapeutics with a wide therapeutic index. These new clinical results clearly establish human translation for RNAi therapeutics that utilizes delivery platform.

Moreover, we believe these new results demonstrate an unmatched level of efficacy for RNA therapeutics with a consistent approximately 90% target gene knockdown via subcu dose administration, in addition to a very promising safety profile. More specifically to our TTR amyloidosis program, we believe these results establish a new benchmark for consistent and sustained TTR knockdown of approximately 90% for RNA therapeutics in development for ATTR.

Because of results like these, our GalNAc-siRNA conjugate delivery platform has now become our primary approach for execution on our Alnylam 5x15 product strategy and in addition to our TTR cardiomyopathy program, it is the platform we're using in our programs in hemophilia, porphyria, complement-mediated diseases, hypercholesterolemia, beta-thalassemia and alpha-1-antitrypsin deficiency, amongst others programs that are yet to be disclosed.

As a result, these data are very meaningful, not only for the continued advancement of ALN-TTRsc, but also for the continued execution on our entire Alnylam 5x15 product strategy. Through this strategy, we believe that we are building a compelling opportunity for shareholder value creation with a modular and reproducible approach for development and ultimately commercialization of innovative medicines for genetically defined disease.

We are in the midst of very exciting times at Alnylam with a steady flow of free clinical and clinical data. And these new results reflect the strong potential of RNAi therapeutics to become a whole new class of innovative medicines.

I'll now turn the call over to Akshay, for a more detailed review of the data. Akshay?

Akshay Vaishnaw

Thanks, John. As you just heard, these new ALN-TTRsc results represent a major milestone in our ATTR program as well as our entire pipeline of RNAi therapeutics. We believe this level of consistent TTR knockdown is exceptional and unmatched. And we now aim to advance ALN-TTRsc in future clinical studies with the goal of achieving approximately 90% TTR knockdown to maximize clinical efficacy.

As most of you are aware, our ATTR program is our lead 5x15 program. ATTR is a devastating, often fatal, hereditary orphan disease caused by mutations in TTR gene afflicting approximately 50,000 people worldwide.

There are two clinical presentations of ATTR. These include familial amyloidotic polyneuropathy or FAP, which affects approximately 10,000 people globally; and familial amyloidotic cardiomyopathy or FAC, which affects at least 40,000 people worldwide. Of course many patients also show evidence of mixed nerve and heart involvement.

New therapies are clearly needed for the treatment of ATTR, and we believe that our mechanism of action, silencing of the disease causing TTR gene leading to knockdown of the circulating pathogenic TTR protein has the potential to generate a profound therapeutic impact.

Now let me walk you through our ALN-TTRsc Phase I study and the results we have generated to date. As you can see over Slide 10, the Phase I trial is being conducted in the U.K. as a randomized, double-blind, placebo-controlled, single and multi-dose, dose-escalation study, enrolling up to 40 healthy volunteer subjects. The primary objective of the study is to evaluate the safety and tolerability of single and multiple doses of subcutaneously administered ALN-TTRsc.

Secondary objective include assessment of clinical activity of the drug as measured by serum TTR levels. In an initial single-ascending dose phase of the study, subjects receive subcutaneous doses of placebo or ALN-TTRsc from 1.25 mg to 10 mg/kg. In the multiple-ascending dose phase of the study, subjects receive 10 subcutaneous doses of placebo or ALN-TTRsc from 2.5 mg to 10 mg/kg.

As you can see on the Slide 11, interim data from the 28 subjects enrolled and analyzed in this study to date, showed that single and multiple dose administration of ALN-TTRsc resulted in rapid, dose-dependent, consistent and durable knockdown of serum TTR levels.

In the multi-dose cohorts, there was a statistically significant knockdown of serum TTR at all doses tested as compared to placebo. At a dose of 5 mg/kg, ALN-TTRsc administration resulted in up to 93.3% knockdown of serum TTR and a mean TTR knockdown of 87.5% at nadir. At a dose of 10 mg/kg, ALN-TTRsc led to up to 94% knockdown of serum TTR and a mean TTR knockdown of 92.4% at nadir.

By all accounts, this is an exceptional and unmatched level of TTR knockdown. Notably, during the period of dose administration, TTR levels are essentially clamped down showing a very consistent effect during dosing. In addition, we are very pleased to see a very rapid onset of action, with nadir achieved at about day 50, and then a very durable effect after cessation of drug with recovery to baseline levels at several weeks after.

And on the inside of Slide 11, analysis of TTR knockdown in humans as compared to non-human primates shows there's a highly correlated effect between the two species on a milligram per kilogram basis. Importantly, as John said, we believe these results unambiguously confirm human translation for our GalNAc-siRNA conjugate platform.

Now, our Phase I study is ongoing and we're currently enrolling subjects in additional cohorts to explore the activity of ALN-TTRsc administered weekly at a dose of 7.5 mg/kg as well as administration of ALN-TTRsc on once every two week dosing schedule. We'll use these additional data to finalize our dose and dose regimen selection for the start of our Phase II later this year with the start of our Phase III plan for next year, but we expect to be proceeding with either a 5 mg/kg or 7.5 mg/kg weekly or once a week two-week dosing regimen.

Setting up safety in this study, as reported to date, single and multiple doses of ALN-TTRsc were found to be generally safe and well tolerated. There were no significant or serious adverse events associated with the drug at doses through 10 mg/kg.

As detailed on Slide 12, all adverse events would be mild or moderate in severity. Injection site reactions were observed in the minority of subjects, including those receiving placebo. These are reported as being clinically mild and consist of transient erythema associated in minority of cases with edema or pain.

In all cases, these reactions were self-limiting and results completely typically within two hours of onset. Importantly there were no study discontinuations, flu-like symptoms or changes in cytokine, CRP, liver function test or kidney function or hematologic parameters.

In aggregate, these new data support our conviction that ALN-TTR has the potential to be an important therapeutic for the treatment of familial amyloidotic cardiomyopathy, a disease for which there are no approved therapies. Clearly, the ability of RNAi therapeutic to achieve a consistent approximately 90% knockdown of serum TTR sets a new benchmark that I believe has the potential to translate into meaningful clinical benefit for patients.

With these results in hand, we are well-positioned for continued execution on this program, which includes the initiation of a pilot Phase II study in FAC patients by the end of this year, and assuming positive results start of a pivotal Phase III trial with ALN-TTRsc by the end of 2014.

And with that, I'd like to turn the call over to Barry. Barry?

Barry Greene

Thanks, Akshay, and good morning, everyone. As you've heard we are demonstrating with robust human clinical data that the RNAi pathway can be harnessed to create high-impact innovative medicines. These new data point out our GalNAc-siRNA conjugate delivery platform as our primary approach for execution on our Alnylam 5x15 product strategy.

As a result, these data are very meaningful, not only for the continued advancement for ALN-TTRsc, but also for the continued execution of our entire Alnylam 5x15 product strategy. And while we have made tremendous progress since the start of the year, we still have some very exciting preclinical and clinical data presentations and milestones coming out of the rest to the year, as you can see on Slide 16.

As Akshay mentioned, we remain on track to start a Phase II study with ALN-TTRsc in cardiomyopathy patients later this year and are planning to start a Phase III trial in 2014. Now, with regard to our TTR02 program, we expect to present further data from our Phase II trial at the International Symposium on FAP in Brazil in November. These data will include full TTR knockdown data for about 30 ATTR patients.

For patients enrolled in Phase II study, we aim to begin an open-label extension study as well in the coming weeks. This study will include clinical data that will begin to readout in 2014.

Finally, we plan to initiative a Phase III pivotal trial for ALN-TTR02 in polyneuropathy patients by the end of the year. Without a doubt, this continues an exciting transition for Alnylam, as we enter advanced stages of our clinical development with our lead program.

Now, turning to our ALN-AT3 program for hemophilia, we've also made tremendous progress and are on track to file an IND for this program in the fourth quarter of this year and a Phase I start in early 2014. With our ALN-AS1 porphyria program we expect to identify a final development candidate for the program by late 2013 and to advance into clinic in 2014.

We also plan to nominate a development candidate for our ALN-CC5 program for complement-mediated diseases by the end of this year. For ALN-CC5, we'll provide clinical timeline guidance at the beginning of next year, but you can expect us to move this program forward quickly. And we plan to end the year with greater than $320 million cash.

Finally, with a number of scientific meetings from now to the end of the year, where our scientists will be presenting new data from essentially all of our 5x15 programs. In summary, I think it's clear that we are executing on our goal of advancing RNAi therapeutics with a potential to become an entirely new class of innovative, high-impact medicines for patients in need.

With that, I'd like to turn the call back over to the operator for your questions. Ellie, we'll take questions now.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Geoff Meacham of JPMorgan.

Geoff Meacham - JPMorgan

I had a few questions. I knew you guys hadn't reported ISRs with the IV formulation, at least I don't remember that, but you have that here. Do you think that for subcu, this is the administration itself or is it some mechanism for the GalNAc delivery or is this problematic at all when you guys look at taking subcu into Phase III down the road? And I have one follow-up.

John Maraganore

Geoff, as you know, just about every subcutaneously-delivered drug has injection site reactions as a reported AE that true with HUMIRA, it's true with insulin, it's true with low-molecular-weight heparin. So it is very much a common phenomenon with subcutaneously-delivered drugs.

With an intravenous infusion of course, there you don't typically have these type of reactions, because you go to a hospital, you get an intravenous catheter administered. So it's a very different type of procedure. None of these injections site reactions that we're seeing are in any way, shape or form limiting, in terms of how we think about that. And the drug will be forward. Akshay, do you want to comment any further on that.

Akshay Vaishnaw

Yes, and I think couple of things over that is that as we described these reactions are very transient, lasting a couple of hours and this consist generally of redness. And importantly no one discontinued, no one was bothered by them, no. Action needed to be taken. And so they are very much, as John is saying, in keeping with other subcu drugs, which have been very successful. And in an indication like this we see nothing but green lights with these great data that we have to knockdown up to almost 94%.

Geoff Meacham - JPMorgan

And then the follow-up is for ATCR. From you guys, epidemiology work, are the mutations at the, let's say the less or more severe spectrum of disease that you can use to inform the entry criteria, when you guys look to start your pivotal later on this year?

John Maraganore

Yes, that's a great question. Akshay, do you want to handle that?

Akshay Vaishnaw

Geoff, just repeat that. I didn't quite get the angle on your question. Are the mutations less or more severe?

Geoff Meacham - JPMorgan

At the spectrum that you can somehow narrow the population or inform your entry criteria for the pivotal study.

Akshay Vaishnaw

I mean the genotype/phenotype relationships are pretty well understood, Geoff. And so we are fortunate to have a loss of literature and through our network of KOLs that we work within the FAC space. The kind of lion's share of FAC in the U.S. is taken out by this mutation V122I, which is dominant in the African-American population. And then there is T60A, and then there are about four others that are associated with FAC. So there's about half-a-dozen mutations that are well described, and we'll inform the design of our Phase III study.

John Maraganore

And Geoff, I'll just add, that in the Phase II that we're about to start, we'll look at a range of different genotypes in that study. It's not going to be restricted to any given genotype. So that will give us some experience across different genotypes prior to starting Phase III.

Operator

Our next question comes from Alethia Young of Deutsche Bank.

Alethia Young - Deutsche Bank

Just a question on like, in the open-label extension study, are you guys planning on communicating like different points with FDA about your progress there or is there any opportunity for breakthrough or faster pathway to approval?

John Maraganore

Alethia, that's a great question. We'll obviously keep the close touch with the FDA if there are compelling clinical data, we certainly will consider it. We'll go to the FDA and talking about our breakthrough, but we have to see how the data merge. Clearly that study is going to start very soon. There will be clinical endpoint data that we read out.

Theoretically, we'll going to give you some more guidance on that when we start that study. But there will be frequent, let me not use the word frequent, there will be periodic reviews of data that come out of that and obviously that's going to help our overall accrual efforts. In our TTR02 Phase III effort, it will obviously been meaningful for physicians to also see how that's progressing. And we'll certainly look at those data in the context of our interactions with the FDA. Akshay, anything you do you want to add to that.

Akshay Vaishnaw

No, no, I think that's exactly right. That's exactly right. We are excited to get the study going and we start to getting paid.

Alethia Young - Deutsche Bank

I hope you don't mind, just one follow-up. The three doses for the next three cohorts, can you just tell me what they are again, please?

John Maraganore

You mean the additional cohorts in the phase, the current Phase I.

Alethia Young - Deutsche Bank

Yes.

John Maraganore

So we are looking at a couple of things really. One, is we wanted to explore 7.5 mg/kg dose in that which is intermediate between the 5 and 10. And anything that we want to explore is in every other week dosing regimens. If you look at our data in our presentation from the multi-dose kinetics, you will see that the levels are very suppressed, and they seem after dosing has stop to be quite durable and it does open up the question of whether or not we can also explore once every two week dosing subcutaneously with our drug.

So we want to explore that in these additional cohorts. And I believe the additional cohort that's there is just a bulk of numbers in the overall population, so it's sort of in the same context of what's right there. Akshay, anything to add to that.

Akshay Vaishnaw

No, no, I think that's right. These initial interim data given there is a lot of guidance on different doses of regimen we'll explore. And I think it will be exciting to do that over the next couple of months.

Operator

Our next question comes from Marko Kozul of Leerink Swann.

Marko Kozul - Leerink Swann

I'd also like to echo my congratulations on your continued progress. My first question has to do with efficacy of GalNAc as a delivery platform. Can you give us a preview of where you might be headed in terms of further improvements and refinements? I think in this current Phase I TTR subcu multi-dose experience, you dosed up to 10 mg/kg.

And back in 2012 at OTS and on Slide 5, I think of your presentation this morning you appear to be achieving meaningful knockdown in the 2 to 3 mg/kg range for AT3 and PCS in pre-clinical models. So can you give us a preview of further improvements on where you might be headed?

John Maraganore

Yes. Thanks, Marko, that's a great question. The ALN-TTR subcu is the first GalNAc conjugate that we took into development. And obviously, we've now seen some very exciting and impressive results. But as all things in science, with a vibrant research group like we have here, there are constant improvements that we're making in these platforms and if that -- the benefit of that has been accrued in programs like our PCSK-9 program and our AT3 program as highlighted on Slide 5 of the conference call deck.

And you can clearly see that we're achieving ED80 type knockdown at doses around 1 milligram per kilogram. So it's about a tenfold, almost a tenfold, maybe a little bit less than a tenfold improvement compared to ALN-TTRsc. So we expect with AT3, which is about to start our clinical testing. We expect to be seeing 80% knockdown levels and doses that are in the 0.5 to 0.75 mg/kg level, which is really quite impressive. And we would expect to see similar type of effects with other GalNAc conjugates in the future.

So just exciting progress in general, and obviously the other thing, Marko, I will say is when we look at non-human primate data now with our GalNAc conjugates like we presented ISTH for our antithrombin program. We now know that that's one-to-one correlation in humans, based on the data you've seen today. So it's very exciting to able to have the confidence around that translation. And we just expect that to continue.

Marko Kozul - Leerink Swann

And just a quick second question that has to do with safety, which appears pretty clean in the poster and slides this morning. When you have final results from this Phase I study, what additional safety info will we have?

John Maraganore

Marko, we'll just have additional patients to look at and obviously look at that in the totality of the existing data sets. But I think also we'll soon be patients with this drug. And we'll soon be generating additional data, both efficacy and safety in patient populations and you will be seeing some of those data next year.

Operator

Our next question comes from Alan Carr of Needham & Company.

Alan Carr - Needham & Company

One of them, can you give us an update on -- any update on regulatory discussions around the upcoming Phase III trial? And then also, I guess a bigger picture question around the safety database here, how many patients have you been in with IV and subcutaneous across each of these some different platforms? And then the third one to follow-up on a previous question, it looks like you're doing, if you got three more cohorts, is it 7.5 every week? And then the other two are 5 and 7.5 every other week?

John Maraganore

Let me answer the first one or the last one first, which is its 7.5 mg/kg in two cohorts weekly and then there is an additional cohort of 7.5 mg/kg every other week, is the current lineup of what we're doing into Phase I. And again those data, we'll likely present those data or report on those data some time next year.

But as it relates to the first question on the regulatory discussions for TTR02, I can tell you that they are extremely well. We're pleased with the feedback we've gotten thus far. We don't foresee any issue from where we stand today, in terms of how we will proceed with the protocol and stay tuned on final details of the design, when we're going to report on them. But I think that we're quite pleased with those discussions. Akshay, anything to add on that point.

Akshay Vaishnaw

No, I think that's exactly right.

John Maraganore

And then you're challenging me now on the second question to sort of actuarially come together with numbers for you. So let me give you top-of-mind numbers. Our TTRO2 Phase I study was around 19 patients as I recall the number and our TTRO2 Phase II study that's going to be presented -- the final results will be presented in November, is about 30 patients. Our TTR subcu Phase I study that we presented today is 28 subjects. And obviously by the end of the additional cohorts it will be an additional -- Akshay help me out here.

Akshay Vaishnaw

No, I was just going to jump in, John. When we did R&D Day in July and added up the numbers, then at that point we had about 175 patients and the subject exposed in a various systemic deliveries human studies that we've done, so from our liver cancer program, TTRO1, TTRO2, PCS and others. And so John was giving you individual numbers from some of those studies, but at that number will soon to approach to 100.

We've given over 500 doses of intravenous Lipid nanoparticle based drug over two years of dosing. And in this current TTRsc study we'll of course top-out at around 40 individual exposed. So we're getting to a significant database and as we progressively shared the safety and efficacy information, obviously we're excited about the profile emerging for our drugs, both IV and LMP from a safety and efficacy viewpoint.

Operator

Our next question comes from Ted Tenthoff of Piper Jaffray

Ted Tenthoff - Piper Jaffray

So I guess my question sort of gets back to sort of a higher level, and I love the fact that you have the optionality around the IV and subcu and are now entering into FAC as well. But maybe tell us a little bit about how you see the future treatment of FAP. And obviously this is going to be data-driven, but is this a disease where maybe less-severe patients will be treated with subcu or maybe patients will be on-boarded first with IV to get disease under control? With this really impressive subcu data, are we even going to need an IV dose? I mean I know this is probably a little bit early to be looking into the crystal ball, but how do you foresee ultimately treating this disease, which is probably more heterogeneous than most people realize?

John Maraganore

It's a great question. Barry you want to handle it.

Barry Greene

Ted thanks for the question and the crystal ball into the future. It's fun to think about the issue of having two commercially available drugs for these patients. And as you know, our plan is develop ALN-TTR02 for FAP and ALN-TTRsc for the cardiomyopathy patients, FAC.

As we think about due to two commercial products available for all ATTR programs, it's likely in the future that we will generate data that allows these products to be used in the future interchangeably. With good data that allows us to educate the physician population to the appropriate use perfect dose and frequency of the drugs.

From a pharmacoeconomic perspective the diseases allow the kind of orphan pricings that you expect, so it won't be any economic incentive to change paces from one to the other, it really will be what's best for a patient. And as you fully appreciate in the world of orphan diseases, once we have and are benefiting the patient with the treatment of our drugs, we want to keep them on our therapies for the rest of their lives.

John Maraganore

And just to add to that, Ted, I suspect that in the future some patients will have to continue receiving drugs intravenous infusion. Like to go to the hospitals, with their physician to receive drug, and then other patients will say, well, I like the concept of having a at-home subcu option, and that's what I'd like to do going forward. And so I think we're going to create optionality here for patients in the future. And obviously, most importantly have what really is the best-in-class program, and best-in-class therapies available for these patients.

Ted Tenthoff - Piper Jaffray

I think there's a lot to learn, but I think you guys are making great progress, so really exciting.

Operator

Our final question comes from Stephen Willey of Stifel.

Stephen Willey - Stifel

I may have missed this, but just to confirm, the 7.5 mg/kg dose that you are planning to use in these next couple of cohorts, that's a single subcu injection, correct?

John Maraganore

Correct.

Stephen Willey - Stifel

And I know you also looked at retinal binding in vitamin A. Just any color around that? Is that consistent with what we have seen?

John Maraganore

Just totally beautifully consistent with what we've reported before. There is just a one beautiful correlation between [ph] RVT and vitamin A knocks down with TTR knockdown as well. So Steve, let me just also provide one clarification point. So we are doing 7.5 mg/kg weekly, okay. But we do, because of volume of administration we are using two injections to achieve that dose.

Stephen Willey - Stifel

And the volume, it's associated with each injection?

John Maraganore

It's roughly 1.5 ml for each injection of that dose. And so at 5 mg/kg, it could be done as a single 2 ml injection in that case.

Operator

And with no further questions, I would like to turn the conference back over to John, for any closing remarks.

John Maraganore

Well, thanks everyone for joining us this morning. We're obviously very excited about the new data and the potential for the continued execution of this platform in our Alnylam 5x15 strategy. And we look forward to sharing more updates and there will be more updates with you in the weeks and months to come. So thank you very much. Bye, bye now.

Operator

Ladies and gentlemen, this does concludes today's conference. You may now disconnect and have a wonderful day.

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Why did Pfizer buy Idun?

"The acquisition of Idun is a further step in our strategy to augment Pfizer's internal research and development efforts with high-potential, externally sourced product candidates and technologies," said Martin Mackay, Senior Vice President Worldwide Research and Technology for Pfizer. "Idun has built a leading technology platform in controlling caspase activity and we see potential broad application of this technology in treating liver damage associated with viral and non-viral diseases plus other areas of significant unmet medical need."

In July 2010, Conatus acquired the Pfizer subsidiary, Idun Pharmaceuticals, along with global rights to emricasan for an undisclosed sum.

Five years later, why did Pfizer sell Idun?

When Conatus acquired emricasan from Pfizer in 2010, emricasan was on clinical hold in the United States after Pfizer scientists observed inflammatory infiltrates in mice in a preclinical study of the investigational drug. They reported the infiltrates to the US Food and Drug Administration (FDA) in 2007. The agency placed a clinical hold on emricasan.

Pfizer performed additional preclinical studies attempting to characterize the nature of the infiltrates, but did not conduct a formal carcinogenicity study to evaluate whether or not the infiltrates progressed to cancer. These infiltrates, observed in mice, were not observed in any other species. In 2008, Pfizer stopped work on the program.

After acquiring emricasan, Conatus conducted a thorough internal review of emricasan studies, commissioned several independent experts to review the data and, based on guidance from the FDA, conducted a 6-month carcinogenicity study in the Tg.rasH2 transgenic mouse model, which is known to be predisposed toward tumor development. This study, which was completed in 2012, found there was no evidence of drug-related tumorgenicity in emricasan. After further discussions with the FDA, Conatus was cleared in January 2013 to proceed with its planned HCV-POLT trial, whuch formally lifted emricasan from clinical hold in the United States. Emricasan was never placed on clinical hold outside the United States.

Prior to its acquisition of emricasan, the company's lead program was CTS-1027, an oral small molecule hepatitis C investigational drug, that Conatus licensed from Hoffmann-La Roche (RHHBY.OB) in 2006. On October 25, 2011, Conatus announced the termination of its Phase 2 clinical trial of CTS-1027 in hepatitis C patients due to laboratory abnormalities and adverse events in a subset of clinical trial participants. In early 2012, the rights to this drug candidate reverted to Roche. Conatus spent $31.3 million to develop the drug.

Emricasan

Emricasan is a first-in-class, orally active caspase protease inhibitor designed to reduce the activity of enzymes that mediate inflammation and cell death. Conatus believes that by reducing the activity of these enzymes, emricasan has the potential to interrupt the progression of liver disease.

At both Idun and Pfizer, emricasan was being developed for the treatment of liver fibrosis. As a result of their collective experience, Conatus' executive management team believes it can successfully develop emricasan.

Emricasan has been administered to over 500 subjects in six Phase 1 and four Phase 2 clinical trials, and has been generally well-tolerated in both healthy volunteers and patients with liver disease. Emricasan has also been extensively profiled in in vitro tests and studied in many preclinical models of human disease.

Several Phase 1 clinical trials to assess safety, tolerability and pharmacokinetics of emricasan have been completed. One trial studied the IV formulation of the drug and five of the oral trials investigated the formulation. In its clinical summary of emricasan, Conatus reports that " emricasan was well tolerated, and a maximum tolerated dose was not identified." Emricasan did not reduce liver enzyme levels in normal volunteers. However, emricasan administration in liver impaired patients resulted in reductions in liver enzyme levels alanine transaminase (ALT) and aspartate transaminase (AST).

Conatus has designed a comprehensive clinical program to demonstrate the therapeutic benefit of emricasan across the spectrum of fibrotic liver disease. The company plans to study emricasan in patients with rapidly progressing fibrosis, such as those patients who have developed liver fibrosis post-orthotopic liver transplant due to Hepatitis C virus infection (HCV-POLT), as well as in patients with established liver cirrhosis and decompensated disease, such as those with acute-on-chronic liver failure (ACLF) and chronic liver failure. (CLF).

Emricasan has been found to have a beneficial effect on serological biomarkers in patients with chronic liver disease independent of the cause of disease. Favorable changes have been observed in functional biomarkers of liver damage and inflammation, such as alanine aminotransferase (ALT) and aspartate aminotransferase (AST), and mechanistic biomarkers, such as cleaved Cytokeratin 18 (cCK18) and caspase activity, indicating that emricasan works by the presumed mechanism of action of inhibiting apoptosis of liver cells. Researchers have also found that emricasan does not inhibit normal levels of caspase activity in healthy individuals.

Emricasan Development Strategy

The company's initial development strategy targets indications for emricasan with high unmet clinical need in orphan patient populations, such as patients with:

Conatus expects to initiate a Phase 2b ACLF trial and a Phase 3 HCV-POLT trial, which is currently designated a Phase 3 registration study in the European Union (EU) and a Phase 2b study in the United States in the second half of 2013 and a Phase 2b CLF trial in the second half of 2014.

Liver Disease

The US National Institutes of Health (NIH) estimates that 5.5 million Americans have chronic liver disease or cirrhosis. Liver disease is the 12th leading cause of death in the United States. According to the European Association for the Study of the Liver, 29 million Europeans have chronic liver disease.

According to the US Centers for Disease Control and Prevention (CDC), there were 101,000 discharges with chronic liver disease and cirrhosis as the first-listed diagnosis in the United States in 2010, and nearly 32,000 died as a result of these disorders.

In the United States, more than 5,000 liver transplants are performed in adults and more than 500 in children annually, with approximately 17,000 people awaiting transplant. Conatus plans to study the effectiveness of emricasan in defined subsets of patients with liver disease. ACLF, CLF and HCV-POLT are potential orphan indications in both the United States and European Union (EU).

Conatus estimates that the target populations for emricasan in these indications in the United States and the EU are approximately 150,000 ACLF patients, 10,000 CLF patients and 50,000 HCV-POLT patients.

Conatus originally applied for orphan drug designation for emricasan for the treatment of fibrosis in HCV-POLT patients in the United States and the EU. The company has not received the requested orphan designation from the FDA. In the EU, Conatus withdrew the application based on feedback that emricasan may have efficacy in fibrosis outside of the HCV-POLT patient population.

According to Transparency Market Research, the global liver diseases therapeutics market was worth $6.5 billion in 2011 and is expected to reach $10.9 billion in 2018, growing at a compound annual growth rate (CAGR) of 8.6% from 2012 to 2018.

Transparency researchers found that the major drivers of the global liver disease therapeutics market are increasing aging population inducing chronic diseases such as hepatitis and liver cancer, increasing global prevalence of liver disorder, high unmet needs existing in liver cancer and increased vaccination in emerging economies. However side effects and risks associated with the medication, strict FDA approval norms and other government regulations and availability of alternate treatment procedures may act as the barrier for this market. Strong pipeline drugs and consolidation opportunities in the healthcare industry will pose future growth prospect for this market.

Acute-on-Chronic Liver Failure

In recent years, acute-on-chronic liver failure (ACLF) has been recognized as a specific clinical form of liver failure associated with cirrhosis. The syndrome refers to an acute deterioration of liver function and subsequently of other organs over a period of weeks. The short-term mortality for this condition is more than 50%.

Fibrosis, if allowed to progress, usually leads to cirrhosis, or excessive scarring of the liver, which may result in reduced liver function. Some patients with liver cirrhosis have a partially functioning liver and may appear asymptomatic for long periods of time. This condition is compensated liver disease. In decompensated liver disease, the liver is unable to perform its normal functions. ACLF occurs in patients who have compensated or decompensated cirrhosis, but are in relatively stable condition until an acute event causes a rapid exacerbation of liver function.

Among liver diseases, cirrhosis is the most frequent reason for hospital admission or liver transplantation. The World Health Organization (WHO) projects that cirrhosis will become the ninth most common cause of death in the western world by 2015. Only 20% of patients with advanced cirrhosis globally can be treated with liver transplantation owing to the great imbalance between donation and potential recipients.

According to the research and advisory firm, GlobalData, the global liver cirrhosis market was estimated to be valued at $1.56 billion in 2010. GlobalData expects this market to grow to $2.03 billion with a CAGR of 3.8% by 2017. This growth is primarily attributed to the increasing prevalence of the disease due to increase in alcoholic liver disease, nonalcoholic steatohepatitis (NASH) and the large group of patients who were originally infected with hepatitis virus, who will be entering their third decade of chronic liver infection.

On September 11, 2013, Conatus announced the initiation of active patient recruitment in a Phase 2b clinical trial of emricasan in patients with ACLF. The trial is designed to assess the pharmacokinetics and pharmacodynamics of emricasan in patients who have compensated or stable liver cirrhosis and who, at the time of study entry have been hospitalized for at least 24 hours due to acute deterioration of liver function.

"This study marks an important milestone in the development of emricasan and we are excited about the potential of emricasan to address this underserved population in high medical need of an efficacious and well-tolerated therapy to prevent progression to multi-organ failure and, ultimately, premature death," said Gary C. Burgess, MD, Chief Medical Officer of Conatus.

Conatus plans to use this trial to determine the dose of emricasan to be studied in the planned Phase 3 trial in ACLF. Safety of emricasan in the patient population will be evaluated, and key biomarkers and clinical outcomes will also be explored. The Phase 2b trial is being conducted at approximately 15 centers in the United Kingdom.

There are currently no approved therapies with a specific indication for the treatment of ACLF, which occurs in patients who have compensated or decompensated cirrhosis but are usually relatively stable. In these patients, some acute event sets off a rapid deterioration of liver function. The cause of this acute episode of decompensation may include toxins, such as alcohol, metabolic abnormalities and infections.

The morbidity and mortality of the patient population Conatus plans to study is high, and up to 45% of the patients may die, develop multi-organ failure, or require a liver transplant as a result of the decompensation episode within 28 days of hospitalization. The rapid deterioration in liver function, which may be exacerbated by an altered immune response, leads to life-threatening complications such as renal failure, increased susceptibility to infection, hepatic coma and systemic hemodynamic dysfunction. Liver transplantation is required in some subjects to improve survival and quality of life.

In addition to the Phase 2b trial in patients with ACLF, Conatus expects to initiate its planned Phase 2b/3 clinical trial of emricasan in patients who have developed liver fibrosis post-orthotopic liver transplant due to Hepatitis C virus infection (HCV-POLT) in the second half of 2013.

Chronic Liver Failure

Patients with chronic liver failure (CLF) suffer from continual disease progression may eventually need orthotopic liver transplantation. In 2004, liver failure resulted in over 26,000 deaths, making it the twelfth leading cause of death in the United States. Patients with compensated chronic liver failure have a median survival of 12 years. After decompensation, median survival drops to ~ 2 years.

Conatus plans to initiate a Phase 2b study comprised of approximately 100 patients with CLF in the second half of 2014 after completion of the ACLF Phase 2b trial. Conatus expects that emricasan will be dosed for one to three months and the endpoints in this study will include TTCW as well as changes in ALT, AST and cCK18 levels. The data from the ACLF dose ranging study is expected to serve as the basis for dose selection in this study.

HCV-POLT

Study A8491003, also known as the "003 trial," was a Phase 2b trial designed to evaluate the safety and efficacy of emricasan in 204 chronic HCV patients who were unresponsive to antiviral therapy and who had compensated liver disease with or without fibrosis. Patients with cirrhosis or hepatocellular carcinoma were excluded from the trial.

The primary endpoint in the study was changed from baseline in ALT and AST levels over a period of 12 weeks. This study also measured cCK18 levels, and caspase 3 and 7 activity as exploratory biomarkers. In this trial, emricasan treatment resulted in statistically significant reductions in the primary endpoints of ALT and AST levels as well as statistically significant reductions in cCK18 levels and caspase 3 and 7 activity.

The changes in ALT demonstrated in the 003 trial were statistically significant in each of the emricasan treatment groups compared with the placebo group. The decreases in ALT were seen by day 7, the first time post-dosing that ALT was measured, and the decreases were maintained throughout the treatment period (up to 12 weeks) in all emricasan treatment groups. Discontinuation of emricasan at the end of the treatment period was followed by a gradual return of ALT toward baseline levels.

A Phase 2a clinical trial of an oral formulation of emricasan was completed in patients infected with hepatitis C virus (HCV), most of whom had failed existing approved treatments. Various doses and dosing regimens ranging from 25 milligrams to 200 milligrams once a day, and 50 to 100 milligrams twice a day (BID) were examined during a two-week dosing period. The study found that all doses of the drug lowered ALT and AST by the end of the treatment period and were well tolerated.

Similar results were obtained in a trial which dosed patients for three months.

A small group of patients with fatty liver disease and a group with hepatitis B virus (HBV) were evaluated as supplemental cohorts of the Phase 2a HCV clinical trial. Aminotransferase reductions were observed during treatment with emricasan in both groups.

A Phase 2 trial was conducted to assess the utility of emricasan on cold ischemia/warm reperfusion (CI/W) injury during human liver transplantation. Researchers found that when emricasan was administered in cold storage and flush solutions during liver transplantation, offered local protection against CI/WR-mediated apoptosis and injury, but this was not observed when emricasan was administered to the patient. No safety signals of concern were seen in the study and the adverse events were generally reflective of the patient population under study.

In a randomized Phase 2b clinical trial in patients with liver disease, emricasan demonstrated a statistically significant, consistent, rapid and sustained reduction in elevated levels of two key biomarkers of inflammation and cell death, ALT and cCK18, both of which are implicated in the severity and progression of liver disease.

Conatus is planning to study emricasan in a 260-patient, Phase 3 HCV-POLT trial, which is currently designated a Phase 3 registration study in the European Union and a Phase 2b study in the United States during the second half of 2013, as well as a Phase 2b CLF trial in the second half of 2014.

The study is designed to demonstrate emricasan's ability to stabilize or slow the progression of liver fibrosis. If emricasan demonstrates the ability to halt the progression of fibrosis, Conatus believes this data could serve as a basis to study emricasan in additional indications in liver disease in the future. In addition, the safety data from this study will be part of the overall safety database required for approval of emricasan in other indications.

The study will be a two-year dosing study with a three-year follow-up. The primary endpoint will be the presence or absence of disease progression as measured by the standard Ishak Fibrosis Score, which stages the severity of fibrosis and/or cirrhosis on a 0-6 scale. Changes in ALT, AST and cCK18 will also be measured in this study.

If the results of clinical trials are positive and emricasan receives FDA or another country's approval, Conatus anticipates that emricasan would be prescribed by physicians to be dosed for 28 days, but potentially as long as six months, in the ACLF patient population, one to three months in the CLF patient population and up to two years in the HCV-POLT patient population.

Severe Alcoholic Hepatitis

On September 10, 2013, Conatus announced initiation of dosing in the Phase 2 clinical trial of emricasan in patients with severe alcoholic hepatitis. This study is being conducted by the Translational Research and Evolving Alcoholic Hepatitis Treatment (TREAT) Consortium consisting of the Mayo Clinic Rochester, Indiana University, and Virginia Commonwealth University in collaboration with the National Institute on Alcohol Abuse and Alcoholism (NIAAA).

"We are very excited by this trial initiation of emricasan in patients with severe alcoholic hepatitis," Conatus President and CEO Mento stated. "We are developing emricasan as a first-in-class orally active treatment for chronic liver disease and acute exacerbations of chronic liver disease. Due to emricasan's mechanism of action and the presence of apoptosis and inflammation in many liver diseases, we believe there may be several patient populations that could potentially benefit from emricasan and have designed a comprehensive clinical program to demonstrate the therapeutic benefit of emricasan across the spectrum of fibrotic liver disease."

The trial is a placebo-controlled, double-blind, multi-center study that is designed to assess whether emricasan improves the 28-day survival in patients with chronic liver disease caused by alcohol and contraindicated to receive corticosteroid therapy for their alcoholic hepatitis. The study is designed to also evaluate the role of apoptosis and sterile necrosis in alcoholic hepatitis, the safety and tolerability of emricasan, overall clinical outcomes, and pharmacokinetics in this patient population.

"We are looking forward to studying the potential beneficial effects of emricasan in patients afflicted by this severe disease," said Vijay Shah, MD, a hepatologist and principal investigator with the Mayo Clinic Rochester. "Alcohol-related liver disease is a major cause of morbidity and mortality in the U.S. and excessive alcohol consumption is the third leading preventable cause of death in the U.S."

In the United States, alcoholic liver disease affects more than 2 million people, representing approximately 1% of the population. The true prevalence of alcoholic hepatitis, especially of its milder forms, is unknown, because patients may be asymptomatic and never seek medical attention. Women are more susceptible than men to the adverse effects of alcohol. Women develop alcoholic hepatitis after a shorter period and smaller amounts of alcohol abuse than men, and alcoholic hepatitis progresses more rapidly in women than in men. For patients who continue to drink after a diagnosis of alcoholic liver disease, the 5-year survival rate is approximately 30% for women compared with 70% for men.

Alcoholic liver disease encompasses a clinical/histological spectrum of disease including fatty liver, alcoholic hepatitis and cirrhosis. Alcoholic hepatitis is a syndrome of progressive inflammatory liver injury associated with long-term heavy intake of ethanol. Severely affected patients show signs of retaining large amounts of fluid in the abdominal cavity (ascites), as well as kidney and liver failure.

Type 1 Diabetes

In addition to liver disease, emricasan may also show promise in diabetes.

On July 19, 2012, Conatus and the University of Alberta announced the treatment of the first patient in an investigator-initiated islet cell transplant Phase 1/Phase 2 clinical trial of emricasan to determine safety, achievement and maintenance of insulin independence and to obtain preliminary data on the efficacy of emricasan to maintain adequate immunological protection against both allo- and autoimmunity of islet cell transplant recipients.

Islet cell transplantation places cells from an organ donor into the body of another person. It is used experimentally to treat type 1 diabetes. Islets are cells found in clusters throughout the pancreas.

In type 1 diabetes, the beta cells of the pancreas no longer make insulin. A person who has type 1 diabetes must take insulin daily to live. Transplanted islet cells, however, can assume the work of the destroyed cells. Once they are implanted, the beta cells in these islets begin to make and release insulin. Researchers hope islet transplantation will help people with type 1 diabetes live without daily insulin injections.

Over 750 islet transplantations are conducted each year in 30 centers worldwide. Diabetologists, funding organizations and regulatory agencies recognize islet transplantation as an effective therapy to prevent episodic hypoglycemia, correct glycated hemoglobin and reduce risk of secondary diabetic complication.

"As Conatus pursues the development of emricasan on our own in liver disease, I am pleased to support new treatment paradigms in diabetes. If the results in humans are similar to the preclinical data, many more patients will benefit from islet cell transplantation," Conatus CEO Mento stated.

The trial will be conducted in two sequential pilot study groups of six patients each with two different dosages of emricasan for 14 days. Once optimal dosing has been determined from these pilot studies, the next proposed study would be a randomized, placebo-controlled study to explore the safety and efficacy of emricasan combined with other islet transplant treatment medications.

Finances

On September 9, 2013, Conatus announced financial results for the quarter ended June 30, 2013.

The net loss for the second quarter of 2013 was $4.9 million, compared to $1.8 million for the second quarter of 2012. Net loss for the six months ended June 30, 2013, was $7.2 million compared to $3.7 million for the comparable period in 2012.

Research and development expenses were $1.1 million for each of the second quarter of 2013 and 2012. General and administrative expenses were $0.7 million for the second quarter of 2013, compared to $0.6 million for the second quarter of 2012. Research and development expenses were $2.1 million for the six months ended June 30, 2013, compared to $2.3 million for the comparable period in 2012. General and administrative expenses were $1.4 million for each of the six months ended June 30, 2013 and 2012.

At June 30, 2013, cash, cash equivalents and short-term investments were $3.5 million, compared to $8.0 million at December 31, 2012. After giving effect to the net proceeds from Conatus' initial public offering and borrowings under Conatus' credit facility, at June 30, 2013, pro forma cash, cash equivalents and short-term investments were $63.5 million.

Conatus believes the company has sufficient funds for operations for at least the next 18 months, including the completion of its planned Phase 2b ACLF trial, Phase 2b/3 HCV-POLT trial and Phase 2b CLF trial.

As of June 30, 2013, Conatus had an accumulated deficit of $66 million.

"Conatus has made significant progress in recent months, including our successful initial public offering, which generated approximately $59 million in net proceeds," Mento stated. "With our enhanced balance sheet, we are focused on further developing emricasan, our first-in-class, orally active treatment for chronic liver disease and acute exacerbations of chronic liver disease, in three orphan populations with high unmet medical need."

Mento continued, "We anticipate a number of important upcoming clinical development milestones. In the second half of this year, we expect to initiate our Phase 2b study of emricasan in patients with acute-on-chronic liver failure and our Phase 2b/3 study in patients who have developed liver fibrosis post-orthotopic liver transplant due to Hepatitis C virus infection. Furthermore, we are supporting a Phase 2 study funded by National Institute on Alcohol Abuse and Alcoholism in patients with alcoholic hepatitis, with enrollment currently underway."

Conclusion

On July 25, 2013, the initial public offering (IPO) for Conatus opened for trading at $11.06 after pricing six million shares at $11. On its first day of trading, Conatus stock hit an all-time high of $11.24 before sliding to $9.50 at market close. Over 3.4 million shares were exchanged on that day.

Over the past three months, Conatus stock has been in the $9 per share range, until recently, when it climbed over $10.

Most analysts are optimistic about Conatus. On August 19, 2013, Sun Trust Robinson Humphrey initiated coverage of Conatus with a Buy rating and a $17 price target. JMP Securities began coverage with an Outperform rating. Stifel Nicolaus started coverage with a Buy rating and a $16 price target, Piper Jaffray initiated coverage with an Overweight rating and a $16 price target. Zacks gave Conatus a 3 Hold rating,

Major shareholders include entities affiliated with Aberdare Ventures 2,177,192 shares (13.9%), entities affiliated with Advent Private Equity 1,986,071 shares (12.7%), and Coöperative Gilde Healthcare II U.A 1,348,773 shares (8.6%).

Although there are currently no therapeutic products approved for the treatment of ACLF, CLF or HCV-POLT, Galectin Therapeutics (GALT), Ocera Therapeutics (OCRX) and others are developing potentially promising therapies. Researchers are also finding stem cell therapy effective in liver cirrhosis.

In April 2013, one of Idun's founders, John C. Reed, became the head of Roche's pharmaceutical research and early development group, where he will oversee research as well as early stage and middle stage clinical trials with a budget in the billions. Will Reed bring a cutting edge apoptosis and cell death research program to Roche? If so, how would such a program impact Conatus?

Some investors have lost much of their enthusiasm for caspase inhibitors, including emricasan, especially after Gilead Sciences' decision in April 2010 to terminate its Phase 2 clinical trial of GS 9450, an investigational caspase inhibitor, in patients with chronic hepatitis C due to reports of significant laboratory abnormalities and adverse events in a number of clinical study participants.

With positive results coming out of several middle stage trials, there is a lot to like about Conatus, What I don't like about the company is that it has only one drug in its pipeline. Although emricasan looks promising, there is always too much risk when one puts "all of one's eggs in one basket." I believe that idiom to be true if you are a small-time investor or a 150M market cap biopharmaceutical company.

Disclosure: I am long GILD, MRK, SNSS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Insiders Are Selling Raptor Pharmaceuticals

Raptor Pharmaceutical Corp. (RPTP): Insiders Are Selling Raptor Pharmaceuticals - Seeking Alpha (function(_,e,rr,s){_errs=[s];var c=_.onerror;_.onerror=function(){var a=arguments;_errs.push(a); c&&c.apply(this,a)};var b=function(){var c=e.createElement(rr),b=e.getElementsByTagName(rr)[0]; c.src="//beacon.errorception.com/"+s+".js";c.async=!0;b.parentNode.insertBefore(c,b)}; _.addEventListener?_.addEventListener("load",b,!1):_.attachEvent("onload",b)}) (window,document,"script","4ffae9d6f05d1da630000008"); if (SA.Data && SA.Data.Cache) { var adata = SA.Data.Cache.get('campaign_content'); }.market_currents_list li .ticker_date_left .mc_list_tickers a{font-weight: normal} var ms_slug = ''; var article_dashboards = '@investing-ideas@sectors@'; var article_sectors_themes = '@insider-ownership@us@drug-manufacturers-major@healthcare@article@'; var ratings_hash={}; var ARTICLE_ID = 1705512; var ARTICLE_TYPE = "standard"; var ARTICLE_LOCK = ""; var author_slug = "markus-aarnio"; var pticker_for_ads = "rptp"; var time_left; var lock_comments = false; var machine_cookie = readCookie('machine_cookie'); var middle_version = ABTest.identity%10; var sector_name = "Healthcare"; var sector_slug = "healthcare"; try { window.sessionStorage.setItem("/article/"+ARTICLE_ID, '1'); } catch (error) {}var mone_article_tags = "{rptp};;;{healthcare};;;{insider-ownership,us,drug-manufacturers-major,investing-ideas,sa-exclusive};;;{markus-aarnio}"var ord = Math.floor(Math.random()*1000000000);Seeking Alpha Seeking Alpha Portfolio App for iPad Finance (1) var ipadData; SeekingAlpha.Initializer.AddAfterLoad(function(){ if (SA.Utils.Env.isIPad && !/3/.test(SA.Data.Cookies.get("user_devices"))){ Mone.event("ipad_promotion_top","top_ipad_banner_large","ipad_promotion_displayed"); ipadData = new SA.Data.iPad(); ipadData.instanceName = "ipadData"; var responseHandler = new Object(); responseHandler.handleResponse = function(data){ if (!data.averageUserRating) return; var stars = data.averageUserRating Home | Portfolio | Market Currents | Investing Ideas | Dividends & Income | ETFs | Macro View | ALERTS | PRO   This article was sent to 863 people who get email alerts on  . Which cover: new articles | breaking news | earnings results | dividend announcements Get email alerts on   » This article was sent to 344,726 people who get the Investing Ideas newsletter. Get the Investing Ideas newsletter » Insiders Are Selling Raptor Pharmaceuticals Sep 20 2013, 12:06 by: Markus Aarnio  |  about: RPTP BOOKMARKED / READ LATER Bookmarked

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In this article, I will feature one healthcare company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

The stock was sold by three or more insiders within one month. The stock was not purchased by any insiders in the month of intensive selling. At least two sellers decreased their holdings by more than 10%.

Raptor Pharmaceuticals (RPTP) is a biopharmaceutical company focused on developing and commercializing life-altering therapeutics that treat rare, debilitating and often fatal diseases.

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Insider selling during the last 30 days

Christopher Starr sold 25,000 shares on September 16 pursuant to a 10b5-1 trading plan. Christopher Starr currently holds 699,370 shares and 1,167,330 options or 3.3% of the company. Christopher Starr is CEO and Co-founder of Raptor. Christopher Starr decreased his holdings by 1.3% in September. Erich Sager sold 17,000 shares on September 16 pursuant to a 10b5-1 trading plan. Erich Sager currently holds 130,727 shares and 495,531 options or 1.1% of the company. Erich Sager serves as a director of the company. Erich Sager decreased his holdings by 2.6% in September. Timothy Walbert sold 5,520 shares on September 13 pursuant to a 10b5-1 trading plan. Timothy Walbert currently holds zero shares and 224,480 options or 0.4% of the company. Timothy Walbert serves as a director of the company. Timothy Walbert decreased his holdings by 2.4% in September. Suzanne Bruhn sold 2,760 shares on September 13 pursuant to a 10b5-1 trading plan. Suzanne Bruhn currently holds zero shares and 227,240 options or 0.4% of the company. Suzanne Bruhn serves as a director of the company. Suzanne Bruhn decreased her holdings by 1.2% in September. Thomas Daley sold 25,000 shares on September 9 pursuant to a 10b5-1 trading plan. Thomas Daley currently holds 69,906 shares and 24,969 options or 0.2% of the company. Thomas Daley is Chief Business Officer. Thomas Daley decreased his holdings by 20.9% in September. Raymond Anderson sold 15,000 shares on September 9 pursuant to a 10b5-1 trading plan. Raymond Anderson currently holds zero shares and 18,306 options or less than 0.1% of the company. Raymond Anderson serves as a director of the company. Raymond Anderson decreased his holdings by 45.0% in September. Richard Franklin sold 10,715 shares on September 9 pursuant to a 10b5-1 trading plan. Richard Franklin currently holds zero shares and 329,254 options or 0.6% of the company. Richard Franklin serves as a director of the company. Richard Franklin decreased his holdings by 3.2% in September. Georgia Erbez sold 7,400 shares on August 30 and currently holds zero shares and zero options of the company. Georgia Erbez serves as Raptor's Chief Financial Officer. Georgia Erbez decreased her holdings by 100% in August.

Insider selling by calendar month

Here is a table of Raptor's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares September 2013 100,995 0 August 2013 7,400 0 July 2013 0 0 June 2013 0 0 May 2013 0 0 April 2013 0 0 March 2013 0 0 February 2013 0 0 January 2013 0 0

There have been 108,395 shares sold and there have been zero shares purchased by insiders this year.

Financials

Raptor reported the second-quarter financial results on August 8 with the following highlights:

Revenue $21,000 Net loss $24.1 million Cash $74.6 million Debt $50.1 million

Outlook

Raptor believes that its cash balance will be sufficient to meet its projected operational requirements and obligations through the end of 2014.

Pipeline

Raptor's lead product, Procysbi (cysteamine bitartrate) delayed-release capsules, received FDA approval on April 30, 2013 and EU approval on September 12, 2013.

Raptor's clinical-stage product pipeline includes two active development programs based on the company's proprietary delayed-release formulation of cysteamine bitartrate (RP103 capsules), as well as the company's Convivia (oral 4-methylpyrazole) program which the company licensed to Uni Pharma, Taiwan. Raptor's preclinical pipeline includes two development programs based upon the company's proprietary molecules.

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Upcoming milestones

Raptor has the following upcoming milestones during the next 12 months.

Phase 2/3 18 month treatment data on RP103 in HD Q1/2014 Health Canada NDS submission H1/2014 NAFLD Phase 2b enrollment completed H1/2014

Competition

Cystinosis

Raptor is aware of only one pharmaceutical product currently approved by the FDA and the EMA to treat cystinosis, Cystagon (immediate-release cysteamine bitartrate capsules), is marketed in the U.S. by Mylan Pharmaceuticals (MYL), and by Recordati (RCDTF.PK) and Orphan Europe in markets outside of the U.S. Cystagon was approved by the FDA in 1994 and by EMA in 1997 and is the standard of care for cystinosis treatment.

Raptor is not aware of any pharmaceutical company with an active program to develop an alternative therapy for cystinosis. There are companies developing and/or marketing products to treat symptoms and conditions related to, or resulting from cystinosis, but none developing products to treat the underlying metabolic disorder (toxic cystine accumulation). Academic researchers in the U.S. and Europe are pursuing potential cures for cystinosis through gene therapy, stem cell therapy, pro-drug and pegylated drug approaches as alternatives to cysteamine bitartrate. Raptor believes that the development timeline to an approved product for these approaches is many years with substantial uncertainty.

Huntington's Disease

Raptor is not aware of any currently available treatment alternatives for HD, although there are products available such as Haldol, Klonopin and Xenazine to treat uncontrollable movements and mood swings that result from the disease. There are several pharmaceutical companies pursuing potential cures and treatments for HD, as well as numerous academic and foundation sponsored research efforts. Raptor's product candidate, RP103, is the only compound in clinical development which specifically targets the fundamental metabolic defect of the disease (deficient brain-derived neurotrophic factor), with the goal of slowing disease progression.

Companies with HD product candidates in development include Eli Lilly & Co. (LLY) and Pfizer (PFE). Several other companies have drug candidates in preclinical development. Additionally, nutritional supplements including creatinine and coenzyme Q10 have been investigated as potential treatments for HD. The Huntington Study Group sponsors numerous studies of potential therapies for HD, including coenzyme Q10 and the antibiotic minocycline.

Conclusion

There have been eight different insiders selling Raptor and there have not been any insiders buying Raptor during the past 30 days. Three of these eight insiders decreased their holdings by more than 10%.

The next catalyst for the stock will be the Phase 2/3 18 month treatment data on RP103 in HD anticipated in the first quarter of 2014. Raptor is currently fully funded through the end of 2014.

There are eight analyst buy ratings, one neutral rating and zero sell ratings with an average price target of $13.78.

Before entering short Raptor, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices and the intensive insider selling activity.

Source: Insiders Are Selling Raptor Pharmaceuticals

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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AcelRx Pharmaceuticals To Submit NDA By End Of September, May Be Acquired Soon

Written by Scott Matusow and Kyle Dennis. Both Authors hold positions in AcelRx while Mr. Dennis holds a position in Halozyme.

Recently, we wrote a bullish piece on Halozyme (HALO) because we like its risk to reward ratio along with a good business model, significant insider buying and strong management. Additionally, Halozyme is to present more extensive data on its pancreatic cancer therapy at the 32nd European Cancer Congress at the end of this month. As we mentioned in our Halozyme article, it's very rare that we come across a speculative biotech company that we feel warrants a longer-term hold. It is hard to find these companies because we not only look for an undervalued company with a deep pipeline, but also strong management that is driving shareholder value.

We feel that AcelRx Pharmaceuticals (ACRX) warrants a close look by both longer-term investors and shorter-term catalyst traders. The major difference between Halozyme and AcelRx is that we have been hearing some strong acquisition rumors concerning AcelRx, much like we heard about Obagi last year. The rumors on Obagi turned out to be correct, as the company was sold last year to Valeant (VRX) for $24 a share. We believe there is merit to the current rumors surrounding AcelRx, and will detail the reasons why further down in this article.

Technology: ZALVISO Sublingual Sufentanil Nanotab System

AcelRx is developing Zalviso, which is designed to address intravenous patient controlled analgesia (IV PCA) problems, which can cause harm following surgery. These include side effects of the invasive IV route for morphine delivery and inherent potential programming and delivery errors associated with the complexity of infusion pumps. Zalviso uses the generic pain medication sufentanil, which is a common anesthetic agent. The difference is in the method of delivery through AcelRx's patented NanoTab technology. Patients receive their dosage of sufentanil sublingually (under the tongue) through this system, instead of the traditional IV drip. AcelRx believes in its sublingual delivery of sufentanil through its Nanotab system, which allows for more prolonged plasma levels relative to IV, a lower maximum concentration, as well as a more consistent concentration during dosing.

The post-operative pain market in the United States, Europe and Japan has been growing steadily over the last few years and is expected to reach $6.5 billion by 2018. Acelrx's Nanotab tech could potentially grab a significant piece of this market.

AcelRx has been studying its Sufentanil Nanotab (patient-controlled analgesia) system in several clinical trials for the treatment of acute and breakthrough pain, particularly in a post-operative hospital setting. Three Phase III trials have been completed rendering excellent results. Top-line data from the final pivotal trial treating pain after knee or hip surgery was released in May.

Phase III data was impressive in several ways. Patients experienced better, longer lasting and more complete pain relief after orthopedic surgery. Additionally, nurses reported that it was much easier to use the Nanotab system. Traditional IV PCA is known for its confusing administering program and patient deaths have even resulted in a small percentage of cases.

The system also eliminates the need for an IV, which decreases patient mobility within the hospital, as well as increasing the chance for IV-related infections. These are huge advantages for both patients and nurses.

As for patients, there are meaningful advantages to using the Nanotab system over an IV PCA. Most importantly, sufentanil provides a faster onset of pain relief. Morphine is associated with some very nasty side effects, but those side effects have been reduced drastically with the use of sufentanil because it is a lot more potent and has much better sedative properties.

Phase III data showed statistical significance in all of these areas while also reducing adverse effects. Not only did Phase III data show a prolonged relief of pain, but also a more durable relief with fewer gaps in between dosing.

Since the company produced positive Phase III data, it is now expecting to file a New Drug Application (NDA) in the third quarter of 2013. According to AxelRx CEO, it expects to file the NDA very soon:

We are now in the middle of putting together our New Drug Application, our NDA, to submit to the FDA. That should happen later this quarter. We are also preparing to launch the product in the United States on the back of an FDA approval, which we hope would occur about a year after submitting our NDA. Assuming that the FDA approves Zalviso, we would then look to begin to commercialize in the last quarter of 2014 and into 2015.

If the company is able to produce in this accelerated fashion, there is a good chance it will equate to more gains for long investors.

The company also intends to file in the European Union (EU) shortly after the U.S. submission. The CEO also states:

Our filing in the EU will be sometime after the U.S. submission. We are in the process of presenting full data from all Phase 3 studies of Zalviso at major medical meetings in 2013 and 2014 with the goal of raising awareness for product physicians, surgeons, nurses and pharmacists both in the U.S. and in Europe.

News could also come regarding another one of its products ARX-04. AcelRx recently received a grant from the US Army Medical Research and Materiel Command (USAMRMC) for $5.6M. As this product moves further along, we can speculate more money could be on the way.

In March of this year, we wrote an article on AcelRx, which gave a one-year price target of $12/share. This was eclipsed in July when the stock briefly went above $13/share. It has now consolidated around $10/share and looks poised to move at least back toward yearly highs with additional clarity and positive signs regarding the company's future.

Other Small Caps Developing Pain Medications

Not surprisingly, a few companies are working to take a slice out of pain management's multi-billion dollar pie as well.

In August of 2012, Zalicus (ZLCS) announced that the U.S. Food and Drug Administration (FDA) had approved the supplemental new drug application filed by Mallinckrodt, for its 32 mg tablet of Exalgo. Exalgo is an extended-release tablet for opioid-tolerant patients with moderate-to-severe chronic pain requiring continuous around-the-clock opioid analgesia for an extended period of time. The FDA approved the 8, 12 and 16 mg tablets of Exalgo in March 2010. Zalicus receives tiered royalties on net sales of Exalgo by Mallinckrodt.

Because Zalicus receives a small royalty for Exalgo sales, the product really has had little effect on the company's top and bottom line, as evident in part by a continual declining stock price. Zalcius is a company that we do not like as we feel it's poorly managed.

Differing from Exalgo, AcelRx has developed novel packaging intended to provide dose-tracking capability to assist in managing patient's opioid use and deterring abuse. The warning on the Exalgo packaging refers to it containing hydromorphone, an opioid agonist and a schedule II controlled substance with an abuse liability similar to other opioid analgesics. So, this may be an advantage that AcelRx over other potential competitors moving forward as the FDA has shown to be favorable to companies demonstrating attention to detail with regards to the topic of abuse.

We saw an advisory committee (ADCOMM) of the Food and Drug Administration vote against recommending Zogenix's (ZGNX) Zohydro, a single-entity extended-release pure hydrocodone (no acetaminophen) 11-2.

The committee said that while Zohydro met the goals of safety and efficacy, it expressed concern that people addicted to other opioids, including oxycodone, might abuse Zohydro. So, it's important that AcelRx has anti-abuse deterrents built into its solution. Based on the product now meeting all end-points on all Phase III trials, it plans to submit a New Drug Application (NDA) to the FDA at the end of this month.

Management Helped Facilitate 13 Combined Buyouts

We always stress about the importance of strong management. A common saying among successful investors is, "You don't invest in a company, you invest in its people." We believe this is one of the most important tenants of investing and always look for small-cap companies with experienced management.

AcelRx has assembled a management team that has extensive experience in managing small-cap biotech companies. This team of management and board of directors have led small cap companies into profitability, and many into buyouts. In fact, the management team has been involved in thirteen different acquisitions. Below are the most notable members and their respective acquisition activity:

Adrian Adams, Chairman of the Board

1. Sold Inspire Pharmaceuticals to Merck & Co. (MRK): Mr. Adams served as President and Chief Executive Officer of Inspire Pharmaceuticals, Inc. Merck bought out Inspire for $430M, or a 26% premium over the current share price.

2. Sold Sepracor to Dainippon Sumitomo: Mr. Adams served as President and Chief Executive Officer of Sepracor Inc. Dainippon Sumitomo bought out Sepracor for $2.6B, or a 48% premium over the current share price.

3. Sold Kos Pharmaceuticals to Abbott Laboratories (ABT): Mr. Adams served as the President and Chief Executive Officer of Kos Pharmaceuticals, Inc. Abbott Laboratories bought out Kos Pharmaceuticals for $78 a share, or a 56% premium over the current share price.

Richard King, President And CEO

4. Sold Tercica to Ipsen: Mr. King served as President and General Manager of Tercica. Ipsen bought out Tercica for $404M, or a 104% premium over the current stock price.

5. Sold Kos Pharmaceuticals to Abbott Laboratories: Mr. King served as Executive Vice President of Commercial Operations of Kos Pharmaceuticals, Inc. See above section for details on that buyout.

6. Sold Solvay Pharmaceuticals to Abbott Laboratories: Mr. King served as Senior Vice President of Commercial Operations at Solvay Pharmaceuticals. Abbott Laboratories bought out Solvay Pharmaceuticals for $6.1B.

Steven J. Hoffman, Skyline Ventures

7. Sold Somatogen to Baxter International (BAX): Dr. Hoffman was the scientific founder of Somatogen Inc. Baxter bought out Somatogen for $189M.

8. Sold ATS Medical, Inc. to Medronics Inc. (MDT): Mr. Nohra served on the Board of Directors of ATS Medical, Inc. Medronics bought out ATS Medical for $370M.

9. Merged ALZA Corporation to Johnson & Johnson (JNJ): Mr. Rosen served as the President of ALZA Corporation. Johnson & Johnson merged with ALZA Corporation for a $10.5B stock for stock transaction.

10. Sold GenPharm International, Inc. to Medarex, which was then acquired by Bristol-Myers Squibb (BMY): Mr. Rosen served as Director of Corporate Development at GenPharm International. Medarex bought out GenPharm for $65M. Later, Bristol-Myers Squibb for $2.4B.

11. Sold Pharsight Corporation to Tripos International: Mr. Rosen served on the Board of Directors of Pharsight Corporation. Tripos International bought out Pharsight for $57M.

12. Sold CoTherix, Inc. to Actelion Pharmaceuticals Ltd.: Mr. Rosen served on the Board of Directors of CoTherix, Inc. Actelion Pharmaceuticals bought out CoTherix for $420M.

David H. Chung, Chief Commercial Officer

13. Sold Conceptus to Bayer: Mr. Chung served as the Chief Commercial Officer at Conceptus. Just recently, Bayer bought out Conceptus for $1.1B.

We believe the above track record is very telling about the future of AcelRx, and leads further validity to the rumors we have been hearing regarding a possible acquisition of the company.

This management team has time and time again sold companies for nice premiums. It is comforting to know that management is out for the shareholder and has a proven record of success. Many members of the management came from ALZA Corporation, which was one of the most successful mergers in the above list. It seems like the same team has assembled again to eventually sell AcelRx for a nice premium as well.

In July of this year, AcelRx raised $51M of which it cleared $48M via a public offering of 3.8 million shares of its common stock, offered at a price of $11.65 per share. Shortly after this offering, the stock hit its 52-week high of $13.50 per share. However, due to a "risk off" market condition and hedging by those who bought the offering, the stock has since retraced to as low as $8.94 in August.

When a company actually has a good drug and/or product with strong potential, investors will normally buy public offerings if executed and priced correctly. Once such example of a company we have covered before is Keryx Biopharmaceuticals (KERX), which did an offering that was received very well by investors. Keryx is a company that works on developing and commercializing novel therapies for the treatment of renal disease. In January of this year, Keryx offered 8,234,000 shares priced at $8.49 per share. The offering was quickly bought by investors and continued to run higher. As with AcelRx, after Keryx hit a fresh 52-week high, the stock fell back to as low as $6.33 in Febraury. Currently, Keryx stock trades near $10 a share. Keryx is but one example of how developmental biotechs can hit 52-week highs after an offering, retrace, and then make new 52-week highs shortly afterwards. We feel AcelRx will follow the same pattern, and will make a new 52-week high very soon.

AcelRx has stated it believes it has enough cash to fund operations through 2014, which is always a good thing when it comes to developmental biotechs.

AcelRx believes its current cash, cash equivalents and investments, including funding from the recently completed public equity offering, are sufficient to fund operations at least through the end of 2014. The company expects its use of cash will decrease during 2H compared to 1H as expenditures, primarily R&D expenditures, decline for clinical activity and final payments are made to contract research organizations.

High insider ownership of a company reflects a sense of confidence in the future of that company. More often than not, there are good reasons for these insiders to be steadily buying shares. When we look at all the sells and buys over the last few months of AcelRx, we find that lots of institutions and insiders have been buying. About 50% of AcelRx is owned by insiders as well as almost half of shares being owned by institutions such as Perceptive Advisors LLC (owning almost 6 million shares), Blackrock Fund Advisors and Vanguard. Perceptive Advisors, have recently been very successful with its Aegerion Pharmaceuticals (AEGR) investment. Director Mark Wan is the largest shareholder of AcelRx with over $6 million shares

This past week has seen activity from nine insiders, eight of them acquiring stock options with no sales, and one insider selling 128k shares.

The 128k sold was in accordance with the rule 10b5-1 trading plan, which means it's an automatic sale. Some might think an acquisition is not likely with this type of activity. However, in an article we wrote covering Trius Therapeutics, we predicted it would be acquired. Trius saw similar 10b5-1 selling approximately one month before it was actually acquired.

AcelRx Director Guy Nohra, after selling the 128k shares, now holds 2,666,127 shares of the company. 10b5-1 plans are frequently adopted by top notch management in order to avoid the appearance of any inappropriate actions, such as acting on inside information. Under 10b5-1, an insider must buy or sell as scheduled, and are not subject to trading blackout periods, which occur when companies are negotiating an acquisition. We have seen this many times before buy-outs occur. Often times, directors of companies that are acquired receive "sweet-heart deals," in which they are awarded additional shares under director incentive programs. Nohra's sell here further strengthens the buy-out rumors we have been hearing in our opinion.

Above, we see a bullish rising wedge pattern forming, which is often misinterpreted as a head and shoulders bearish pattern. In some ways, the chart looks a lot like the S&P 500 over the last year or so. We have drawn an arrow pointing to the red MACD signal converging with the yellow Histogram. Each time this has occurred with this stock, the price has gone up.

Acelrx's Nanotab tech could potentially grab a significant piece of the $6.5B pain medication market. With a current market cap around $429M, cash to fund the company through 2014, ($80M) an NDA filing to come likely by the end month, and likeliness of FDA approval, we feel AcelRx is significantly undervalued, especially considering the company is more de-risked than most other developmental biotechs.

Additionally, based on the rumors we have heard, and comparing these rumors to the past performance of BOD members, we believe the company will be acquired within six months. Several BOD members own over 1M shares, with total insider ownership near 50%, which indicates strong confidence in its own company. Based on these factors, our short-term price target opinion is $14, with a one-year target price opinion of $17 to $20 a share.

Disclosure: I am long ACRX, HALO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

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