The Biggest Loser: A Compelling Short Opportunity In Vivus

Short Recommendation for Vivus (VVUS)

Current Price: $10.12

Target Price: $6

Horizon: 3-12 Months

Situation Analysis:

Sell side analysts have a mean price target of $13 on Vivus. This price target is based on a discounted cash flow, with projected sales of Vivus's lead drug Qsymia in the hundreds of millions by FY 2014. I differ and believe the ramp up will be slower than expected and am projecting lower revenue than the sell side, which will drive down the stock price. I also believe competition in the weight loss drug market will erode peak sales of Qsymia. The weak sales from the launch of Qsymia is also likely to mitigate the chance of a major pharmaceutical partner emerging or at least substantially delay it. I also see opportunity for Belviq to outpace Qsymia TRx (Revenue) which it has recently. I am interested in this company, because this company is trying to build a new market and because of that there is a lot of uncertainty around their prospects and therefore inefficiency

Potential Catalysts(How We Get Paid)

*Safety issues and negative side effect profile

*Inability or substantial delay in Vivus finding major pharmaceutical partner

*Intense completion from new drugs and existing competitor Arena Pharmaceuticals (ARNA)

*Weak sales of Qsymia

*Dilution from recent and future financings

*Insider Sales

*Lack of reimbursement improvements

Company Background:

VIVUS is a biopharmaceutical company dedicated to commercializing and developing innovative therapies to address unmet needs in obesity, sleep apnea, diabetes and sexual health. Their drug, Qsymia (phentermine and topiramate extended-release) (formerly known as Qnexa®)was approved by the FDA for the treatment of obesity as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management in adult patients with an initial body mass index, or BMI, of 30 or greater (obese), or 27 or greater (overweight) in the presence of at least one weight-related comorbidity, such as hypertension, type 2 diabetes mellitus or high cholesterol (dyslipidemia). Qsymia incorporates low doses of active ingredients from two previously approved drugs, phentermine and topiramate. Although the exact mechanism of action is not known, Qsymia is believed to target appetite and satiety, or the feeling of being full, the two main mechanisms that impact eating behavior. Company announced the U.S. market availability of Qsymia for obesity in September 2012. On February 21, 2013, the CHMP confirmed its October 18, 2012 decision to deny the MAA for Qsiva™ (phentermine/topiramate ER) for the treatment of obesity in the European Union, or EU. Company has completed Phase 2 clinical studies for Qsymia for the treatment of sleep apnea and Qsymia for the treatment of type 2 diabetes.

VIVUS's drug, STENDRA, or avanafil, was approved by the FDA for the treatment of erectile dysfunction, or ED, in the U.S. VIVUS, through collaboration arrangements with third parties, intend to market and sell STENDRA in the U.S. and, if approved, under the trade name

SPEDRA™ in the EU and other territories outside the U.S.

Weight Loss Market Analysis:

According to data from the World Health Organization globally there are roughly 1.4 billion people classified as overweight. "By 2030, 50-60% of the populations in many countries are on target to be classified as obese," from a recent report from Bank of America. Further, the obesity drug market in U.S. France, Germany, Italy, Spain, the United Kingdom and Japan is projected to increase to $2.6 billion by 2020. There is no doubt there is a market for weight loss drugs, the question however is Qsymia the drug that will be able to take sufficient market share to justify its current $1 billion capitalization? I question the amount of market share Vivus can obtain and feel there will be a delay in how long it takes to achieve peak penetration. Sell side analysts are projecting that Qsymia can achieve around $1.2 billion in revenue by 2020, this is 46% of projected market. I am forecasting $800 million by 2020, much lower peak market share

Current FDA Approved Competition:

-ALLI (orlistat): Works by preventing digestion of 25% of fat consume. A starter pack of Alli - which includes a month's supply of pills, a dietary guidelines guide, a calorie and fat counter, and a food journal - costs about $54. In the US first quarter 2013 sales of Alli grew 7%, due in part to its restocking

-BELVIQ (Locraserin HCI): BELVIQ is the first FDA-approved weight-loss medicine that works by targeting a hunger receptor in the brain and is believed to help you control portions. The precise way BELVIQ produces feelings of satisfaction is not fully understood, but it is believed to help you lose weight by making you feel satisfied when eating less. BELVIQ is marketed by Arena Pharmaceuticals

Competitors in Pipeline (Currently Conducting Trials):

-Empatic and Contrave from Orexigen. Lead combination product candidates target obesity. Products are Contrave®, which has completed Phase III clinical trials for which a New Drug Application, or NDA, has been submitted and reviewed by the U.S. Food and Drug Administration, or FDA, and Empatic™, which has completed Phase II clinical trials.

-Zafgen: Pipeline is shown below

Source: Zafgen Investor Website

Is Qsymia a drug that will take $1.2 billion dollars in market share by 2020?

For further insight, look at Vivus's 10-Q risk factors:

Qsymia is a combination of two active ingredient drug products approved individually by the FDA that are commercially available and marketed by other companies, although the specific dose strengths and formulation (extended-release vs. immediate-release) would differ. As a result, Qsymia may be subject to substitution by prescribing physicians with individual drugs contained in the Qsymia formulation, which would adversely affect our business.

In the third quarter of 2013, Supernus Pharmaceuticals, Inc. announced its plan to launch Trokendi XR, an extended-release pediatric formulation of the generic drug topiramate that is indicated for pediatric epilepsy. Topiramate is not approved forobesity treatment, and phentermine is only approved for short-term treatment of obesity. However, because the price of Qsymia is significantly higher than the prices of the individual components as marketed by other companies, physicians may have a greater incentive to write prescriptions for the individual components outside of their approved indication, instead of for their combination drug, and this may limit how Vivus prices or market Qsymia.

Patent Protection is Key to maintaining market share for a biotechnology company and Vivus's protection appears to be weak given it is based on two already FDA approved drugs

How is the commercial launch proceeding for Qsymia?

VVUS reported 81,000 TRx for the 2nd quarter. This was very slow growth from the end of the first quarter with 23,000 TRx. The retail launch does not appear to be moving as quickly as the market anticipated

CFO Selling is A Red Flag:

Seth Fischer, the company's CFO, recently sold his shares near time all time company low. The CFO of a biotechnology company is usually the one most attune to the market prices and when might be an opportune to sell. The sale price per the form 4, ranged from $11.90 to $11.95 per share. I see this as a major lack of confidence in the company, and I know he still holds stock in the name, but to sell at a time the stock is burning is not a great sign of confidence from those who know company best

Decision Tree:

Downside (30%): Short Squeeze occurs goes up to $14 per share and shorts should cover

Base Case (35%): $9 price

Upside Case (35%): $6 price target

How Shorts Get Burned:

- Major big pharma marketing partnership announced(unlikely given weak prescription adoption as of now)

- Stronger TRx numbers

- Sale of company(unlikely for same reason above)

- Erectile dysfunction drug becomes meaningful revenue for company

Discounted Cash Flow Analysis:

From my discounted cash flow analysis with a 10% discount rate and no terminal value, I arrive at a $6 price target driven primarily by lower revenue projections than the street.

Street Versus Hunter

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in VVUS over 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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Gentium: Buying Opportunity At A Lower Level Amid Correction

Gentium (GENT) is an Italian biotech company that provides unique treatment options to patients faced with rare diseases with high unmet medical needs. Gentium is an excellent growth play on its investigational drug Defibrotide. However, the stock appears reasonably valued after rising ~200% from its 52-week low at $6.96. I believe that the stock could correct ~30% from its recent high at $22.40. This would provide investors an excellent buying opportunity with a favorable risk-reward ratio.

Company Overview

Gentium is a multi-product biopharmaceutical company that develops drugs primarily sourced from DNAs. Defibrotide, Gentium's lead product candidate, has been designed for treatment and prevention of veno-occlusive disease ("VOD"). Defibrotide is derived from porcine mucosal DNA. Phase III clinical trial of Defibrotide is complete as a first-line therapy of severe VOD in the US, Canada, and Israel. The company also completed Phase II/III pediatric trial of Defibrotide in Europe for preventing VOD. Apart from Defibrotide, Gentium produces Sulglicotide, Urokinase and Heparin for commercial distribution.

Gentium: An Excellent Growth Play on Defibrotide

VOD is a disorder of the vascular system that can result from commonly used cancer therapies. In most cases, cancer is treated with chemotherapy, radiation therapy or hormone therapy. In some cases, the therapy treats the cancer directly whereas in other cases, it is administered to prepare the patient for a stem cell transplantation ("SCT") or bone marrow transplantation ("BMT"). The frequency of occurrence of VOD is significant, which ranges from 5% to more than 60% in adults as well as in children.

Gentium recently received a positive opinion for Defitelio, a medicine containing the active substance Defibrotide, by the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP"). This process is similar to the FDA's PDUFA meetings that could lead to the drug's final approval and commercialization. If approved, Defitelio would become the first drug for VOD in the current treatment setting.

The EMA's reversal from its earlier negative decision helped Gentium post its best ever quarterly results in June, 2013 for Defibrotide, which is currently available in Europe under the named patient program ("NPP"). I feel that the use of Defibrotide in controlling VOD would be much wider than expected, particularly in severe VOD with high morbidity and mortality rates post stem cell transplantation.

In the US, Defibrotide is available on a pre-approval basis through a cost recovery program and its application is limited to clinical studies and compassionate use. Defibrotide has been granted orphan and fast-track designations by the FDA. In July 2011, a New Drug Application ("NDA") for Defibrotide was filed with the FDA for the treatment of VOD. But after the FDA found many potential "Refuse to File" issues with the candidate, Gentium voluntarily withdrew its NDA in August 2011. Since then, the company has been working hard for resubmitting the NDA and I strongly believe it will be successful in getting the final approval. I will explain in the next section of this article why I believe so. Since there are no approved drugs that can treat or prevent VOD, I expect that the successful commercialization of Defibrotide will unlock significant value for Gentium shareholders.

Defibrotide's Potential

Defibrotide is the sodium salt of a complex mixture of single-stranded oligodeoxyribonucleotides extracted from porcine DNA. It has anti-thrombotic, anti-inflammatory and anti-ischemic properties. In patients suffering from VOD, high levels of various anti-cancer drugs travel to the microvessels of the liver for being filtered out though circulation. This causes extensive damage to the endothelial lining of these vessels. The natural response by the body is to clot the sites of damage, which results in occlusion of these small-diameter vessels and eventually liver failure and multi-organ failure ("MOF"). Defibrotide has protective effects on human microvascular endothelial cells ("HMEC"). It increases the breakdown of blood clots and protects the cells lining the blood vessels. I believe this mechanism of action of Defibrotide will eventually convince the regulatory authorities to approve the drug.

As I explained, severe VOD leads to multi-organ failure, which is characterized by increased oxygen requirement, renal dysfunction and encephalopathy. The prognosis for patients with severe VOD with multi-organ failure is grim, where VOD typically occurs within 30 days of stem cell transplantation, and the survival rate for patients with VOD is 20% or less following 100 days. Several prospective trials were performed to investigate the effectiveness of Prostaglandin E1 ("PGE1"), Antithrombin III ("ATIII") and Ursodeoxycholic Acid as therapeutic measures, which demonstrated no statistically significant results.

Since VOD is difficult to diagnose, prophylactic intervention is always considered. However, a large prospective cohort study to assess the efficacy of a frequently used prophylaxis with low-dose or low-molecular weight heparin demonstrated no significant benefit. The study was conducted by the European Group for Blood and Marrow Transplantation ("EBMT").

The advent of Defibrotide ushered in a new era in controlling VOD, both in terms of therapeutic as well as prophylactic measures. In a retrospective study consisting of 45 pediatric patients, the efficacy of Defibrotide as a therapeutic measure has been tested, which showed that in a subgroup of 22 patients with severe disease, younger age and early start of Defibrotide administration were associated with a significantly superior outcome. In another subgroup of patients who underwent transplantation for malignant infantile osteopetrosis, the incidence rate of VOD was more than 60%. Because of this high incidence, Defibrotide as a prophylactic measure was initiated in 9 patients who underwent transplantation. In this group, only 1 patient (11.1%) was diagnosed with moderate VOD.

Apart from VOD, Defibrotide is also effective in treating Multiple Myeloma, for which Phase I/II dose-escalating, multi center, non comparative and open label trials in combination with melphalan, prednisone, and thalidomide are already completed. The most common side effects of Defibrotide are hemorrhage, hypotension and coagulopathy.

Gentium's Pipeline

Apart from Defibrotide, the company has another compound currently in pre-clinical stages of development. The name of the compound is Oligotide, which is a derivative of Defibrotide. A study by Eissner G et al. showed that Oligotide protects human microvascular endothelial cells against fludarabine-induced activation, damage and allogenicity.

In another study by T. Murohara et al. the efficacy of Oligotide was examined in a feline model of myocardial ischaemia (MI: 90 min) and reperfusion (R: 270 min). Oligotide exerted a significant cardioprotection in MI+R injury.

The studies mentioned above indicate that Gentium will succeed when clinical trials of Oligotide will commence. I believe that Oligotide will have tremendous potential in multiple indications and it will contribute a significant share in Gentium's future revenues.

Gentium: A Stable Value Play Too

While Defibrotide is Gentium's immediate growth driver, it has other products that generate stable revenues for the company. Its Sulglicotide, a sulphated glycopeptide derived from porcine duodenum with ulcer healing and gastrointestinal protective properties, is a popular drug worldwide.

Gentium is a leading producer of Urokinase in Europe. Urokinase is an enzyme derived from human urine. The drug is used in the management of thromboembolic disorders, such as deep venous thrombosis, pulmonary embolism, acute myocardial infarction and peripheral arterial thromboembolism.

The company also produces Heparin Sodium, the sodium salt of sulphated glycosaminoglycan. The source of the substance is swine intestinal mucosa. Heparin has the characteristic property of delaying the clotting of freshly shed blood. Gentium supplies Sulglicotide, Urokinase and Heparin to international pharmaceutical companies that market the drugs in their own countries.

Gentium's Valuation and Projected Stock Price

Gentium is a cash-rich company and I don't think any public offering would be necessary in the near-term. It has cash and equivalents of $21.06 million on its balance sheet as of the quarter ending 30 June, 2013. Given that the company has a steady cash flow, the chance of a cash-crunch is almost zero. Moreover, with a limited chance of share dilution, shareholders' value would be protected.

GENT Cash and Equivalents data by YCharts

Gentium is trading at a Price/Book ratio of 9.4x on a book value per share of $2.11. In terms of Price to Book, Gentium is trading at a significant premium relative to its peers, such as Illumina (ILMN), Auxilium Pharmaceuticals (AUXL), Jazz Pharmaceuticals (JAZZ), and Onyx Pharmaceuticals (ONXX). The peer group average Price/Book ratio is 6.3x. I expect that Gentium's book value per share will be around $2.50 in the next six to nine months, following successful commercialization of Defibrotide in Europe. Assigning the peer group average Price/Book ratio on Gentium's forward book value per share, I arrive at $15.75 as Gentium's near-term target price. I believe that would be a good entry point with a 60-70% upside potential from there, running into the FDA's final approval process of Defibrotide and upcoming clinical trials of Oligotide.

GENT Book Value Per Share data by YCharts

I believe Price/Book is one of the best metrics that offers valuable insight to investors seeking growth at a reasonable price. However, I prefer to compare it with ROE, and if there is a significant divergence between the two, I feel something might be wrong.

GENT Return on Equity data by YCharts

In case of Gentium, while the Price/Book is rising steadily since the last few weeks, its ROE is not showing significant strength as I expect. Although the ROE is not unimpressive, the fact that it is trending downwards is a bit worrisome. This divergence makes me conclude that the stock needs to be corrected in the short-term. Therefore, I sold my long position in GENT. I am waiting to enter the counter again at a lower level. I still believe GENT is an excellent growth story and expect that the next round of catalysts will come in the form of the FDA's final approval proceedings for Defibrotide and the upcoming clinical trials of Oligotide.

Summary: Reasons to Buy

Defibrotide has been granted Orphan Medicinal Product Designation by the European Commission for the treatment and prevention of VOD. Recently the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP") adopted a positive opinion for Defitelio, a medicine containing the active substance Defibrotide.CHMP's positive opinion for Defitelio could lead to the drug's final approval and commercialization in Europe in the near-term. If approved, Defitelio would become the first drug for VOD in the current treatment setting.In the US, Defibrotide has been granted orphan and fast-track designations by the FDA, which has increased the possibility of getting final approval.Gentium's pipeline contains Oligotide, a product with a potential clinical use in pre-SCT conditioning. Oligotide could have significant potential in the treatment of damaged human microvascular endothelial cells ("HMEC").Apart from Defibrotide, Gentium has several other product lines that generate stable revenues for the company, such as Sulglicotide, Urokinase and Heparin.

Potential Downsides

Gentium's stock appears reasonably valued at the current price around $20 after rising ~200% from its 52-week low at $6.96. A short-term correction may be just in the cards.If EMA doesn't approve Defitelio in the near-term, the stock may slide towards $10, where it has significant support.It's not clear when the company will resubmit its NDA for Defibrotide to the FDA. The most recently available update regarding this provided no clue. It only mentioned that the company plans to resubmit it this year. Delay in resubmitting the NDA could negatively impact the stock.

The Bottom Line

Although Gentium currently has an unfavorable risk-reward ratio for short-term investors, I strongly believe that the stock will eventually cross its all-time high of $22.40. Investors with a long-term horizon are advised to accumulate the stock on dips close to $15.75.

Disclosure: I am long AUXL. 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...)

Additional disclosure: I have sold GENT at $21 and will buy again at a lower level.

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'We should not miss the opportunity for change within the NHS'

'We should not fail to take previously missed opportunties to learn from some excellent reports', says Tony Yeaman. Photograph: Christopher Thomond

Prof Don Berwick's report Improving the Safety of Patients in England follows a long line of investigations into failures in care within the NHS and a plethora of responses to them; and yet we are no closer to the solution of the wide-ranging problems. 

While a number of commentators say the Berwick report contains nothing new, this should not devalue its positive recommendations and the chance it provides to advance patient safety throughout the NHS. Nor should we fail to take previously missed opportunities to learn from some excellent reports, not least Robert Francis's two reports into Mid Staffordshire.

Berwick's advisory group identified a number of problems that related more to systems, procedures and priorities than staff, and argued that there was a lack of focus on the patient. The group advised that continuous improvement and investment in life-long learning is needed, with the patient at the heart of this. It also suggested a move away from a blame culture to greater transparency. They recommended that the service must accept the need for systemic change, move away from blame as a tool and work more closely with service users and providers.  A more careful approach on quantitative targets is needed, as is clarity on which body is actually charged with delivering safety.

There is a real opportunity – and importantly public and political appetite – for change, with a radically reformed NHS putting clinicians at the heart of commissioning through CCGs, a public shift in attitude, and a willingness to learn and share experience exemplified by the NHS Litigation Authority's new approach of using its unique data sets from claims to develop learning initiatives to reduce harm, thereby improving patient and staff safety. 

The biggest challenge for all those in healthcare – the commissioners, providers and regulators who wholeheartedly accept this drive for improved patient safety – is to have sufficient time and resources to implement the changes needed against a moving target that is created by publication of report after report, making slightly different but overlapping recommendations, guidance and regulation. This job is made all the more difficult by the reality of working under the spotlight of external review and public suspicion, and doing so in a constrained financial environment.

Going forward it will not just be the providers who will have to ensure patient care is at the top of their agenda, but also those who commission care and regulate the service. Commissioners will have to ensure they commission with safety at the heart of their intentions, assuring themselves of a provider's track record and ongoing safe performance, using appropriate data metrics to do so. There will be an extra impetus on them not to miss any warning signs – whether they be complaints, claims or mortality indicators.

The whole healthcare economy will have to work much more closely and find a way not only to hear the voice of regulators but importantly patients, their representatives and those delivering the care in a more open blame-free environment. But as Berwick points out, in order to keep this promise it's not just about the staff – even Berwick's recommendation of a criminal sanction against those found to have wilfully neglected patients comes with this warning.

It is more instead about systems, procedures and culture and all these require a unified approach and proper resourcing. Boards are being asked to take a long hard look at their organisations and ensure they are adopting current and best practice, and their staff as a whole are being developed. Let's hope they are given time to do so.

Tony Yeaman is head of healthcare at law firm Weightmans LLP

This article is published by Guardian Professional. Join the Healthcare Professionals Network to receive regular emails and exclusive offers.

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Gentium: Buying Opportunity At A Lower Level Amid Correction

Gentium (GENT) is an Italian biotech company that provides unique treatment options to patients faced with rare diseases with high unmet medical needs. Gentium is an excellent growth play on its investigational drug Defibrotide. However, the stock appears reasonably valued after rising ~200% from its 52-week low at $6.96. I believe that the stock could correct ~30% from its recent high at $22.40. This would provide investors an excellent buying opportunity with a favorable risk-reward ratio.

Company Overview

Gentium is a multi-product biopharmaceutical company that develops drugs primarily sourced from DNAs. Defibrotide, Gentium's lead product candidate, has been designed for treatment and prevention of veno-occlusive disease ("VOD"). Defibrotide is derived from porcine mucosal DNA. Phase III clinical trial of Defibrotide is complete as a first-line therapy of severe VOD in the US, Canada, and Israel. The company also completed Phase II/III pediatric trial of Defibrotide in Europe for preventing VOD. Apart from Defibrotide, Gentium produces Sulglicotide, Urokinase and Heparin for commercial distribution.

Gentium: An Excellent Growth Play on Defibrotide

VOD is a disorder of the vascular system that can result from commonly used cancer therapies. In most cases, cancer is treated with chemotherapy, radiation therapy or hormone therapy. In some cases, the therapy treats the cancer directly whereas in other cases, it is administered to prepare the patient for a stem cell transplantation ("SCT") or bone marrow transplantation ("BMT"). The frequency of occurrence of VOD is significant, which ranges from 5% to more than 60% in adults as well as in children.

Gentium recently received a positive opinion for Defitelio, a medicine containing the active substance Defibrotide, by the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP"). This process is similar to the FDA's PDUFA meetings that could lead to the drug's final approval and commercialization. If approved, Defitelio would become the first drug for VOD in the current treatment setting.

The EMA's reversal from its earlier negative decision helped Gentium post its best ever quarterly results in June, 2013 for Defibrotide, which is currently available in Europe under the named patient program ("NPP"). I feel that the use of Defibrotide in controlling VOD would be much wider than expected, particularly in severe VOD with high morbidity and mortality rates post stem cell transplantation.

In the US, Defibrotide is available on a pre-approval basis through a cost recovery program and its application is limited to clinical studies and compassionate use. Defibrotide has been granted orphan and fast-track designations by the FDA. In July 2011, a New Drug Application ("NDA") for Defibrotide was filed with the FDA for the treatment of VOD. But after the FDA found many potential "Refuse to File" issues with the candidate, Gentium voluntarily withdrew its NDA in August 2011. Since then, the company has been working hard for resubmitting the NDA and I strongly believe it will be successful in getting the final approval. I will explain in the next section of this article why I believe so. Since there are no approved drugs that can treat or prevent VOD, I expect that the successful commercialization of Defibrotide will unlock significant value for Gentium shareholders.

Defibrotide's Potential

Defibrotide is the sodium salt of a complex mixture of single-stranded oligodeoxyribonucleotides extracted from porcine DNA. It has anti-thrombotic, anti-inflammatory and anti-ischemic properties. In patients suffering from VOD, high levels of various anti-cancer drugs travel to the microvessels of the liver for being filtered out though circulation. This causes extensive damage to the endothelial lining of these vessels. The natural response by the body is to clot the sites of damage, which results in occlusion of these small-diameter vessels and eventually liver failure and multi-organ failure ("MOF"). Defibrotide has protective effects on human microvascular endothelial cells ("HMEC"). It increases the breakdown of blood clots and protects the cells lining the blood vessels. I believe this mechanism of action of Defibrotide will eventually convince the regulatory authorities to approve the drug.

As I explained, severe VOD leads to multi-organ failure, which is characterized by increased oxygen requirement, renal dysfunction and encephalopathy. The prognosis for patients with severe VOD with multi-organ failure is grim, where VOD typically occurs within 30 days of stem cell transplantation, and the survival rate for patients with VOD is 20% or less following 100 days. Several prospective trials were performed to investigate the effectiveness of Prostaglandin E1 ("PGE1"), Antithrombin III ("ATIII") and Ursodeoxycholic Acid as therapeutic measures, which demonstrated no statistically significant results.

Since VOD is difficult to diagnose, prophylactic intervention is always considered. However, a large prospective cohort study to assess the efficacy of a frequently used prophylaxis with low-dose or low-molecular weight heparin demonstrated no significant benefit. The study was conducted by the European Group for Blood and Marrow Transplantation ("EBMT").

The advent of Defibrotide ushered in a new era in controlling VOD, both in terms of therapeutic as well as prophylactic measures. In a retrospective study consisting of 45 pediatric patients, the efficacy of Defibrotide as a therapeutic measure has been tested, which showed that in a subgroup of 22 patients with severe disease, younger age and early start of Defibrotide administration were associated with a significantly superior outcome. In another subgroup of patients who underwent transplantation for malignant infantile osteopetrosis, the incidence rate of VOD was more than 60%. Because of this high incidence, Defibrotide as a prophylactic measure was initiated in 9 patients who underwent transplantation. In this group, only 1 patient (11.1%) was diagnosed with moderate VOD.

Apart from VOD, Defibrotide is also effective in treating Multiple Myeloma, for which Phase I/II dose-escalating, multi center, non comparative and open label trials in combination with melphalan, prednisone, and thalidomide are already completed. The most common side effects of Defibrotide are hemorrhage, hypotension and coagulopathy.

Gentium's Pipeline

Apart from Defibrotide, the company has another compound currently in pre-clinical stages of development. The name of the compound is Oligotide, which is a derivative of Defibrotide. A study by Eissner G et al. showed that Oligotide protects human microvascular endothelial cells against fludarabine-induced activation, damage and allogenicity.

In another study by T. Murohara et al. the efficacy of Oligotide was examined in a feline model of myocardial ischaemia (MI: 90 min) and reperfusion (R: 270 min). Oligotide exerted a significant cardioprotection in MI+R injury.

The studies mentioned above indicate that Gentium will succeed when clinical trials of Oligotide will commence. I believe that Oligotide will have tremendous potential in multiple indications and it will contribute a significant share in Gentium's future revenues.

Gentium: A Stable Value Play Too

While Defibrotide is Gentium's immediate growth driver, it has other products that generate stable revenues for the company. Its Sulglicotide, a sulphated glycopeptide derived from porcine duodenum with ulcer healing and gastrointestinal protective properties, is a popular drug worldwide.

Gentium is a leading producer of Urokinase in Europe. Urokinase is an enzyme derived from human urine. The drug is used in the management of thromboembolic disorders, such as deep venous thrombosis, pulmonary embolism, acute myocardial infarction and peripheral arterial thromboembolism.

The company also produces Heparin Sodium, the sodium salt of sulphated glycosaminoglycan. The source of the substance is swine intestinal mucosa. Heparin has the characteristic property of delaying the clotting of freshly shed blood. Gentium supplies Sulglicotide, Urokinase and Heparin to international pharmaceutical companies that market the drugs in their own countries.

Gentium's Valuation and Projected Stock Price

Gentium is a cash-rich company and I don't think any public offering would be necessary in the near-term. It has cash and equivalents of $21.06 million on its balance sheet as of the quarter ending 30 June, 2013. Given that the company has a steady cash flow, the chance of a cash-crunch is almost zero. Moreover, with a limited chance of share dilution, shareholders' value would be protected.

GENT Cash and Equivalents data by YCharts

Gentium is trading at a Price/Book ratio of 9.4x on a book value per share of $2.11. In terms of Price to Book, Gentium is trading at a significant premium relative to its peers, such as Illumina (ILMN), Auxilium Pharmaceuticals (AUXL), Jazz Pharmaceuticals (JAZZ), and Onyx Pharmaceuticals (ONXX). The peer group average Price/Book ratio is 6.3x. I expect that Gentium's book value per share will be around $2.50 in the next six to nine months, following successful commercialization of Defibrotide in Europe. Assigning the peer group average Price/Book ratio on Gentium's forward book value per share, I arrive at $15.75 as Gentium's near-term target price. I believe that would be a good entry point with a 60-70% upside potential from there, running into the FDA's final approval process of Defibrotide and upcoming clinical trials of Oligotide.

GENT Book Value Per Share data by YCharts

I believe Price/Book is one of the best metrics that offers valuable insight to investors seeking growth at a reasonable price. However, I prefer to compare it with ROE, and if there is a significant divergence between the two, I feel something might be wrong.

GENT Return on Equity data by YCharts

In case of Gentium, while the Price/Book is rising steadily since the last few weeks, its ROE is not showing significant strength as I expect. Although the ROE is not unimpressive, the fact that it is trending downwards is a bit worrisome. This divergence makes me conclude that the stock needs to be corrected in the short-term. Therefore, I sold my long position in GENT. I am waiting to enter the counter again at a lower level. I still believe GENT is an excellent growth story and expect that the next round of catalysts will come in the form of the FDA's final approval proceedings for Defibrotide and the upcoming clinical trials of Oligotide.

Summary: Reasons to Buy

Defibrotide has been granted Orphan Medicinal Product Designation by the European Commission for the treatment and prevention of VOD. Recently the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP") adopted a positive opinion for Defitelio, a medicine containing the active substance Defibrotide.CHMP's positive opinion for Defitelio could lead to the drug's final approval and commercialization in Europe in the near-term. If approved, Defitelio would become the first drug for VOD in the current treatment setting.In the US, Defibrotide has been granted orphan and fast-track designations by the FDA, which has increased the possibility of getting final approval.Gentium's pipeline contains Oligotide, a product with a potential clinical use in pre-SCT conditioning. Oligotide could have significant potential in the treatment of damaged human microvascular endothelial cells ("HMEC").Apart from Defibrotide, Gentium has several other product lines that generate stable revenues for the company, such as Sulglicotide, Urokinase and Heparin.

Potential Downsides

Gentium's stock appears reasonably valued at the current price around $20 after rising ~200% from its 52-week low at $6.96. A short-term correction may be just in the cards.If EMA doesn't approve Defitelio in the near-term, the stock may slide towards $10, where it has significant support.It's not clear when the company will resubmit its NDA for Defibrotide to the FDA. The most recently available update regarding this provided no clue. It only mentioned that the company plans to resubmit it this year. Delay in resubmitting the NDA could negatively impact the stock.

The Bottom Line

Although Gentium currently has an unfavorable risk-reward ratio for short-term investors, I strongly believe that the stock will eventually cross its all-time high of $22.40. Investors with a long-term horizon are advised to accumulate the stock on dips close to $15.75.

Disclosure: I am long AUXL. 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...)

Additional disclosure: I have sold GENT at $21 and will buy again at a lower level.

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Medtronic: Infuse Woes Signals Opportunity For Others In Bone Grafting

We believe that market share for Medtronic's (MDT) Infuse will continue to be soft in the market, allowing other players to chip at its market share. Infuse revenues were down 11% for the second quarter, leaving an opportunity for other players to pick up MDT's lost market share. For a full report please contact: research@thecockrellgroup.com

Issue That Dilute Market Dominance

Medtronic's Infuse Bone Graft market dominance in bone grafting. But, the product has been losing market share due to safety issues, which has resulted in significant impact on the company's spine business. Independent research studies from Yale University also confirmed that Infuse has certain risks that must be evaluated carefully by both physicians and patients before use.

What Is Infuse Bone Graft

The Infuse Bone Graft is a biologic for bone growth and is heavily used off-label for spinal fusions. The material is made up of two parts: recombinant human bone morphogenetic protein (rhBMP-2) and a sponge fabricated from cow collagen. The powdered protein is mixed with sterilized water and is then applied over the sponge. The product is commonly placed within a spinal cage which is implanted into the spine. Infuse is often used in replacement of autograft, which involves harvesting bone from the patient's own hip, and can be more painful for the patients and usually requires more healing time. This product, however, has been associated with a series of side effects that led patients and physicians to seek other treatment options available in the market.

Risks Associated With Infuse

The most common and serious adverse events associated with Infuse include cancer, bone and nerve injury, male infertility, infection and urinary problems. In addition, the product may have a potential risk for pregnant women due to its active ingredients based on an experimental rabbit study. According to this study, the rhBMP-2 extracts antibodies that are capable of crossing the placenta, which becomes a threat to the fetus.

In addition, there are no well-controlled studies in pregnant women, and there are concerns as to the safety and effectiveness of the device, which is not yet established in nursing women.

Safety Issues Impact Medtronic Spine Business

Medtronic's spine segment showed significant pressure on its quarterly results due to decreasing sales of Infuse, resulting from safety concerns. During first quarter, FY14, Infuse Bone Graft revenues, which is commonly referred to as BMP, were $124 million, down by approximately 11% at constant currency over the prior year, due to lower sales volume. But, the decline is offset by the company's core spine offerings, which provides some stability with increased sales of new products and enabling technologies such as imaging, navigation, and powered surgical instruments. Overall, Medtronic's spine business posted revenue of $765 million, down by 1% on constant currency over the prior year.

Source: Company Reports

(Click to enlarge)

Source: Company Reports

Competitive Products In The Bone Grafting Market

Besides bone morphogenetic proteins (BMP), a comprehensive number of technologies are available in the market for bone grafting. They include demineralized bone matrix (DBM), bone graft substitutes and platelet concentration systems. The DBM technology is considered as effective among the available bone grafting methods. Companies like Bacterin International Holdings (BONE) develop bone graft materials and biologic allografts for transplant using its proprietary DBM technology.

Technological Advantage Of Bacterin's Allograft

Bacterin's core competencies are focused on how allografts are processed, and most specifically, DBM scaffolds. For DBM, allograft material is broken down into small pieces and then submerged with hydrochloric acid to remove bone minerals without affecting the protein (collagen) materials. This process supports bone growth due to its osteoconductive and osteoinductive properties.

Increasing Prevalence Drives Bone Grafting Therapy Market

Back pain is a common problem that frequently occurs with changing life style and an increasing elderly population. Severe back pain can happen due to spine and other related degenerative diseases. Physicians recommend treatment options based on the severity and duration of the disease. But with increasing incidence of chronic cases, patients are opting for spine surgery as the best possible option. Among surgeries, biologic treatment such as bone grafting is considered as one of the best possible therapies for patients with spine aliments such as severe back pain. Though a number of existing therapies such as Infuse Bone Grafting are available; some are vulnerable to causing side effects. In addition, the cost of surgery is high, approximately $34,000 or more. This has led to increasing unmet needs. It is also estimated that 84 % of bone grafts are used for spinal fusion to treat chronic back pain. In the U.S., around 432,000 spinal fusions are performed annually.

Opportunity For Bacterin In Bone Grafting Business

In bone replacement, Medtronic dominates the market with Infuse, accounting for over 40% of the $1.9 billion bone grafting market, followed by DePuy and NuVasive (NUVA). Besides BMP, other technologies including demineralized bone, allograft bone, cell-based matrices and bone substitutes offer services in the market. As the market is growing with increasing new products and technology and expects growth of around $3.3 billion by the year 2017. Based on the effectiveness and safety of DBM in the grafting process, Bacterin expects to generate continued and improving sales within its core bone grafting business.

Bacterin's Biologic Support Growth

In the second quarter 2013, Bacterin reported stable growth in sales of $8.2 million with increased sales volume. Patent-pending technology based products will further support top line growth in the coming periods. Bacterin is yet to report positive earnings as the company is focusing mostly on market development and optimizing the sales force. The company had a cash balance of $5.1 million as of June 30, 2013 to carry out its operation.

Looking Ahead

Though the core spine segment will continue to provide positive growth for Medtronic. Nonetheless, lost credibility with its most profitable product - Infuse - will make sales challenging going forward. This will create an opportunity for other players to position their respective, competing technologies to take advantage of the bone grafting market. This will also be the case for Bacterin and its clinically superior DBM technology. The effective and safety profile of the DBM process should boost the Company's bone grafting business.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Business relationship disclosure: COCKRELL GROUP does and seeks to do business with companies covered in COCKRELL GROUP Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of COCKRELL GROUP Research. Investors should consider COCKRELL GROUP Research as only a single factor in making their investment decision. Certification: The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts

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'We should not miss the opportunity for change within the NHS'

'We should not fail to take previously missed opportunties to learn from some excellent reports', says Tony Yeaman. Photograph: Christopher Thomond

Prof Don Berwick's report Improving the Safety of Patients in England follows a long line of investigations into failures in care within the NHS and a plethora of responses to them; and yet we are no closer to the solution of the wide-ranging problems. 

While a number of commentators say the Berwick report contains nothing new, this should not devalue its positive recommendations and the chance it provides to advance patient safety throughout the NHS. Nor should we fail to take previously missed opportunities to learn from some excellent reports, not least Robert Francis's two reports into Mid Staffordshire.

Berwick's advisory group identified a number of problems that related more to systems, procedures and priorities than staff, and argued that there was a lack of focus on the patient. The group advised that continuous improvement and investment in life-long learning is needed, with the patient at the heart of this. It also suggested a move away from a blame culture to greater transparency. They recommended that the service must accept the need for systemic change, move away from blame as a tool and work more closely with service users and providers.  A more careful approach on quantitative targets is needed, as is clarity on which body is actually charged with delivering safety.

There is a real opportunity – and importantly public and political appetite – for change, with a radically reformed NHS putting clinicians at the heart of commissioning through CCGs, a public shift in attitude, and a willingness to learn and share experience exemplified by the NHS Litigation Authority's new approach of using its unique data sets from claims to develop learning initiatives to reduce harm, thereby improving patient and staff safety. 

The biggest challenge for all those in healthcare – the commissioners, providers and regulators who wholeheartedly accept this drive for improved patient safety – is to have sufficient time and resources to implement the changes needed against a moving target that is created by publication of report after report, making slightly different but overlapping recommendations, guidance and regulation. This job is made all the more difficult by the reality of working under the spotlight of external review and public suspicion, and doing so in a constrained financial environment.

Going forward it will not just be the providers who will have to ensure patient care is at the top of their agenda, but also those who commission care and regulate the service. Commissioners will have to ensure they commission with safety at the heart of their intentions, assuring themselves of a provider's track record and ongoing safe performance, using appropriate data metrics to do so. There will be an extra impetus on them not to miss any warning signs – whether they be complaints, claims or mortality indicators.

The whole healthcare economy will have to work much more closely and find a way not only to hear the voice of regulators but importantly patients, their representatives and those delivering the care in a more open blame-free environment. But as Berwick points out, in order to keep this promise it's not just about the staff – even Berwick's recommendation of a criminal sanction against those found to have wilfully neglected patients comes with this warning.

It is more instead about systems, procedures and culture and all these require a unified approach and proper resourcing. Boards are being asked to take a long hard look at their organisations and ensure they are adopting current and best practice, and their staff as a whole are being developed. Let's hope they are given time to do so.

Tony Yeaman is head of healthcare at law firm Weightmans LLP

This article is published by Guardian Professional. Join the Healthcare Professionals Network to receive regular emails and exclusive offers.

View the original article here

'We should not miss the opportunity for change within the NHS'

'We should not fail to take previously missed opportunties to learn from some excellent reports', says Tony Yeaman. Photograph: Christopher Thomond

Prof Don Berwick's report Improving the Safety of Patients in England follows a long line of investigations into failures in care within the NHS and a plethora of responses to them; and yet we are no closer to the solution of the wide-ranging problems. 

While a number of commentators say the Berwick report contains nothing new, this should not devalue its positive recommendations and the chance it provides to advance patient safety throughout the NHS. Nor should we fail to take previously missed opportunities to learn from some excellent reports, not least Robert Francis's two reports into Mid Staffordshire.

Berwick's advisory group identified a number of problems that related more to systems, procedures and priorities than staff, and argued that there was a lack of focus on the patient. The group advised that continuous improvement and investment in life-long learning is needed, with the patient at the heart of this. It also suggested a move away from a blame culture to greater transparency. They recommended that the service must accept the need for systemic change, move away from blame as a tool and work more closely with service users and providers.  A more careful approach on quantitative targets is needed, as is clarity on which body is actually charged with delivering safety.

There is a real opportunity – and importantly public and political appetite – for change, with a radically reformed NHS putting clinicians at the heart of commissioning through CCGs, a public shift in attitude, and a willingness to learn and share experience exemplified by the NHS Litigation Authority's new approach of using its unique data sets from claims to develop learning initiatives to reduce harm, thereby improving patient and staff safety. 

The biggest challenge for all those in healthcare – the commissioners, providers and regulators who wholeheartedly accept this drive for improved patient safety – is to have sufficient time and resources to implement the changes needed against a moving target that is created by publication of report after report, making slightly different but overlapping recommendations, guidance and regulation. This job is made all the more difficult by the reality of working under the spotlight of external review and public suspicion, and doing so in a constrained financial environment.

Going forward it will not just be the providers who will have to ensure patient care is at the top of their agenda, but also those who commission care and regulate the service. Commissioners will have to ensure they commission with safety at the heart of their intentions, assuring themselves of a provider's track record and ongoing safe performance, using appropriate data metrics to do so. There will be an extra impetus on them not to miss any warning signs – whether they be complaints, claims or mortality indicators.

The whole healthcare economy will have to work much more closely and find a way not only to hear the voice of regulators but importantly patients, their representatives and those delivering the care in a more open blame-free environment. But as Berwick points out, in order to keep this promise it's not just about the staff – even Berwick's recommendation of a criminal sanction against those found to have wilfully neglected patients comes with this warning.

It is more instead about systems, procedures and culture and all these require a unified approach and proper resourcing. Boards are being asked to take a long hard look at their organisations and ensure they are adopting current and best practice, and their staff as a whole are being developed. Let's hope they are given time to do so.

Tony Yeaman is head of healthcare at law firm Weightmans LLP

This article is published by Guardian Professional. Join the Healthcare Professionals Network to receive regular emails and exclusive offers.

View the original article here

Expanded role for pharmacists in Canada is an opportunity to offer better patient care

Main Category: Pharmacy / Pharmacist
Article Date: 19 Aug 2013 - 9:00 PDT Current ratings for:
Expanded role for pharmacists in Canada is an opportunity to offer better patient care

The newly expanded role of pharmacists in Canada to help manage the health of patients can benefit both patients and physicians, according to an article in CMAJ (Canadian Medical Association Journal).

The article, written by a physician and a pharmacist, summarizes the opportunities for collaborative care and how physicians can work with pharmacists.

Pharmacists in Canada have recently been given broader responsibilities, including in some provinces, prescribing privileges, ability to order and interpret laboratory tests, and ability to vaccinate and inject medications. Pharmacists in other countries such as the United Kingdom, United States and New Zealand are also increasingly involved in collaborative care arrangements.

There is strong evidence that pharmacists' care can benefit patients, especially in providing vaccines and managing high blood pressure, diabetes, heart failure, asthma and other conditions.

"As pharmacists more actively participate in medication management, physicians should be aware that in interprofessional models of care, every member of the team is accountable for the care he or she provides and is not to be held directly liable for the acts of others," write Dr. Cara Tannenbaum, Faculties of Medicine and Pharmacy, Université de Montréal and Dr. Ross Tsuyuki, Faculty of Medicine and Dentistry, University of Alberta.

Because more than 10% of visits to emergency departments are for drug-related problems, collaboration can help reduce the number of drug?"drug interactions and avoid visits to the emergency department. Pharmacists, who have specialized expertise in drug dosing, drug interactions, pharmacology and related areas, can help physicians manage safe prescribing in complex (often elderly) patients taking 5 or more drugs. They can also help in tapering patients off medications.

"Once established, collaborative care with pharmacists will likely yield tremendous benefits to both patients and physicians. The expanding scope of pharmacists' practice offers many opportunities to improve patient care. However, it is also an ongoing process that must be evaluated as regulated activities change, new pharmacists enter practice and scopes of activities continue to expand," the authors conclude.

Article adapted by Medical News Today from original press release. Click 'references' tab above for source.
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