Dr. Paul Wagner, CFO of Pfenex Inc (PFNX), says he believes there will be significant opportunities for the company’s Lucentis biosimilar as certain large geographic markets begin to open up by 2018.
“Currently, approximately $65 million of the 2013 market is open from an I.P. perspective in geographies like India and Russia and some of the central European countries as well,” Wagner says. “In the second quarter of 2018, we believe there is going to be some larger geographies opening up, including Canada and Turkey, which accounts for just under $500 million of revenue. And then, by the second quarter of 2020, we expect the United States will be open from an I.P. perspective as well as Australia, which would provide another $2 billion of revenue opportunity, and then Europe in 2022, which would be $1.7 billion.”
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Wagner says the global market for Lucentis biosimilars is $4.3 billion. He says the experience in Europe provides an indication of what percentage of that market Pfenex could capture.
“We can look to Europe where there are now approximately 20 biosimilars that have been approved. The market share of those biosimilars on a volume basis has been anywhere between 30% and 40% on average in the largest five countries, and without significant price discounting,” Wagner says. “Additionally, we believe that our PF582 is the only Lucentis biosimilar candidate that’s in global development, which gets back to the expertise we have with our Pfenex Expression Technology and our ability to develop very difficult-to-produce proteins.”
Dr. Kleanthis Xanthopoulos, CEO of Regulus Therapeutics Inc (RGLS), says the reason the company decided to separate its research division is because the technology, which was originally started to support its own therapeutic programs, turned out to have more utilities than management had anticipated. He says the research division attracted interest from a number of partners.
“We at Regulus want to focus exclusively on therapeutics, not biomarkers or diagnostics, but we want to use this technology for a lot of our clinical studies for stratifying patients, such as identifying clinical biomarkers that follow the effect of a specific drug,” Xanthopoulos says. “So with the Biogen Idec deal of 2012 and the extension that was announced recently, we see the possibility of that division growing and ultimately standing on its own right as an independent unit or even within the current business.”
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Xanthopoulos says one of Regulus’ top goals is to develop a greater understanding of how drugs change in terms of microRNA once they are in a patient’s bloodstream.
“It would be terrific if we can develop signatures, if you like, that can predict that this particular individual is going to be positively responding to which drug versus not responding. And of course, you now take all the therapeutic indications and all the drugs that are in the market or in development, and there is a tremendous business opportunity,” Xanthopoulos says. “So that’s what we want to be focusing on. We don’t want to enable other companies to compete with us on the therapeutic front. That’s the space that we completely want to dominate.”
Stifel Nicolaus & Co. Vice President Brian Klein is currently recommending Medivation Inc (MDVN) to investors. He says he expects the company to be able to address a larger patient population with its prostate cancer drug.
“They have one approved product, it’s called XTANDI, and it’s for the treatment of prostate cancer,” Klein says. “In this case, or currently I should say, it’s approved in patients after they have received chemotherapy. And we’re hopeful that the drug will be approved shortly for patients prior to chemotherapy as well, and that’s based on some clinical trials that were previously conducted and reported already which showed a survival benefit if you were treated with this product ahead of chemotherapy.”
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Klein says the patient population of men who get prostate cancer is quite large. As such, he believes the data is compelling for Medivation.
“Certainly it’s been tested in a number of patients,” Klein says. “It’s already approved, it’s already selling quite well, and we think that the label expansion, which we are forecasting will occur in mid-September, will allow them to address an even larger patient population and help that disease.”
Brian Klein, a Vice President with Stifel Nicolaus & Co., says biotechnology investors may want to take a closer look at Clovis Oncology Inc (CLVS),as the company is making some headway on development of a drug to treat lung cancer.
“This company is developing a cancer product for patients with specific a mutation in lung cancer called EGFR mutation, and that stands for epidermal growth factor receptor; it’s a type of receptor on the cancer cell that helps stimulate the growth of cells,” Klein says. “And in particular, patients within this EGFR mutated class have developed a resistance pattern to the current standard of care, and then they tend to deteriorate rather rapidly.”
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Klein says Clovis is developing a targeted therapy for a specific mutation, and the data is in the early stages. So, while there is a risk factor, Klein thinks the outlook is good for Clovis.
“From the data that we’ve seen the drug appears quite active, and we think that given the targeted nature of the product, the large unmet need in lung cancer and the data that they generated today, it’s possible that the FDA could be quite accommodative here and have this drug on the markets within a couple of years,” Klein says.
Sandesh Seth, Chairman of Actinium Pharmaceuticals Inc (ATNM), says the company is poised to achieve fast-track status with the FDA.
“We are not the fifth me-too drug candidate for a chronic disease. Rather, Iomab-B and Actimab-A — if approved — would have life-extending benefits, and in so doing, Actinium Pharmaceuticals can make a difference,” Seth says. “That really motivates us.”
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Seth says Iomab-B, Actinium’s drug for patients who cannot withstand chemotherapy, is preparing to enter a Phase III pivotal trial. So far, he says, the drug has demonstrated strong results.
“Iomab-B has shown strong clinical trials results in more than 250 patients to date. In the Phase I/II clinical trials, it has shown that 100% of these patients were able to move to a bone marrow transplant with one-year survival of approximately 30% and two-year survival of approximately 19%, which compares to 10% and 0%, respectively,” Seth says.
Meanwhile, Seth says Actinium expects to have early results in December for its second drug candidate, Actimab-A, which is for elderly patients who are newly diagnosed with AML. Seth says that as a second-generation product, he believes Actimab-A is derisked.
“The first-generation product, Bismab-A, had proof of concept in a Phase I/II study in a tougher patient population, which are relapsed and refractory patients, whereas these are newly diagnosed AML patients…The first-generation product was commercially unviable because it cost $98,000 a dose and had a 46-minute half-life,” Seth says. “We can make the second-generation drug, Actimab-A, which is 500 times more potent for under $10,000, and it is commercially viable with a half-life of 10.5 days, so the logistics work.”
Kevin Gorman, CEO of Neurocrine Biosciences, Inc. (NBIX), says the company has partnered with AbbVie, Inc. (ABBV) to market a drug to treat endometriosis and uterine fibroids. He says the drug, Elagolix, is currently in Phase III clinical trials for endometriosis and Phase IIb clinical trials for uterine fibroids. Gorman says he sees a large potential market for Elagolix.
“In the United States alone, there are about 7.5 million women who have endometriosis. About 2.5 million of these women are actually diagnosed and getting treatment of some sort or another for endometriosis. And so that’s a very large market,” Gorman says. “We figure about two-thirds of those women are suffering from moderate-to-severe endometriosis, such as suffering significant pain and bleeding due to the disease.”
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Gorman says the market for women who might use Elagolix for uterine fibroids is even larger. He says there are currently 9 million women suffering from uterine fibroids, and treatments are essentially limited to different types of surgeries.
AbbVie will be responsible for pricing Elagolix as the drug moves closer to the market, Gorman says, and Neurocrine Biosciences will receive a percentage of sales.
“We have a very good double-digit royalty on sales throughout the world,” Gorman says. “So yes, that is very good economics to Neurocrine, plus others can see as how we took the drug all the way through Phase II clinical trials before licensing it.”
Analyst Jonathan Ho of William Blair & Company says Proofpoint Inc (PFPT) is a company in the cybersecurity space with a focus on e-mail filtering and advanced threat protection that has significant growth opportunity due to a number of factors.
“They have done an excellent job of taking share from incumbents based on an SaaS-oriented product and incorporating advanced threat detection features,” Ho said. “Many of Proofpoint’s standalone competitors have been acquired. This gives the company a focus advantage relative to broader IT players that have lost specific security focus, and we believe has really allowed them to gain share.”
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Ho says this success is due to Proofpoint management’s strong execution and the ability to gain share against traditional players like Cisco IronPort, Google Postini and Symantec.
“We think that Proofpoint’s advanced threat products, which are still in the relatively early stages of penetration, should present a significant growth opportunity that could potentially double the market size of what they are able to address today,” Ho said.
Analyst Jonathan Ho of William Blair & Company says Palo Alto Networks Inc’s (PANW) next-generation firewall and advanced threat protection products are two areas where he is seeing traction in the market.
“When we talk to customers, resellers and industry leaders, we do feel like their technology has captured significant mindshare, and that we’re seeing a broader transition in the market from traditional firewall technology to the next-generation firewall,” Ho said.
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Ho says that with regard to advanced threats, Palo Alto’s WildFire product is one that is garnering customer interest, as it has an attractive cloud-based capability. He expects Palo Alto to continue challenging traditional players in the market.
“In the next-generation firewall market, we see a lot of opportunity for Palo Alto to gain share and to continue growing in a market that historically had a lot of incumbent players that have not maintained competitive solutions. The traditional players in that firewall market and in the advanced persistent threat market, I think, are going to face more challenges from companies like Palo Alto over time,” Ho said.
Managing Director Michael Sansoterra of Silvant Capital Management says Pharmacyclics, Inc. (PCYC) is an interesting company not properly reflected in the market. He says the company’s key drug, IMBRUVICA, may provide PCYC tremendous growth opportunity.
“[IMBRUVICA is] an oral pill, and it works on a type of non-Hodgkin lymphoma, which is cancer, white blood and bone marrow cancer. There are other products on the market that have tried to attempt to treat this version of cancer,” Sansoterra said.
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While Gilead has a drug awaiting approval, Sansoterra says Pharmacyclics’ drug has had better efficacy rates. Currently IMBRUVICA sales in the U.S. are around $350 to $400 million, but Sansoterra believes sales could be closer to $1 billion by 2016, and even double that at peak sales.
“This is a company that can probably be north of three or four times its current size over the years if things go well,” Sansoterra said. “There will be other competing drugs, but we think in the meantime this is one that is a little bit off the radar of some folks, and we think the earnings power here is quite large.”
Michael A. Sansoterra, Managing Director at Silvant Capital Management LLC, says WhiteWave Foods Co (WWAV) has exposure to the healthy eating trend, and is seeing growth in sales and earnings while taking market share in the nondairy and organic food segments.
“They are a food company that does organic foods, and we have seen a transition from eating whatever you want to slightly eating healthier. Now, we’ve got a pretty good trend in place where Americans in particular, but actually, lots of folks globally, are trying to eat a little bit better,” Sansoterra said.
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While WhiteWave Foods owns recognizable brands — Land O’Lakes butter and International Delight coffee creamers — Sansoterra says the interesting part of the business is the Silk like of nondairy, as well as the Earthbound Farms business that sells organic grocery products.
“Here’s a company that’s taking market share from the dairy business, taking market share in the prepackaged salad business from the general market share for frozen vegetables, and suddenly, you see a decidedly better growth profile than a traditional food company,” Sansoterra said.
“These guys are growing.,” Sansoterra added. “They’ve got revenue, even with acquisitions, growing sales north of 30% and earnings north of 30%, and as they go into Europe, we think they will do even better.”
