Wednesday, December 29, 2010

Red Hat accelerates earnings growth

Red Hat (RHT) had impressive improvements in revenues and net income (profits) in its fourth quarter (its 3rd fiscal 2011 quarter). For details, see my Red Hat analyst call summary for the December 21st call.

Still, while Red Hat is a great company, its price-to-earnings ratio is much higher than many other good, rapidly growing technology companies. So at this price it is for momentum players and those who can wait a few years to see its profits catch up to the expectations. I don't own any Red Had stock presently, but did when it had a lower P/E ratio.

Red Hat specializes in Linux for the enterprise and related technologies.

Tuesday, December 14, 2010

Onyx Pharmaceuticals Clinical Trial Overview

I listened to the Onyx Pharmaceuticals (ONXX) presentation to analysts today. It mainly reported on Onyx's therapeutic pipeline. I have covered Onyx in more depth elsewhere (see my Onyx Pharmaceuticals ONXX page); here I am just recording my immediate impressions from the presentations.

Carfilzomib for multiple myeloma data seems to be excellent. Carfilzomib could become the drug of choice for MM patients. Revenues could begin in late 2011, but would more likely be a 2012 story (they already got a large milestone payment from Ono Pharmaceutical in Japan).

In addition to extending Nexavar (Sorafenib) for liver cancer, there are three main targets for Nexavar: breast, lung, and thyroid cancer.

The breast cancer results seemed somewhat marginal to me. With the right subtype target, they should be able to get results good enough for FDA approval, but it is not a sure thing. A big Phase III trial is about to get underway, which will give everyone a much better view.

The lung cancer results seemed fairly solid, again with the best chance of success being based on subtype identification. I would give Nexavar a better-than-average chance of approval based on data available so far.

The best data appeared to be for thyroid cancer. Here we have a good combination of a lack of any good therapy availability to date and the method of action of Nexavar working out well for the most common type of thyroid cancer. I would bet this indication will be approved.

In the short run, the biggest impact on the stock would come from the approval of reimbursement for Nexavar for liver cancer in South Korea. Liver cancer is far more common in Asia than in the U.S. or Europe (over 10 times as common), so the bulk of the global profits will eventually come from Japan, Korea, and China. China has approved prescribing Nexavar, but not reimbursement for the costs. The Korean approval won't take effect until January 1, so it won't effect Q4 2010 revenues.

My overal impression is that the Onyx stock I own is now very underpriced, but that is based on future trial results, FDA approvals, and marketing successes, so making stock purchases on that assumption involves pretty much risk.

Onyx stock (ONXX) ended the day up $1.04 or 3.1%, at $34.54.

See also Onyx Pharmaceuticals site

Saturday, December 11, 2010

Celgene (CELG) ASH Data Points

Revlimid, used to treat MDS (myelodysplastic syndromes) and multiple myeloma, saw revenues increase 44% from Q3 2009. Vidaza, also used to treat MDS, had revenue up 37% y/y. In 2010 Celgene (CELG) stock began at $55.68, yesterday (Friday) it closed at $57.46, so this year has not had a big run up.

That is mainly due to a plunge from some of the data presented at the American Hematological Society (ASH) meeting last weekend. Celgene is trying to show that Revlimid should be used both earlier in the treatment of multiple myeloma and myelodysplastic syndromes (before or coincidental with other therapies) and for a longer duration. Right now "REVLIMID or lenalidomide in combination with dexamethasone is indicated for the treatment of multiple myeloma or MM patients who have received at least one prior therapy." What Celgene wants is Revlimid to be prescribed to new MM patients, without trying any other therapy first.

The data presented in that regard was very positive. See, for instance, Analysis of Revlimid Phase III Study Reports a Significant Improvement in Survival for del(5Q) Myelodysplastic Syndromes and Phase III Study Evaluating Revlimid in Patients with High-Risk Smoldering Multiple Myeloma Reported Statistically Significant Reduction in Risk of Disease Progression. There were many more reports on Celgene products at ASH.

The plunge was due to some data suggesting that patients taking Revlimid for long periods of time had an increased risk for secondary cancers compared to patients taking placebos. This is certainly something to look at; if the increased secondary malignancies are actually caused by Revlimid, rather than a statistical fluctuation (so far the numbers are small), then that would have to be weighted negatively. But Revlimid is not a diet drug, where a few deaths would be weighed against limited benefits. Death is still par for the course with untreated blood cancer patients, and even with treatment. The survival data on patients in the trials has consistently shown that Revlimid prolongs life, and that would include an adverse events, including the development of other cancers.

Mark Shoenebaum, the former Bear Stearns analyst who wrote pointed out the negative data, also pointed out that the results may have been skewed by not looking for secondary tumors in patients whose myeloma progressed, so that Revlimid patients, who had longer times before their myeloma progressed, were not actually compared to a like set of patients.

Celgene stock fell rather dramatically on December 6 (from $60.59 on the prior close to $55.64) as a result of the "news." What this mainly shows is the danger of pricing by auction markets. No one knows if the news is even true, or how significant it is. Buyers disappear, so even normal selling can tank a stock.

Celgene is already trading at a very reasonable forward price to earnings multiple of 22. Most likely Revlimid will be approved for use as a first-line treatment in 2011. In addition, Celgene has an extensive, high-quality pipeline. So my guess is that in a few months the December 6 drop will just look like background noise on the stock charts.

See also:
My Celgene Analyst Conference Call summary for Q3 2011

Tuesday, December 7, 2010

Onyx Pharmaceuticals ASH Carfilzomib Conference Call

Main point is the evidence presented at ASH (American Society of Hematology) that Carfilzomib will be approved eventually by the FDA and become Onyx's (ONXX) second commercial therapy.

Repeated news about working with Ono Pharmaceutical of Japan for Carfilzomib for multiple myeloma. It is in a class of drugs known as proteasome inhibitors. It causes cell death by preventing protein degradation, essentially poisoning the cell with its own products. The hope is that it kills cancer cells with minimal harm to other cell types.

A Phase II trial of Carfilzomib (003a1) has been completed and data was presented at ASH. This was for refractory multiple myeloma, in other words for patients who have received other therapies, but then had the disease progress. Median survival expectation for such patients is currently about 9 months. Study had over 200 patients, endpoint was overall response wait, adjudicated by an independent monitoring committee. Median patient time from diagnosis was 5.4 years. Most patients had pre-existing peripheral neuropathy. Typically had had 5 prior lines of therapy (different drugs). In other words, a very sick, very previously treated group. Overall response rate was 24%, with another 10% with minimal response. Duration of response was 8.3 months, including minimal response patients. Number and type of prior therapies did not seem to influence responses. Median overall survival was 15.5 months. Adverse events were modest for this type of therapy. Conclusion is that Carfilzomib has a robust benefit for this patient population.

004 study of Carfilzomib was a non-randomized 125 patient open label trial also with refractory multiple myeloma, in two dose cohorts. Dexamethasone was administered at beginning of trial. Median age was mid-sixties, about 3.5 years of prior therapy, typically 2 prior lines of therapy, including stem cell transplants in 73 percent. Overall response rate for cohort 1 was 41% cohort 2 was 53%. Responses were relatively fast. Time to progression 8.3 for cohort 1, with cohort 2 median time to progression has not been reached. Typical modest adverse events. Showed a very impressive overall response rate with good tolerance over extended periods of time.

In the trial of therapy naive newly-diagnosed multiple myeloma patients with Carfilzomib plus two current best approved treatments (CRD), with relatively healthy (compared to the two trials above) patients in stage 2 or 3, median age was 59. Neutropenia was surprisingly low and mild, and neuropathy was minimal. 55% complete response rate, one of the best we have seen. 22% had no detectible disease. Nearly 100% had some response. Showed the regimen did not adversely affect stem cell collection. No patient has progressed, and all survived. Concludes regimen is "highly active, demonstrating rapid responses in newly diagnosed myeloma." Consensus of myeloma experts is the results compare favorably to best current therapies.

In refractory patients, many had recieved a different proteosome inhibitor therapy, notably Velcade (Bortezomib). So the response that shows differentiation from other such therapies. In patients who are refractory, the medical community considers minimal response to be significant, but it would not be significant in first-time myeloma patients.

Analysts questioned the characterization of the sickness of patients compared to Velcade trials; the doctors explained why, if anything, the patients were sicker. Patients were able to stay on therapy longer because of the tolerance patients had for it. Doctors insisted "this is the best drug in the myeloma space."

See also:

Onyx Pharmaceuticals site

My Onyx Pharmaceuticals main page