5 High-Impact Biotech Catalysts to Watch This Week

This week is marked with several high-impact catalysts that investors and traders should be monitoring. Below we have some commentary on the 5 events that are going to be on everyone's watchlist.

Arena Pharmaceuticals Inc. (NASDAQ:ARNA) received a Complete Response Letter (CRL) from the FDA regarding their NDA for Lorcaserin. The FDA cited a number of non-clinical and clinical reasons for their decision including marginal efficacy, rat tumors, and recommended that ARNA submit the final study report of the BLOOM-DM (Lorcaserin in diabetes) trial.

I don’t see this news as positive in any way. There appear to be too many what-ifs along the road for ARNA. BLOOM-DM trial results aren’t likely to be significant for their case due to marginal efficacy. It’s also unclear how much work will be needed in order to alleviate the rat tumor issue. A resubmission from ARNA will certainly not happen until spring 2011, since it will take at least a month for them just to meet with the FDA, then there will be considerable work to be done.

Avanir Pharmaceuticals Inc. (NASDAQ: AVNR) has a PDUFA date of October 30th (Saturday) for AVP-923 (dextromethorphan/quinidine) for the treatment of patients with a neurological condition known as pseudobulbar affect (PBA). AVNR’s complete response includes data from their STAR trial which was conducted under a Special Protocol Assessment (SPA) agreement with the FDA. Both doses of AVP-923 met the primary efficacy endpoint in the STAR trial.

You can expect increased volume to continue into this week as investors finalize their decision on whether to hold through FDA approval. It is possible that AVNR will hear from the FDA before Saturday. AVNR management has answered questions about the safety data in the STAR trial and most potential issues appear accounted for. The active ingredient in AVP-923 is in most cough suppressants sold over-the-counter and quinidine decreases gastrointestinal adverse events. I believe AVNR has demonstrated that AVP-923 offers the FDA an acceptable efficacy/safety profile for treatment of PBA.

Biodel Inc. (NASDAQ: BIOD) has a PDUFA date of October 30th (Saturday) for Linjeta, which is a new injectable formulation of rapid-acting insulin for the treatment of type 1 and type 2 diabetes. Linjeta also appears to cause less weight gain and lower incidence of hypoglycemia, which are common side effects of current treatment options. BIOD also used the 505(b)(2) NDA, which typically has lower regulatory risk.

Shares of BIOD have taken quite the beating throughout October, falling 30%. Many questions surround their Phase 3 data and how the FDA will view certain data from India that appear anomalous. Non-inferiority of Linjeta to Humulin was achieved without the data from India, it wasn’t achieved when the data from India was included. If and when this reaches the market, Linjeta could be a better insulin treatment for diabetics, especially those prone to hypoglycemic episodes or weight gain.

EXACT Sciences (NASDAQ: EXAS) will be presenting the results of three pre-clinical validation studies at the American Association of Cancer Research Conference (AACR) in Philadelphia on 10/28/10 at 1PM EDT. They expect to start their pivotal study during 2nd/3rdQ 2011 to eventually support a FDA filing in 2012. In late July, EXAS reported preliminary results demonstrating their DNA methylation technology “detected 100 percent of colorectal cancers and precancers at a specificity cutoff of 100 percent in a preliminary study with colorectal tissue.”

EXAS is up more than 130% from the July lows, so expectations for positive results are high. Positive results would lead the way forward for EXAS to capitalize on the colorectal screening market which sees roughly 25-30M screening tests per year, with another 20-25M patients who are not up-to-date with colon cancer screening. The company has been using 30% market penetration for their test which yields $1.2B market potential. There has also been noticable insider buying at EXAS. Keep in mind that EXAS has a $150M shelf registered, which is likely to be used once results are known.

VIVUS Inc. (NASDAQ: VVUS) has a PDUFA date of October 28th (Thursday) for Qnexa for the treatment of obesity, including weight loss and maintenance of weight loss, in patients who are obese or overweight with co-morbidities such as hypertension, type 2 diabetes, dyslipidemia or central adiposity. After the trading volatility that ARNA saw last week, it’s likely that VVUS could see some movement for those speculating on approval.

In my opinion, VVUS has a stronger case for approval than ARNA. Considering ARNA was given a CRL with uncertain terms, this could give VVUS a boost. The FDA questioned the marginal efficacy of Lorcaserin (for ARNA), a problem that Qnexa does not have. Another important fact to consider: VVUS had an SPA for their pivotal trial results, which demonstrated very significant efficacy. Recently released results from their long-term (2-year) SEQUEL study did not show any safety problems and reiterated the considerable efficacy seen with Qnexa. Weight-loss of 11.4% (26 lbs) in the high-dose Qnexa and 10.4% (23 lbs) in the low-dose group. It is unclear if the FDA will have had time to review this data. They might not get approval now, but they appear to have the quickest route to approval.

Disclosure: Long AVNR