A Good Reminder: Most Drugs Won’t Make the Cut

We count at least nine failures of one sort or another (Complete Response Letters, failed trials) in the last five days from companies such as Pozen (POZN), Flamel (FLML), Cytokinetics (CYTK), Synthetic Biologics (SYN), Athersys (ATHX), Endocyte (ECYT), Acorda (ACOR), OncoGenex (OGXI) and Nymox (NYMX) – whew!

Accordingly, the iShares Nasdaq Bio ETF (IBB) is retreating from resistance in the mid-230’s and trading sideways – a trend that’s likely to continue as the ETF befriends its 200-day moving average.

Falling into the “surprise announcements of the week” category, Acorda Therapeutics (ACOR) (PropThink’s latest commentary here) announced early on Friday morning that a new drug application for Plumiaz was met with a Complete Response Letter from the FDA. Plumiaz is Acorda’s nasally administered diazepam therapy for cluster seizures; we think an approval would help the company’s top-line by more than 30%. Investors were left with little information on the reasons for the CRL, although the company suggested that an approval is unlikely in 2014. Acorda releases its first quarter financials before the market open on May 6. We and the rest of the analyst community will be looking for guidance from management on what went wrong with Plumiaz, and how the company plans to address the issues.

Barring anymore surprises related to the CRL (major clinical deficits), Acorda’s novel remyelinating agent for the treatment of MS, and a potential label expansion for dalfampradine into post-stroke walking difficulties, keep us interested in the name as a long-term holding. ACOR is down 15% since we last wrote about the company early this month.

PropThink’s call on positive phase 2 data for Synergy Pharmaceutical’s (SGYP) plecanatide was spot on, although the market’s reaction certainly wasn’t indicative of success. The stock is off 14% since releasing data on Wednesday, a phenomenon that we explained, along with an analysis of the trial results. Synergy is a pure-play gastro company with a defined value proposition, and we continue to like the story. Competitors Ironwood (IRWD) and Forest Labs (FRX) are prepping the market with competing constipation treatment and fellow GC-C agonist, Linzess (read more here), and many in the investing community believe SGYP is a sensible take-over target for just that reason.

AVEO Pharmaceuticals (AVEO) has lost more than 90% of its market value in the last 21 months and trades at a discount to its net liquidity.  In his ongoing “Drugs that Disappointed in 2013” series, David Phillips revisited this forsaken equity this week to explain why investors take such a dim view of the company’s prospects.. His conclusion: “The Market Just Isn’t Convinced the AVEO Nightmare is Over”.

Durect Corp. (DRRX) reported earnings after the close on Thursday. As usual, the company is largely in the dark about what its partner, Pfizer (PFE), intends to do with the development of Remoxy, an abuse deterrent oxycodone formulation. Pfizer will conclude bioequivalence and abuse-potential studies at mid-year, but how or when Pfizer will publicly release the data from these two studies, the last hurdles before the pharmaceutical company re-files a New Drug Application in 2015, remains unclear. Durect also indicated that next week it will request a meeting with the FDA to discuss the February CRL for Posidur. The company should get a meeting by this summer. You can catch up on that story here to understand why we like the stock.

One or more of PropThink’s contributors are long SGYP, DRRX, or ACOR.