This Week’s Small-Cap Healthcare Roundup

Tekmira Pharmaceuticals (TKMR) was the momentum stock of the week as the spread of Ebola continues in Guinea, Liberia and Sierra Leone, and two infected Americans return to the states this weekend. Tekmira is getting attention as the leading Ebola treatment developer with its LNP-enabled RNAi therapeutic, TKM-Ebola. The drug has already proven effective in Ebola-infected primates, relevant given the FDA’s Animal Rule, which allows for approval based on human safety and animal efficacy.

Incidentally, the FDA put a phase 1 safety study of TKM-Ebola on clinical hold early in July when healthy patients receiving the highest dose of the drug presented with outsized immune reactions. At the time, we explained why the immune response seen with TKM-Ebola, and the cause of the current clinical hold, should be an addressable issue. 

This Friday evening, Reuters reported that a representative of the FDA said the agency would consider proposals for providing Ebola treatments under special emergency applications, if the benefits of the treatment outweighed the safety risks. According to the news agency, the agency said it “stands ready” to work with companies and investigators working with patients “in dire need of treatment.
 

TKMR is up 55% in the last two weeks, and at $14.25 has returned to levels at which it traded prior to the clinical hold, announced on July 3. This makes sense given that the FDA is signaling willingness to accelerate the development program (possibly shortening the clinical hold), though investors need to keep in perspective the actual market opportunity for an Ebola product as the landscape exists today. Companies likeEmergent Biosolutions (EBS) have built lucrative businesses around U.S. biodefense stockpiling programs (read more), but with preventive products and over the course of many years. Still, investors will continue to bid TKMR up on the Ebola “hype”, whether the fundamentals of the situation align or not – and it doesn’t appear this outbreak will resolve in short order.

You can read much more about Tekmira, a longtime small-cap favorite atPropThink, including why we suggested buying last year when the stock was below $5, by clicking here.

We briefly covered the FDA rejection of AcelRx’s (ACRX) Zalviso last Friday but followed up with a note to PropThink Premium subscribers over the weekend. Here, we explained what the Complete Response Letter means for investors and outlined why the $6-7 range was a likely place for ACRX to land. Sure enough, the stock was range-bound between $6.15 and $7.15 in trading this week.

On a conference call with investors Monday, management suggested that bench/human factor testing would be adequate for resubmission following modifications to the Zalviso device and optical system. Management is optimistic about a Class 1 resubmission (thus, a 2-month review as opposed to 6-month) because no new clinical trials have been requested to date. But until the company meets with FDA and confirms that bench testing of the modified device will be adequate, as opposed to more clinical trials, we would not count on another PDUFA decision before mid-2015, a 6-month review if the resubmission comes by the end of the year. An End-of-Review meeting will provide clarity in the next few months.

We revisited Orexigen Therapeutics (OREX) this week and outlined one theory that would explain the 3-month approval delay for NB32, the company’s late-stage weight-loss drug. OREX was good for 30% for PropThink Premium subscribers early this summer, and there’s reason to believe the stock could present yet another attractive trading opportunity in the second half. Continue reading...