While the cure rates on fidaxomicin matched that of vancocin, the company has claimed that its real benefit lies in its ability to reducing the recurrence rate. In the two Phase 3 trials, among subjects who had experienced a prior CDI episode and recurred within three months of entering the study, treatment with fidaxomicin resulted in a 47% reduction in repeat CDI recurrence compared to Vancocin (p=0.045). The data also indicated that treatment with fidaxomicin significantly improved the recurrence rate and global cure rate in CDI patients requiring concomitant antibiotics compared to Vancocin. Fidaxomicin was well tolerated in both studies with no adverse side-effects (See safety data here) and safety data. Information courtesy of Optimer’s fact sheet.

This hype has led to its stock gaining more than 40% within the last six months, helping its stock price rise from $9.50 to a new 52-week high of $14.20, yet despite the bubbly sentiment, serious problems are lurking beneath the surface. First and foremost is the fact that the product’s only advantage is its ability to reduce the risk of recurrence among CDI patients. On April, 4, 2011 the FDA panel met to discuss a few issues and whether or not fidaxomicin was all it’s cracked up to be.  Unlike many other previous panels, this one was fairly straight forward with only two questions to be answered. First, “Has the applicant demonstrated the safety and effectiveness of fidaxomicin for the requested indication, treatment of Clostridium difficile-associated diarrhea (CDAD)?” The panel, as expected with no surprises voted very highly on this with a 13-0 vote in favour of the drug’s approval, leading to many singing praises thereafter, yet, there was one more question to be answered, albeit the most important as well.

Negative FDA Panel Outcome of Recurrence Benefit

Perhaps the climax of the panel’s session was the answer to, “Is the finding of lower recurrence of CDAD at Day 31 in the fidaxomicin-treated subjects of clinical significance?” An important thing to note, before even answering the question, some panel members were already discussing their interest in disregarding the recurrence data. The vote ended up being 6 yes, 7 no. Some of the comments for voting negatively on this question by the panel members were:

• Did not like recurrence endpoint because it was not a comparison of 2 randomized groups
• Swayed by statistical arguments of relative weakness of recurrence analyses conducted by FDA, while also encouraged by the results of the “30 day resolution rate” clearly favored with superiority fida.
• Given the study examined recurrence at 30 days, the information should be placed on the the label, a “30-day response” should be in the label
• One member stated that the design of the trial was not geared towards showing a recurrence benefit
• Lastly, the data only addresses recurrence but not treatment of patients with CDI recurrence. The study did not specifically address or enroll patients who experienced CDI relapse.

Now then, the real question becomes, “Will it matter from a marketing/commercial standpoint if the label includes a claim of 30-day disease recurrence rather than a broader claim about reduction in risk of recurrence?” Apparently the market seems to think so as the stock dropped immediately from $13.80 to $12.99, and as far as $11.98 a month later. Based on this, we can now assume that Optimer, will in fact not obtain the indication that it wants in “prevention of recurrences” on its label, and more likely that of 30 day recurrence benefit. It is also important to acknowledge that Optimer only had 30-day post treatment results to showcase to the FDA, which further emphasizes that the drug may see labeling and script use that differs from that of the market’s expectations.

From this we can safely assume that this panel’s decision and Optimer’s trial designs and results may not affect approval, but now do place a very important question mark on its recurrence benefit label. This is very important for commercial marketing purposes as the “superiority” of fidaxomicin over vanco is supposed to be lower CDI recurrence.

Rising Short Interest

Short interest has been rising heavily over the last three months, nearly doubling in value as institutions and large funds begin to hedge and bet against its approval. Short interest as a percentage of float now stands at 10.90%, or 4.07M shares out of a total 37.37M float.

Double Top Technical Chart

Another drawback comes from its “Double Top” at the $14 resistance, which the stock seems to be having a lot of trouble breaching and remaining above. Just like back in early December, the upper bollinger band has been pierced more than 4 times which has always led to a correction, and may also foreshadow negative price action to come. Relative strength index (RSI) also dictates an overbought stock, with full stochastic and MACD divergence all about to turn negative. Volume has been light during the last two weeks of accumulation in anticipation of the binary event.

There is also the wild card possibility of a fast approaching generic vanco approval by ViroPharma (NASDAQ:VPHM). In fact, Piper Jaffray said ViroPharma has been weaker on increased speculation regarding Vanococin competition, yet the firm recommends buying ViroPharma on any weakness from a generic vanco approval and they continue to expect strong growth. Shares are Overweight rated with a $23 price target.

In conclusion, Optimer is a company that could have up to $500M in sales annually should the recurrence benefit hold on its label, yet this scenario seems less and less probable the more closer we get to the decision date. Of course, there is also the drawback of its recently signed partnership with Astellas, where it entered into an exclusive collaboration and licensing agreement thus lowering its potential revenue and profits. With shares trading at $14, the stock seems to be at full value with foolish investors discounting the possibility of a negative surprise outcome. Sure, approval is likely, but what kind of label fidaxomicin (Dificid) will get, on the other hand, is still a bit of a mystery.

Disclosure: Short OPTR

First up on the list is Oxigene, Inc. (NASDAQ:OXGN), whom has experienced nothing short of a meteoric rise from the $1.5 price per share level to the now $5.24 in a matter of three weeks following our report discussing their nearing of marketing approval of the first anaplastic thyroid cancer drug. While early technical analysis showed clear evidence of the oversold and undervalued condition, the stock has now begun trading at 10 times average volume in each of the past few days during this run, which often signals that a few hedge funds and institutions have begun to take a controlling stake in its low float, which sources list at 5.61 million.

While some argue that this could be due to a potential hostile takeover attempt, this is highly unlikely, and more so a elaborate scheme to control the price of the shares to their liking. More worrisome is the fact that fundamentals or significant changes to the outlook for the cancer drugs in its pipeline have nothing to do with the recent momentum, according to an analyst at TheStreet. Investors are looking forward to the ASCO meeting which will provide updates for two studies in the company’s flagship product, Zybrestat. Last September, researchers stated the company’s drug (FACT study) had a median overall survival of 5.1 months compared to 4.1 months in ATC patients, one which was not statistically significant by any means. This caused a spike in the share price from $5 to $8 in just a few hours which, in the end, resulted in a move back down and erasing all of the gains posted during that trading session.

The second set of results will come from the (FALCON study) for the company’s advanced non-small cell lung cancer treatment, though it is not clear it will be ready for this year’s ASCO meeting. The last update in November showed patients treated with the drug had survival of 9.5 months compared to that of 8.8 months control arm, which was not statistically significant nor clinically meaningful. Again, despite bad results, the stock had a spike from $4 to $5.5 on the news, which would eventually come crashing back down to even par two months later.

From the above technical and fundamental analysis, it becomes evidently clear that should history repeat itself, a swift move downward to the $3.5 support favours the short side into the upcoming ASCO meeting when compared to previous occurrences and expectations. There is also a lot of speculation that the company will take this opportunity and look to dilute shares in order to fund its less than stellar fund its balance sheet, which is now estimated to hold $5 to 8 million in cash, of that $3 million being used to fund clinical trials per quarter. A new phase 1 clinical trial was also announced last Thursday, and while the market took this as a positive at first glance, it should be noted that this places further emphasis on this need to raise capital principle, especially considering that these trials cost upwards of $150 million from start to finish.

Next up on the board is Sunesis Pharmaceuticals (NASDAQ:SNSS) whom will be presenting the abstract for its VALOR study, a phase III trial of vosaroxin for patients with first relapsed or refractory acute myeloid leukemia. The company expects 450 patients at multiple global sites to be enrolled, with results potentially being out during 1st quarter 2013. Additionally, the company received FDA fast track status on 2/23/11. Unlike many other small cap biotechs, Sunesis is well funded with close to $15 million in cash, and should do well going forward as it just reported 1st quarter profit after getting a $4 million dollar payment from new partner, Millennium Pharmaceuticals.

The stock has made a tremendous rebound from the $1.8 price in mid March to settle at the current $2.87 resistance, which marks an inflection point. From the chart, we see a black doji candlestick printed which dictates that there is indecision between buyers and sellers, thus we can look to the ASCO meeting for further direction once the fundamentals are out of the way. Traders can look for the 200-day moving average of $2.33 to provide strong support, with $3 being resistance directly ahead. Unfortunately, pressure will be on the downside, as a simple clinical trial design is not significant enough to drive momentum in the stock considering no results will be provided.

Last, but not least on the list is Cyclacel Pharmaceuticals (NASDAQ:CYCC) whose phase I/II data for sapacitabine (anti-cancer agent) is expected to be presented at the ASCO. Non small cell lung cancer (NSCLC) will be $13 billion dollar market in 2015, according to Zacks, therefore, given that they receive favourable results, Cyclacel could see significant share price appreciation due to its currently low market valuation at 79.2M. With a healthy $29.5 million in cash, the company looks ready to make a move higher, though in the short-term strong resistance from a technical standpoint could prove to be a strong barrier.

Making predictions based on the chart pattern for Cyclacel has been a relatively easy task, and should be one going forward as well. With the Relative Stregth Index (RSI) now showing an overbought stock that gained strong momentum into the ASCO conference, it is expected thata pullback will now occur as the “buy the rumour, sell the news” principle comes into play. Below, the stock finds strong support at the 200-day moving average of $1.52, with strong resistance directly ahead at the $2 mark.

Disclosure: Short OXGN, No other positions

Despite these amazing results, some investment analysts took the opportunity to slam the stock, which seems like nothing more than an opportunity for longs to load up on more shares. A report on Reuters claimed that Atmel gave a “weak second quarter revenue outlook”, with  Capstone Investment analyst Jeff Schreiner writing in a note, “We believe one potential reason for less-than-stellar guidance could be some smartphone shipments occurring during the second half versus prior estimated linear acceleration through out 2011,” Schreiner said. Despite this being far from the truth, the news item dropped the stock to $14 intraday, rocking investors appetites before closing near the $15 mark the next day. This is largely due to the fact that this analyst’s claims have no merit.

First, we can take a look at the latest analyst claims and estimates which focus on the strong growth and demand of the Android platform coupled with the Atmel maXTouch touchscreen controllers.

From the above chart, we can clearly see that the Android app market has, by far, the strongest growth among competitors with 861.5%. Additionally, LG, Samsung, Nokia, HTC and Motorola were among the growing list of cell phone companies that recently reported record revenues on increasing demand as their products dominated the top 10 cell phones list by PCWorld, with  8 of these having exclusive deals with Atmel.

The positive developments also spurred Canaccord analyst to increase their price target on the stock to $20 per share. Analysts claim, “We reiterate our rating and price target on shares of Atmel following a big beat and raise last night. While the bears may focus on inventory growth and sequential “noise” for touch revenues, we believe management is credible when calling for strong H2 growth on continuing MCU and touch momentum. Importantly, increased 2011 touch guidance (up from roughly $280M to greater than $300M) looks conservative considering the expected portion from tablets is unchanged from an excessively cautious ~$30M to $45M.”

UBS also stepped in and guided the stocks performance higher for the second half of the year with a $19 price target. “UBS reiterates a ‘Buy’ on Atmel (NASDAQ: ATML), raises PT from $18 to $19.UBS analyst says, “Even as Atmel s +1-4% q/q 2Q sales guidance was below our +5.9% estimate, the company highlighted expected strong 2H11 touchscreen controller sales growth…For 2Q11, we lower our sales estimate by 1% to $478.1m on lingering inventory rebalancing and a more 2H weighted touchscreen controller revenue profile. On higher than expected gross margin, we raise our 2Q EPS estimate $0.01 to $0.18. For 2011, we raise our sales/EPS estimates by 1%/4% to $1,990m/$0.78, as we raise our sales estimates for both 32-bit microcontrollers and non-volatile memory.”

Going forward, according to Yahoo Estimates, the company’s revenues are projected to increase 19.1% year-over-year to 1.96B, with 2.19B expected by the end of 2012. This high growth thesis is supported by record first quarter 2011 gross margin of 51% is the highest level achieved since the company went public in 1991.The first quarter’s gross margin of 51% was 150 basis points improvement from the 49.5% they reported last quarter and ahead of their guidance range of 48.5% to 49.5%.

Furthermore, in April, Gartner Research forecasted smartphone sales to increase from 297 million units in 2010 to 468 million in 2011, a 58% increase. They are forecasting smartphone shipments to exceed 1.1 billion units in 2015 as more consumers and enterprise users turn in their feature phones for smartphones with more advanced features.

Technically speaking, Atmel is currently in an uptrend channel that looks to be heading towards a price target of $16.5 should the upper resistance be met. After the earnings report which saw a minor bear raid, the stock bounced off the middle of the Bolinger Band and began a renewed positive shift. The Relative Strength Index (RSI) also curved back and remained above the pivotal 50 mark, as buying pressure in the stock dominated the sellers. With a positive MACD divergence and full stochastic helping support the bullish scenario, look for Atmel to test and potentially break its 52-week high of $16.80 in the near future.

Disclosure: Long ATML

At a market cap of only 10M, Oxigene remains the cheapest and most undervalued of all phase 3 late-stage oncology companies worldwide, with its flagship product, ZYBRESTAT targeting Tanaplastic Thyroid Cancer. The company has stated that they will be presenting the final phase 2/3 (FACT study) data for the drug at the ASCO, and many experts seem to be leaning towards highly positive results based on its previous clinical trials. Currently there exists no treatments available for this form of cancer other than radiation therapy and surgery which is usually combined with chemotherapy.

Just a few months ago, the company reported positive data from the FACT study of ZYBRESTAT plus chemotherapy in patients with Anaplastic thyroid cancer (ATC). At the 14th International Thyroid Congress,  the company’s investigators reported that patients receiving ZYBRESTAT had a median overall survival (OS) time of 5.1 months, compared with a median survival time of 4.1 months for patients receiving chemotherapy alone. Furthermore, 48% of patients treated with ZYBRESTAT and chemotherapy were alive at six months, compared with 37% percent of patients treated with only chemotherapy and at one year, 23% of patients treated with ZYBRESTAT and chemotherapy were alive compared to 9% of patients treated with chemotherapy alone. These are some of the best results of any late-stage Aanaplastic thyroid cancer drugs seen worldwide, and this improvement in OS is meaningful, both clinically and on a personal level for patients. With no currently approved drugs in the market for treatment, the doors are wide open for Oxigene to step in and dominate it. The company also reported on March 21st that they had spoken with the FDA and received very positive type C meeting minutes stating that the trial data was highly suggestive of regulatory approval given an additional clinical trial with a suvival endpoint.

The Thyroid cancer market was estimated to be worth $55M in 2010, and is expected to grow at a CAGR (Compound Annual Growth Rate) of 27.34% to reach $298M by 2017.

Oxigene will also be presenting their additional phase 2 (FALCON study) data also for ZYBRESTAT for the treatment of Non-small cell lung cancer at the ASCO. The FALCON study is the first randomized, controlled study of a vascular disrupting agent (VDA) in combination with an anti-angiogenic agent, and combined both bevacizumab and chemotherapy. In mid-2010, the company reported that to date, the drug was well-tolerated, and the clinical activity they are seeing  indicates a trend toward clinical benefit. These data are still interim; and the final overall survival data from this study will be presented at the ASCO.

According to a new report by Global Industry Analysts, the global Non-small cell lung cancer therapeutics market is slated to reach $13.3 billion by 2015. This is largely fueled by rising incidence of lung cancer, improved understanding of non-small cell lung cancer, and the development of new treatments targeted at growth factor pathways.

Additionally, the company features a diverse pipeline with a total of 7 indications, potentially targetting a market of $5 billion or more, should a few of these meet FDA marketing approval. With mergers and acquisitions being a hot topic within the biotech industry as larger companies look to strengthen their portfolios, the expectation of a partnership also remains highly probable in 2011, and according to the CEO’s open letter, Mr. Langecker, “The feedback we’ve gathered from potential partners is that we now have a stronger collection of data validating proof of concept. We believe that there is meaningful interest among potential partners in pursuing a possible collaboration.”

The recent decline in price can be attributed to and equity offering agreement with McNicoll, Lewis & Vlak LLC, or MLV, that saw the company raise approximately $8,776,000 in order to strengthen its balance sheet from July 21, 2010 to date. The company has stated that as the current ongoing trials proceed to completion, they expect the per quarter cash requirement to continue to decline to the $2,500,000 to $3,000,000 range over the course of 2011, thus it can be assumed that based on the previous financing, a healthy state on its balance sheet has now been achieved for the time being. All information per the 10-K filing as of 3/16/2011.

Technical Analysis

Since the start of 2011, Oxigene’s shares have been stuck in a constant downtrend that saw a minor attempt and failure to breakout during early February and late March. Despite positive clinial developments, shares were hit by the financing news which took the stock down from the mid $5 range all the way to the present mid $1, presenting a highly favourable risk versus reward ratio. The stock seems to be basing as the downtrend looks to finish, and a break past the $2.25 resistance could mark a reversal of the price action towards the upside.

The first resistance lies at the 50-day moving average of $2.25, which also incidentally conicides with a previous basing attempt, and should this be broken, there is clear break to the $4-4.50 level which is also the 200-day moving average. The RSI seems to be gaining momentum as buying pressure once again resumes in the equity, which is also supported by a positive MACD divergence currently engaged in a bullish cross. Look for stock to gain momentum as anticipation builds in the coming weeks ahead of  highly anticipated positive developments during ASCO conference.

Disclosure: Long OXGN

This development caused shares to immediately plunge to $12, leading many shareholders to exit their positions and move onto other opportunities.  Since then, shares have quietly crept up more than 67% as a new ray of hope has emerged for its Alzheimer’s drug. In light of the bad news, University of Southern California Alzheimer’s expert Lon Schneider sees a positive amidst all the uncertainty. According to Robert Langreth of Forbes, “Schneider points out that while Dimebon did nothing to improve the cognitive abilities of Alzheimer’s patients , patients who took the drug did improve slightly over the course of the trial on something called the Neuropsychiatric Inventory. This scale measures behavioral problems seen in patients with psychiatric and neurological disorders, including delusions, hallucinations, agitation, and anxiety.”

He goes on to add, “Why does this matter? The current failed trial was in mild-to-moderate Alzheimer’s cases. But Pfizer (NYSE:PFE) and Medivation are conducting two big trials in patients with moderate to severe Alzheimer’s Disease, who may have more severe behavioral problems. One of these trials uses the Neuropsychiatric Inventory as its primary goal; the other has it as a secondary goal. Dr. Schneider points out that the drug Dimebon bears some chemical similarity to various antidepressants and anti-psychotic drugs that improve behavior. It could be that the drug indeed does nothing to help memory at all directly–but does help improve behavior in severely demented patients.  If these two trials come out positive on the NPI, then the drug still may have a shot at getting approved.”

The Alzheimer’s drug market was a $4.3 billion dollar industry in 2009, and will increase to more than $13.3 billion in 2019 within the USA, France, Germany, Italy, Spain, the UK and Japan, forecasts advisory firm Decision Resources. Such a large market leaves plenty of opportunity for companies to share revenues, and even the slightest bit of good news could cause Medivation’s currently undervalued market cap at 630M to nearly double.

Pending Clinical Trials

Back in 12/7/10, the company completed enrolment in the CONCERT study for mild-to-moderate Alzheimer’s disease in combo with Aricept, and top-line results are expected in the 1st half of 2012. In addition, it is expected their report top-line results for the HORIZON (Huntington disease) study which is partnered with Pfizer during first half 2011.

Global Hunter Analysts maintained a ‘Buy’ rating on Medivation, and raised the price target from $19 to $24, stating” We are raising our fair value estimate to $24 from $19 as we now attribute some value from the chemo-naïve setting given the positive data so far. We suggest investors Buy MDVN shares ahead of upcoming catalysts including potentially positive Phase III dimebon data in Huntington’s disease in March/H1:11 and interim AFFIRM data likely in Q3. We view the next significant catalyst for the stock as potentially positive top-line Phase III Huntington’s (HORIZON) data release in H1:11 and as early as Q1:11. Based on powering of the study alone, we believe the probability of a positive outcome is 60%.” Most of the other analysts are also cautiously optimisitic, with Wedbush providing a $25 target. Most experts expect to see results by April 16th, and if positive catalysts do indeed emerge, the stock should have at least a market cap of $1 billion.

Notes on $24 Price Per Share Valuation

Taking in consideration the analysts’ projections, we made a list of potential catalysts that could lift shares to meet their targets:

• Estimated orphan selling price of $2-3000 a month with Medivation’s split being 40%, while Pfizer takes 60%
• Pfizer would be obligated to pay some kind of milestone payment to Medivation, most likely in the hundreds of millions
• Off label sales could be significant since the only other cognitive impairment drugs is the limited Aricept class
• Medivation has been advancing Dimebon analogues and their value would suddenly rise if Dimebon works in Huntington Disease
• Alzheimer’s is a very different disease but a successful Huntington Disease trial would increase the odds of success in the Phase III Alzheimer’s trial
• Dimebon would be the only drug approved for the Neuropsychiatric Inventory of Huntington Disease, allowing for complete control of the market
• Current Medivation price and market cap is based on the strong MDV-3100 (prostate cancer) data and very little to Dimebon. Current cash and equivalents was $207.8M as estimated in 1Q11, thus an additional $400M market cap was added due to the highly positive MDV-3100 phase II results which target a $4.8 billion dollar market. You may read about the company’s promising upcoming prostate cancer treatment here.

Expecting Huntington Results Within 2 Weeks

The last patient for the P II Huntington Disease trial was enrolled on March 18 of 2008, which was a 90 day trial with 90 patients. Top line results were announced on July 7 2008, thus the last patient was finished with the trial on June 18th. This paved the way for the top line results to be announced to the public only 3 weeks later. The reason for the rapid results may have been the company using the Huntington Study Group, which most likely expedited the process.

Currently, the P III trial is once again using the Huntington Study Group to help with clinical sites and the recruiting of patients. The company currently has 400 patients in the P III vs 90 in the P II with 37 sites in the P III vs 16 trial sites in the P II. The last enrollment of the P III occurred at some point in the middle of July of 2010. Furthermore, the P IIII was a 26 week trial with a 4 week observation period, and by this, if the last patient started in late July, then Medivation should have finished the observational period in late Feb and thus should have passed the 3 weeks it took to get the P II results. By these assumptions, it would be rational to expect that we get top line sometime over the next 2 weeks leading up to April 16th.

Medivation’s 100% Stock Gains in the month of April

Perhaps no better indication of a major positive forthcoming development for Medivation is its month of April stock performance over the last 13 years. According to a iBankCoin.com article and research, “Medivation has been up 100% of the time in the month of April, and more impressively, with 13 data points to prove the point. Beyond that, the average return for this stock in the month of April is a whopping 17%”

It is no wonder that the stock made the list of the top 13 biotech stocks snapped up by insiders, according to Kapitall Investments. Insiders purchased an average of 188,146 shares per year over the last two years

One metric market experts often utilize in determining the prospects of a company is the short interest. As we can see from the above image, the amount of current short shares has declined significantly over the last year in anticipation of the company’s rebound as its pipeline advances. With only 28.37M shares float out of the 34.7M outstanding, this stock is well positioned for a rapid move higher once the catalysts begin rolling in.

Disclosure: Long MDVN

Of the two, the highest potential and most promising data from early to mid-stage trials belongs to Medivation, as the company is on the verge of becoming one of the most sought after oncology companies, whose product could be a medical breakthrough by all means when comparing its results to currently available options.These developments have led to many analysts upgrading the company’s short-term price target to well beyond $24 a share.

The profit potential for anyone entering this target market is truly staggering. Development of new therapies and drugs for prostate cancer is likely to supplement, rather substitute the prevailing drugs or therapies, such as chemotherapy, radiation therapy, hormonal therapy and surgery, and propel sales in global prostate cancer therapeutics market to $4.8 billion by 2015. Growth in prostate cancer therapies can be attributed to the increase in number of prostate cancer incidences in men aged more than 60 years. Given the longevity of an average individual, and the rapidly aging world population, the risk of prostate cancer stands tall. Statistics reveal that an estimated 1.4 million new invasive cancer cases diagnosed in the US alone in the year 2008.

Comparing Medivation’s MDV-3100 vs. Johnson & Johnson’s abiraterone

Men diagnosed with advanced prostate cancer but not yet treated with chemotherapy lived a median 420 days with MDV-3100 before their disease progressed again, according to a Phase I/II trial with partner Astellas Pharma Inc. That compares favorably with Johnson & Johnson’s experimental prostate cancer drug abiraterone, which in a Phase III trial reported in October showed patients lived 234 days before the disease progressed.

“Abiraterone has the most robust data seen to date,” said Medivation CEO David Hung, “and we’re well-positioned right behind them.”

Medivation and Astellas have four additional trials planned or under way for MDV-3100: two Phase III studies with a total of 2,900 patients, and two mid-stage trials.

A strong showing in those trials could help Medivation’s drug line up as the first in a line of treatments to combat prostate cancer that has spread to other parts of the body but hasn’t yet faced chemotherapy, Hung said.

“The pre-chemo opportunity is many times larger than the post-chemo opportunity,” Hung said, since there are more men diagnosed with prostate cancer who haven’t gone through chemotherapy and they live longer.

According to Wall Street analyst, Larry Smith, “MDV 3100 has the potential to be used in every stage of prostate cancer from first line now treated with the hormonal drug, Abbott’s (NYSE:ABT) Lupron through to fifth line patients in the final stages of the disease who are refractory to the chemotherapy drug, Sanofi-Aventis’ (NYSE:SNY) Taxoterre. Its mode of action should also allow it to be used in combination with abiraterone, Dendreon’s (NASDAQ:DNDN) Provenge, LHRH agents like Lupron and chemotherapy. Because it does not require concomitant use of a steroid, it might have a safety advantage over abiraterone. If most things go right in the clinical trials, this drug could be a multi-billion commercial opportunity for Medivation and its partner, the Japanese company Astellas (PINK:ALPMY).”

From the above comparison, it is noticeable that MDV-3100 compares very favorably to abiraterone in most of the five important measures of effect on tumors.

Medivation also maintains a healthy balance sheet, with nearly $207.8 million cash and equivalents, which should see it fund operations well beyond 2012.

Upcoming FDA Catalysts

The company expects to report top-line results on Dimebon from its phase III HORIZON (Huntington disease) study in the first half of 2011. Meanwhile, Medivation continues to evaluate Dimebon in the CONCERT study, which is being conducted with patients suffering from mild-to-moderate Alzheimer’s. Robust results from this study along with data from an earlier study could be enough to support Dimebon’s approval for mild-to-moderate Alzheimer’s disease. Results from the CONCERT study are expected in the first half of 2012.

Medivation and partner Astellas finished enrolling patients for the phase III AFFIRM study (advanced prostate cancer) in Nov 2010. The companies initiated another phase III study (PREVAIL), which is being conducted in chemotherapy-naïve advanced prostate cancer patients. The initiation of this study triggered a $10 million milestone payment from Astellas.

Medivation and Astellas also intend to commence two new studies with MDV3100 in the first half of 2011. While one trial will be a head-to-head phase II study between MDV3100 and AstraZeneca’s (AZN) Casodex (bicalutamide), the other study (phase II) will be conducted in hormone-naïve patients. Top-line results from AFFIRM should be out in 2012. However, results could be presented in 2011 itself if an interim analysis is conducted. All information via Zack’s Investment Research.

Analyst Recommendations

• 2/16/11 – Global Hunter Securities maintains a ‘Buy’ on Medivation, raises PT from $19 to $24
• 11/30/10 – Wedbush assumes coverage on Medivation with a Outperform. PT $25

Technical Analysis

The target for Medivation is set to $25 based on the Ascending Triangle pattern that has formed over the last three months, which is confirmed by the decreasing volume as accumulation by institutions and mutual funds is present before the breakout. The relative strength index (RSI) has also broken out of the symmetrical triangle formation, thus heavy buying pressure can be expected as money flows back into the equity in anticipation of upcoming catalysts.

A ‘golden cross’, whereby the 50-day moving average and the 200-day moving average cross in a positive manner has occurred, and often spells higher prices moving forward for the equity. There is strong support at the $16.23 (50-day MA) level with light resistance at the $17.50 level which should be broken within the next few trading sessions. Both MACD divergence and full stochastic look eerily similar to early December and February, when the stock saw strong gains of well beyond 30% in a matter of two weeks respectively.

The point & figure chart also forecasts a move towards the $22.50 level in the short-term, as the bullish behaviour is expected to continue.

Disclosure: Long MDVN

Such was the case with AT&T’s shocking buyout of T-Mobile (NYSE:T), a marriage that cost $39 billion dollars, helping boost markets and confidence around the world. And while this deal received front-page acclamation on just about every mainstream media outlet, smaller companies have been engaging in such activities as well, especially the biotech industry. During February, Clinical Data (NASDAQ:CLDA) won a surprising approval for its flagship product, viibryd,  the first antidepressant approved by the FDA in over 15 years, leading to Forest Labs (NYSE:FRX) sweeping in to buy the company for $1.2 billion. Forest’s price reflects its interest in viibryd’s claim that it is safer and triggers fewer sexual side effects than other SSRI drugs now on the market. The drug is being touted as the “first and only” antidepressant to combine an SSRI and a serotonin 1a receptor partial agonist in one molecule.

This left many biotech bargain hunters looking for the next blockbuster buyout, which then leads to Optimer Pharmaceuticals. Much to the likes of Clinical Data’s recently approved viibryd, Optimer’s flagship product, fidaxomicin, has a higher safety profile, along with many other added benefits which could make it the first Clostridium defficile infection (CDI) treatment in more than 25 years. Currently, the infection only has two pharmacological options as treatments: metronidazole and oral vancomycin, both of which lack the ability to reduce recurrences, while improving global cure rates. This is where fidaxomicin comes in — it not only has a higher cure rate, but boasts a statistically significant reduction in recurrences and a substantially higher global cure rate. You may view the company CMO, Sherwood Gorbach discussing its advantages in a video here.

Fidaxomicin vs. Vancocin

• Similarly high cure rates: The clinical cure rates between fidaxomicin and vancomycin were similar, with slightly better results from fidaxomicin.
• Statistically Significant in Reducing Recurrences: fidaxomicin significantly reduced the risk of recurrence among CDI patients.
• Substantial Improvement in Global Cure Rates: Compared to the current treatment, fidaxomicin demonstrated a statistically significant higher global cure rate, defined as curing the patient at the end
  of treatment without recurrence.

The following table outlines top-line data from two Phase 3 clinical trials of fidaxomicin that together enrolled 1,164 patients in the U.S., Canada and Europe. Fidaxomicin was well tolerated in both studies with no adverse side-effects (See safety data here) and excellent safety data. Information courtesy of Optimer’s fact sheet.

Reduction in CDI recurrence is highly important and advantageous, as studies suggest that each case of CDI recurrence results in $10,000-$34,000 in additional cost to health-care and that treatment with fidaxomicin would lower that burden by $2,000-$6,000 per patient. Polls also showed that 32% of doctors would make fidaxomicin their first-line therapy for CDI, while 52% would make it their second-line choice.

According to renowned Wall Street analyst, Hilary Kramer, Optimer is poised for double digit gains in 2011. She goes on to note, “The big pharmaceutical companies are in desperate need for new blockbusters, this is because many are losing them to expiration of IP protection and other generic treatments, thus we are going to see big pharma wanting a company like Optimer. Currently it is trading at around approximately around $12, and it could be acquired at around $17 to $19 dollars a share. There is opportunities for billions of dollars of sales around the world for the drug to fight this disease.”

Another added benefit is that Optimer has IP protection until 2026, and relative to its current 554M market cap is highly undervalued when considering it is tapping into a $7B target CDI market which has increased exponentially in recent years in both North America and Europe, with little-to-no competition.

According to a recent Barron’s article, “An FDA Advisory Committee meeting is scheduled to review Optimer’s fidaxomicin on April 25. A Prescription Drug User Fee Act (PDUFA) date has been set for May 30. Based on a successful Phase III program in C. difficile infection establishing consistent superiority to vancomycin with respect to recurrence of infection and global cure, we believe the compound is likely to receive a favorable vote, followed by approval in May. Management is planning to launch the drug in August. With an enterprise value of $270 million, we believe the stock is significantly undervalued. We estimate world-wide peak sales of up to $500 million to $1.5 billion.” The company also announced on 7/29/10 the MAA filing for approval in Europe with an expected positive decision in the 3rd quarter of 2011.

Optimer is also expected to make an announcement regarding Pruvel, its broad spectrum pro-drug antibiotic whom had excellent phase III results. On 11/10/10, in a n SEC 8-K filing they indicated higher incidence of a mild skin rash from the drug interaction study with antacids and they are currently evaluating the cause of this rash. Expectations are that in mid-2011 this situation will be resolved on the clinical hold and the NDA filing will commence, this adding another catalyst to boost share price.

Additionally, Optimer maintains a healthy balance sheet, which has roughly $192M cash on hand, no major debt financing, along with recently signed a $224M deal for partnership with additional double digit royalties in Europe. Deals prior to PDUFA are a rarity, and many analysts view this as a positive development for the FDA outcome, and thus led to many analysts raising their price per share forecasts to well beyond $17 near-term.

Analyst Recommendations

• 2/7 – Jefferies maintains buy, price target of $17.00.
• 2/7 – Ladenburg Thalmann maintains buy, price target raised to $14.00 (from $13.00).
• 2/7 – Needham & Co. maintains buy, price target of $19.00.
• 2/7 – Canaccord Genuity maintains buy, price target of $18.00.
• 2/7 – Oppenheimer & Co. maintains outperform, price target of $14.00.
• 2/3 – ThinkEquity maintains buy, price target of $18.00.
• 2/3 – JMP Securities maintains market outperform, price target of $16.00.
• 1/13 – Robert W. Baird maintains outperform, price target of $14.00.

Furthermore, Optimer ranks among the top 30 most undervalued small cap stocks by analyst target price. Market cap of $554M. Price at time of writing $12 vs. target price of $15.33 (discount of 22.77%).

From data compiled by Daily Finance, we can notice that the short interest is hovering around 9.3%, with a float of only 27.55M, thus leaving it highly susceptible to a massive short squeeze rally once positive catalysts begin rolling in.

The company also made the top 13 biotech stocks snapped up by insiders list, according to Kapitall Investments. Insiders purchased an average of 242,795 shares per year over the last two years.

Heavy Call Options Activity

Optimer has experienced a very low put-to-call options activity, signalling that institutions and bigger funds are leaning heavily towards positive developments coming forth in the near-term. For the April/15/11 expiration, $10 and $12.50 call options had nearly 4x the open interest when compared to all put options, with the $12.50 strike hitting a volume of 700 on the day. Moving onto the June/17/11 expiration, the $12.50 and $15 strike call options had nearly 5.5x the amount of open interest relative to all of the put options available. All information courtesy of Yahoo Finance.

Point & Figure Chart Price Projection

Ironically enough the P&F chart projects a $17 price target for Optimer, which is in line with analyst’s target of the stock post PDUFA, as well as the rumoured buyout. Point & Figure charts consist of columns of X’s and O’s that represent filtered rice movements over time.

Disclosure: Long OPTR

Clostridium difficile infection (CDI), commonly referred to as c-diff, is a bacterial infection in the lining of the gut that can cause diarrhea, colitis and in some cases death. When the bacterium grows and multiplies, it releases toxins in the gut. CDI is a particular risk following treatment with broad-spectrum antibiotics, which can kill healthy bacteria in the gut that keep the dangerous clostridium difficile bacterium in check.

C. diff rates have steadily risen over the past decade and the CDC estimates that more than 700,000 C. diff infections occur in the U.S. each year. Projected estimates for CDI in the U.S. have reached more than 700,000 cases per year. The infection strikes with particular intensity against the world’s rapidly growing elderly population in fact, two-thirds of CDI patients are 65 or older.

Excellent Clinical Trial Results

Optimer completed two fidaxomicin Phase 3 trials which showed that fidaxomicin achieved the primary endpoint of clinical cure and demonstrated a significantly lower recurrence rate and significantly higher global cure rate (defined as cure with no recurrence within four weeks of completing therapy) compared to Vancocin, the only FDA-approved antibiotic for the treatment of CDI. In the two Phase 3 trials, among subjects who had experienced a prior CDI episode and recurred within three months of entering the study, treatment with fidaxomicin resulted in a 47% reduction in repeat CDI recurrence compared to Vancocin (p=0.045). The data also indicated that treatment with fidaxomicin significantly improved the recurrence rate and global cure rate in CDI patients requiring concomitant antibiotics compared to Vancocin.

Reduction in CDI reocurrence is highly important and advantageous as studies suggest that each case of CDI recurrence results in $10,000-$34,000 in additional cost to healthcare and that treatment with fidaxomicin would lower that burden by $2,000-$6,000 per patient. Polls also showed that 32% of doctors would make fidaxomicin their first-line therapy for CDI, while 52% would make it their second-line choice.

Fidaxomicin vs. Vancocin

• Similarly high cure rates: The clinical cure rates between fidaxomicin and vancomycin were similar,
  with slightly better results from fidaxomicin.
• Statistically Significant in Reducing Recurrences: Fidaxomicin significantly reduced the risk of
  recurrence among CDI patients.
• Substantial Improvement in Global Cure Rates: Compared to the current treatment, fidaxomicin
  demonstrated a statistically significant higher global cure rate, defined as curing the patient at the end
  of treatment without recurrence.

The following table outlines top-line data from two Phase 3 clinical trials of fidaxomicin that together enrolled 1,164 patients in the U.S., Canada and Europe. Fidaxomicin was well tolerated in both studies. Information courtesy of Optimer’s fact sheet.

Should the FDA clear this new therapy for sale, it would become Optimer’s first marketed product and the first new therapy for this dangerous hospital-based infection in about 25 years. This makes its potential market value highly comparable to that of Clinical Data’s (NASDAQ:CLDA) Viibryd, first approved treatment major depressive disorder (MDD) in over 15 years, and Human Genome Sciences (NASDAQ:HGSI) whose treatment for lupus is the first in 50 years. Human Genome Sciences went on to gain from $2.82  to $27 a share on approval, while Clinical Data went on to be bought out for $30 a share, nearly a 100% increase from its pre-approval price per share.

Analyst Recommendations

Highly positive clinical trial results, major deal for EU has resulted in many upgrades during the past year from renowned firms:

• 2/7 – Jefferies maintains buy, price target of $17.00.
• 2/7 – Ladenburg Thalmann maintains buy, price target raised to $14.00 (from $13.00).
• 2/7 – Needham & Co. maintains buy, price target of $19.00.
• 2/7 – Canaccord Genuity maintains buy, price target of $18.00.
• 2/7 – Oppenheimer & Co. maintains outperform, price target of $14.00.
• 2/3 – ThinkEquity maintains buy, price target of $18.00.
• 2/3 – JMP Securities maintains market outperform, price target of $16.00.
• 1/13 – Robert W. Baird maintains outperform, price target of $14.00.

Highly Experienced Leadership

An often highly important and overlooked aspect for biotech companies is the past experience of the man at the helm, or the CEO. Optimer’s Pedro Lichtinger has more than one can ask for, after a long career at Pfizer, where he was the president of the company’s primary care business. His experience is in commercialization, which happens to be exactly the phase of the game that Optimer is just now about to enter. “When I was getting started at Pfizer, all the managers who joined when they were younger had a dream to bring to the market highly effective products that will benefit patients. That dream has stayed with me,” says Pedro Lichtinger, Optimer’s CEO. “When I retired from Pfizer, what I saw in Optimer was an opportunity to make a major advancement in medicine, that was at the same time cost-effective and would do a lot of good for thousands of patients.”

You may view a recent CNBC interview with Mr. Lichtinger here, where he discusses the company’s IP protection, product advantages, fda approval and marketability.

Technical Analysis

From a technical standpoint, the stock is currently interlocked in a highly bullish Ascending Triangle pattern on the apex of a breakout. Volume seems to have dried up which is indicative of its formation of lower lows and similar highs, often a byproduct of institutional and mutual fund accumulation prior to strong moves upward. The measured move would take it up to $14, and is comparable to the breakout from its previous Ascending Triangle experienced on December, 13, 2010.

Relative Strength Index (RSI) has also entered a similar pattern, and looks to move higher as money begins flowing into the equity. Both Full stochastic and MACD divergence have bullish crosses, further paving the way for positive gains. The 4/5/11 FDA advisory panel meeting should provide the necessary catalyst to break the stock out of this pattern.

Disclosure: Long OPTR

Few and far between from the investment community had been aware of Threshold Pharmaceuticals, a small company based out of California whose shares rose 80% at one point, before cooling off to 57.14% higher on nearly 16 times average volume. The interest was sparked by their product, TH-302, a novel treatment for soft tissue sarcoma, which received a Special Protocol Assessment (SPA designation by the FDA for their phase 3 randomized trial designation by the FDA. “With this SPA, we have reached agreement with the FDA on the key features of our Phase 3 trial design that will be necessary to support the registration of TH-302,” said Stewart Kroll, Threshold’s Vice President, Bio-statistics and Clinical Operations.

So just what makes an SPA designation so important you may ask? This particular declaration from the Food and Drug Administration allows for an uncompleted Phase 3 trial’s design, clinical endpoints, and statistical analyses to be acceptable for FDA approval. This then implies that it helps in expediting the process of approval, allowing for faster marketability and thus the opportunity to grab hold of the market prior to any competitors.

This event left many wondering which company might be next to follow in the footsteps of Threshold Pharma, and there seems to be no better suitor than Apricus Bio, whom seems to be a bigger twin offering very similar opportunities for large gains.

Comparing the two companies can be as easy as looking at the share price, market cap, financial standing and market potential — essentially the same variables any large potential investors and institutions analyze when making their investment decisions. Right off the bat we see that Apricus Bio has a highly undervalued market cap of 52.32M versus that of 92.68M pertaining to Threshold. Digging deeper we see that Apricus has estimated, warrants and raising of capital, $25 million in total assets, while Threshold lags behind with a mere $220,000 as per their latest 10-Q.

Apricus also wins the battle in total products with 12 (of which are more advanced in phase 1, 2, 3 and one marketed) rather a mere 3 of Threshold, which are only in phase 1 and 2 currently.

When analyzing the products up for Special Protocol Assessment, Apricus Bio also has an advantage over Threshold, as quick analysis will immediately show that Apricus’ product, ProvOnco (treatment of liver cancer), far outweighs the market potential than that of Threshold Pharma (soft tissue sarcoma) by almost three times.

Another important factor to consider is that Apricus’ product, ProvOnco has an Orphan Drug designation while Threshold’s does not. An orphan drug is a pharmaceutical agent that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease. This is highly significant because it would mean that it would enjoy 7 years of market exclusivity for the condition it was approved to treat.

Technical Chart Comparison

Perhaps the most ironic aspect of these two companies is how similar their chart patterns are. When looking above at Threshold Pharma, it is clear that it had broken out of an ‘Ascending Triangle’ pattern today, one which had formed over the course of 2 months. Strong volume came in to lead the breakout, and as expected, the other metrics began to trend up and follow the bullish momentum. The measured move was to $3.2 which was briefly hit today before leveling off at $2.75.

Apricus seems to be one step behind Threshold Pharma in achieving its breakout of the ‘Ascending Triangle’ formation. In an almost identical fashion, the RSI seems to be basing off as money begins flowing back in the stock, with all other metrics awaiting a strong reversal to the upside. Decreasing volume is also similar to that of Threshold’s just prior to the catalyst that sparked the turning point. The chart pattern has a modest target of $6.10, though a push to $9.30 to test its 52-week high the same way Threshold did is not out of the question once institutional investors come in. Further validation of the potential strength of the upwards movement can be seen back in November 22, 2010 when Apricus rose from $2.10 to $3.23 by simply announcing their application for SPA in their phase III trial of ProvOnco.

In summary, it seems Apricus is significantly undervalued at current levels while awaiting for its very own SPA designation from the FDA. Comparing it to Threshold’s price action, we can expect that Apricus sees nearly a double in price should positive developments come its way as expected. The company is led by Dr. Damaj, whom since being appointed as CEO in December 2009, led Apricus to approval of its first drug as well as gaining NASDAQ compliance, thus due to his experience in both the investment and medical field, it is highly likely that an SPA designation is well on its way.

Disclosure: Long APRI

Perhaps what makes Apricus stand apart from its other small cap biotech peers is the fact that it has an already approved drug in Vitaros for the Canadian market, used to treat erectile dysfunction, a worldwide market valued at over $3B annually. This event took place on November 12, 2010, where Apricus Bio announced that Health Canada had approved Vitaros for marketing as the first topical treatment for ED in that country. “The drug itself is a major breakthrough in the erectile dysfunction world,” stated Apricus Bio CEO Dr. Bassam Damaj, in an interview following the approval. He added that the treatment is simple, safer, and a faster acting drug than existing treatments.

Additionally, the application for approval to market Vitaros in Europe is scheduled to be filed in April 2011. The company quickly capitalized on its opportunity to increase cash flow and generate revenues without any expenses by signing a licensing agreement for the selling of Vitaros in Italy (Europe’s largest ED market valued at $200M) with Bracco SpA which saw it receive $7.5M up-front, with a further agreement to receive double-digit royalties based on the future sales of the product. The Middle East and North Africa markets are expecting an NDA during the 1H2011, according to the company’s website.

What makes this drug stand apart from its rivals is truly astonishing, as according to a recent Seeking Alpha article, “The drug is even safe for use by patients with hypertension, diabetes, cardiac problems, and many others who are often unable to safely use traditional oral treatments. Vitaros® has been shown to work within a couple of minutes, compared to the typical 30 minutes to two hour delay from oral medications. This is quite a remarkable medical feat and one that is sure to pique the interest of patients. Company market research also indicates that urologists would prescribe the drug to up to 30% of their patients diagnosed with erectile dysfunction—not a bad number in a $2 billion ex-US market. The company plans to use the recent approval to move forward in getting Vitaros® into over 100 international markets.”

In fact, Apricus has had a number of positive developments that went unnoticed during the past 12 months, including 3 partnerships in the past 2 months, 3 grants, and a number of highly positive conferences and presentations at some of the worlds most prestigious gatherings of pharmaceutical experts.

Moreover, PrevOnco, an orphan drug status treatment for liver cancer, is expected to receive word during 1st quarter 2011 with regards to an answer from the FDA on its phase III protocol for request of Special Protocol Assessment (SPA) which was submitted on 11/22/10. Liver cancer represents the fifth most commonly occurring cancer and the third leading cause of deaths related to cancer in the world. Each year, close to 600,000 people are newly diagnosed with primary liver cancer, also known as Hepatocellular carcinoma. According to a recent report issued by Global Industry Analysts, the global liver cancer drugs market is slated to exceed $2B annually by 2015.

During the first half of 2011, Apricus is also expected to announce an update on Femprox, potentially the first ever product to treat female sexual arousal disorder. The drug is currently in phase II testing in the US, and phase III in China.

The company’s full pipeline includes:

Perhaps the most surprising aspect of this company is the fact that according to their latest 10-Q filing, the company has has a total of roughly $25M in total assets, current liabilities of only $1.8M. This then implies that according to the current market cap of $50M, the funds and institutions are valuing the company’s 12 product portfolio, with nearly $5B combined market product potential at a measly $25M. By this, using Wall Street’s forward 12-month forward looking principle, we can estimate that a simple 10% reach of this market would mean a market cap of $500M or nearly 10 times current price per share levels. This is even more mind boggling when you consider that with the help of the company’s first approved product, Vitaros, they was able to boost total revenues from $109,590 in 2009, to well over $5,303,749 in 2010 in its first year of marketability, or nearly a 5000% increase year-over-year.

The company also has a solid management led by Dr. Damaj, who since being appointed as CEO in December 2009, led Apricus to approval of its first drug as well as gaining NASDAQ compliance. “People don’t understand the power of our technology”, added Dr. Damaj. He goes on to state that Apricus Bio is already in 22 active partnering discussions, many of which are described as being in the ‘late stages’.

With all these upcoming developments, a short squeeze also looks to be in place, as short interest is now 15.5%, with 1.67M shares short out of a possible 10.80M float. On a more positive note, roughly 2 million shares are held by institutional, mutual fund, and direct company executives.

Technical Analysis

The company’s stock is currently entrenched in an ascending triangle pattern on the apex of a breakout on strong volume should a positive development hit the wires. The measured move would see the stock test the last year’s resistance of $6.5, which could just as easily be pushed to $8. Positive metrics currently support a bullish stance, including an RSI indicator looking to begin trending upwards as money flows back in, 50-day MA moving through 200-day MA giving the ‘Golden Cross’ signal, decreasing volume showing accumulation before breakout, a steady MACD divergence and full stochastic.

Disclosure: Long APRI

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related stocks are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.

TheMarketFinancial is not paid, compensated or in any way incentivized to report news and developments about publicly traded companies.