Lundbeck Gets An Unexpected Boon From The FDA

Things really do seem a little different at the FDA these days. The FDA's commissioner, Scott Gottlieb, has talked openly of wanting the agency to take a different approach to its interactions with the biopharma industry, speeding up processes, removing certain roadblocks, and generally shifting more toward a "let the market decide" philosophy. Although there are a lot of moving parts to that, some of them quite controversial and beyond the scope of this piece, it has had an immediate impact on H. Lundbeck (OTCPK:HLUYY) (LUN.CO).

Lundbeck made a surprising announcement late on May 2 that the FDA had chosen to grant expanded labeling claims for its depression drug Trintellix. Although this change is not going to make a night-and-day difference for the company, it is a positive development all the same and one that I believe could boost Lundbeck's long-term revenue growth rate by close to 1% and its fair value by more than 5%.

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Lundbeck Gets An Unexpected Boon From The FDA

Lundbeck Takes A Few Hard Knocks

The stock market is a funny place when it comes to pharma/biotech. Analysts and investors can say that they're not really counting on a high-risk drug, but when that drug fails they nevertheless whack expectations commensurate with having had some pretty meaningful expectations. So when Lundbeck (OTCPK:HLUYY) (LUN.CO) announced disappointing (but not entirely surprising) results from its experimental Alzheimer's drug idalopiridine back in September, it seriously damaged the positive sentiment and momentum that had been carrying the stock.

Idalopiridine isn't the only issue. Trintellix continues to underwhelm and Abilify Maintena's ramp continues to be erratic, and the company recently saw a setback with a proof-of-concept clinical trial that could have helped expand Trintellix's market. On the other hand, Lundbeck's existing business continues to perform quite well otherwise, expense reductions are really making a difference, and management seemed to suggest that there are pre-clinical candidates that could come to the clinic faster now that idalopiridine has failed.

My fair value is about 6% lower now, largely due to tweaking some expectations and another downward revision in Trintellix. With a fair value of close to $41/ADR, these shares look more interesting again as a buy candidate. I am certainly concerned about the ongoing issues with Trintellix uptake and a thin pipeline, but those concerns seem more than reasonably discounted by the market.

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Lundbeck Takes A Few Hard Knocks

Lundbeck Continues Its Beat-And-Raise Trend

A lot of things are going right for Lundbeck (OTCPK:HLUYY) (LUN.CO) these days. Kare Schultz has made a definite positive impact on the company's cost structure, but without compromising the launches of several important new drugs. Lundbeck has also been the recipient of what I'd call good luck, as a couple of large off-patent franchises aren't declining quite as rapidly as expected.

For now, my concerns on Lundbeck remain basically the same. The pipeline is very, very thin (and two of the drugs are high-risk Alzheimer's candidates) and I continue to wonder and worry whether Lundbeck has boxed itself in a little too tightly with its R&D focus. I also continue to believe that Brintellix/Trintellix will disappoint unless and until the company can coax the FDA into approving a differentiated label.

All of that said, I'm a content holder at these levels. I believe Lundbeck can generate over 6% revenue growth over the next 10 years and there is upside potential from the Alzheimer's pipeline. I likewise believe that this can/will be a very profitable business in a few years' time, supporting a cash flow-based fair value of close to $43/ADR.

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Lundbeck Continues Its Beat-And-Raise Trend

Seeking Alpha: Lundbeck's Results Easing A Lot Of Anxiety

Denmark's H. Lundbeck A/S (or "Lundbeck") (OTCPK:HLUYY) (LUN.KO) continues to do a commendable job of restructuring and repositioning itself to come back from significant patent cliffs. Not only has the company launched two potential, albeit uncertain, blockbusters in the last two years, the company's cost restructuring effort seems ahead of plan. With the company now offering a credible trajectory toward 20%-plus free cash flow margins and respectable revenue growth, a fair value of DKK247/$37.25 seems reasonable today.

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Lundbeck's Results Easing A Lot Of Anxiety

Seeking Alpha: Lundbeck Executing Where It Can, But The Biggest Drivers Are Risky

As I've written in the past, I think being a little reluctant to sell out of a good position is far from the worst trait an investor could have. To that end, while I saw less value left in the shares of Danish drug company H. Lundbeck (OTCPK:HLUYY) (LUN.CO) than I would have liked back in August, I was hesitant to sell ahead of potential upside in the cost-cutting program.

Since that last article, Lundbeck shares have logged solid double-digit appreciation and outperformed most pharmaceutical peers. Moreover, the company has provided some evidence that the cost-cutting efforts will drive better profit improvements than the sell-side initially expected. That said, the valuation argument is even harder to make now, and the prime drivers of further outperformance are both risky and at least a few months off.

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Lundbeck Executing Where It Can, But The Biggest Drivers Are Risky

Seeking Alpha: Xenoport Not Getting Much Love Ahead Of Key Data

Serial disappointments have made investors understandably cagey about Xenoport (NASDAQ:XNPT) and the question of whether its "transported prodrugs" can really achieve meaningful improvements in efficacy and/or safety. Even so, I find it curious that the shares have been so weak over the past six months as the company approaches key data from a study of XP23829 (or '829) in psoriasis. I don't believe there is anything like enough evidence to say that this is "another Receptos (NASDAQ:RCPT)", a company that has seen a pronounced run in its shares on the back of strong data in multiple sclerosis and ulcerative colitis, but the fact remains that this company may yet have a clinical pipeline candidate with more than $1 billion in revenue potential in both multiple sclerosis and psoriasis.

I continue to believe that Xenoport is a long-shot story. The company has yet to establish that its R&D approach can develop meaningfully better drugs, but bulls can fairly retort that it only takes one success for the stock to work. The multiple sclerosis and psoriasis markets are competitive markets already, and likely to become more so, but even modest assumptions regarding the odds of clinical success would argue that Xenoport is undervalued ahead of what could be a significant share-moving event.

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Xenoport Not Getting Much Love Ahead Of Key Data

Seeking Alpha: Although Undervalued, Lundbeck Likely Stuck Until New Drugs Start Ramping

H. Lundbeck A/S (OTCPK:HLUYY) (or "Lundbeck") is running out of time to convince investors that its new drug launches will meaningfully offset sales erosion due to patent expirations and competitive product category launches. I continue to believe that the potential is here for Lundbeck to be a much more interesting company (and a better-performing stock), but absent better execution that potential is all but worthless.

This will likely be a year defined by how well management addresses the challenges with Brintellix, Abilify Maintena and Northera. The data are there to support differentiation and sizable sales potential, but FDA cooperation and sales execution is critical. The company's choice of new CEO will also be telling and represents another opportunity to demonstrate an attractive long-term vision for the company. While I believe the shares are more than 20% below fair value today, a better sales trajectory is the real driver for these shares.

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Although Undervalued, Lundbeck Likely Stuck Until New Drugs Start Ramping

Seeking Alpha: XenoPort Prepping For Key Data In 2015

Nine months ago, I thought XenoPort (NASDAQ:XNPT) had some appeal for very aggressive investors willing to play the odds that not only would the biotech sector recover, but that the Street would get more bullish on XenoPort's relaunch of Horizant and the prospects of XP23829 ('829) in multiple sclerosis and possibly psoriasis as well. Since then, the shares have risen almost 120%.

Is there still enough upside in XenoPort to make it worth holding these shares? The answer is a guarded "yes". The markets for both psoriasis and multiple sclerosis are each likely to be worth more than $15 billion a year by the time '829 achieves commercial sales, but the company is still facing comparatively long odds for commercial success. That makes the Phase II psoriasis data later this year very significant - a strong indication of efficacy should unlock significant value (by de-risking the outlook), but inadequate results will sap virtually all of the upside.

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XenoPort Prepping For Key Data In 2015

Seeking Alpha: Xenoport's Path Is Long, But The Potential Is There

Potential is a word you hear a lot in biotech, but it's also worth remembering a quote (apocryphally attributed to former Dallas Cowboys defensive lineman Randy White) that goes "potential is a fancy French word that means you haven't done yet".

If XenoPort (XNPT) can establish '829 as a true peer to Biogen Idec's (BIIB) Tecfidera, or possibly better in some respects, the stock is going to do very, very well. Of course, if the data don't come through, this company has very little left other than a record of repeated disappointments.

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Xenoport's Path Is Long, But The Potential Is There

Seeking Alpha: Alkermes Still Not Getting Full Credit For Its Pipeline

Biotech is a strange world, one where investors often seem to prefer stories that are relatively weak on sales, earnings, and actual data. Maybe that makes a certain amount of sense - in the absence of data, investors are free to dream about blockbuster drugs and multi-baggers.

In the case of Alkermes (ALKS), it would seem that having an actual cash flow-generating business is almost a detriment to the stock. Given that I believe Alkermes combines a strong (and fairly stable) royalty-generating business with a high-risk/high-reward, but undervalued, pipeline, I believe this is a stock worth considering even at these relatively elevated prices for biotech stocks.

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Alkermes Still Not Getting Full Credit For Its Pipeline

Seeking Alpha: Lundbeck Could Cheer Up Patient Investors

H.Lundbeck (HLUYY.PK) isn't going to be an especially familiar name for many readers, as this Danish pharmaceutical company has largely sold through licensing partners in the United States. That said, this CNS specialist was the brains behind Forest Labs' (FRX) highly successful depression drug Lexapro, and the company has some particularly interesting drugs in its pipeline. While the company's go-to-market strategy is still a work in progress and patent expirations are likely going to cut deeply into cash flows in the short term, this looks like a potentially undervalued name to consider.

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Lundbeck Could Cheer Up Patient Investors

Seeking Alpha: Uncertainty Is The Trade-Off For Salix's Appealing Price

If a quality specialty pharmaceutical company like Salix Pharmaceuticals (SLXP) is trading at a discount, you can usually rest assured that it's because the story has a little too much of what Wall Street hates most - uncertainty. In the case of Salix, the uncertainty surrounds just why the FDA rejected its application for subcutaneous form of Relistor and what, if anything, that means for the oral form of the drug. FDA issues are no trivial thing for a company like Salix, but nevertheless this stock looks like a name worth owning.

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Uncertainty Is The Trade-Off For Salix's Appealing Price

Long Undervalued, Is Alkermes Still A Bargain?

For a large part of its history, Alkermes (ALKS) never quite seemed to get its due from the Street. Given its business plan of helping other pharmaceutical/biotech companies develop drugs in exchange for modest royalties, perhaps that's not so surprising. After all, other drug development names like Nektar (NKTR), PDL BioPharma (PDLI), and Flamel (FLML) really haven't worked out to early expectations.

Things are different now. Not only does the company have a mature portfolio of proven drugs and established technology, but the merger with Elan Drug Technologies has diversified that base in a meaningful way. Better still, the company has an intriguing mix of emerging drugs and a strong pipeline that includes several promising wholly-owned compounds.

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Long Undervalued, Is Alkermes Still A Bargain?

Seeking Alpha: The Rumor Behind Amylin's Spike Makes Sense

Amylin Pharmaceuticals (AMLN) has always been a feast-or-famine sort of stock, as the company has long experience in surmounting the difficulties of dealing with the FDA (Symlin and Bydureon, most notably), competition, and its own now-former partner Lilly (LLY). Although recent prescription data on Bydureon has been disappointing, Wednesday's news from Bloomberg that a Big Pharma buyer had approached Amylin earlier this year had the stock rocketing in response.

Enter The First Rumored Bidder
Bloomberg reported Wednesday morning that unnamed sources claimed that Bristol-Myers Squibb (BMY) approached Amylin's board with a $22 takeout offer, which Amylin's board rejected last week. According to the report, there has been no follow-up from Bristol-Myers and Amylin remains focused on securing a marketing partner for Bydureon in Europe.

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The Rumor Behind Amylin's Spike Makes Sense

Seeking Alpha: Amylin Gets Its Yes: Now For The Hard Work

Amylin Pharmaceutical (AMLN) investors got some long-awaited good news Friday afternoon, as the FDA finally granted approval to market Bydureon, an extended-release of Amylin's one-time blockbuster Byetta. Obviously this is a positive development for the company, but now the hard work begins. Amylin's market cap already assumed approval of this drug and now the company has to convince skeptical analysts and investors that it can steer itself to greatness (or buyout) as largely a one-product company.

Don't Tell Me About The Labor Pains, Just Show Me The Baby
Amylin has been working on getting approval of Bydureon since May of 2009, when the company first submitted a New Drug Application (NDA) to the FDA. The first FDA rejection came about a year later when the FDA wanted data on labeling and a risk mitigation strategy. The company resubmitted its response to these fairly routine questions only to get a second rejection in October of 2010 and a request from the FDA for a new trial to assess potential cardiac risk.


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Amylin Gets Its Yes; Now For The Hard Work

Seeking Alpha: Nektar Therapeutics - Often Forgotten, But Worth A Look

A few weeks into 2012, it looks like investors are much more eager to take on some risk in their portfolios and biotechs are coming back into favor. With that in mind, it makes sense to check out some of the promising biotechs that languished a bit in 2011. Although Nektar Therapeutics (NASDAQ: NKTR) hasn't had much bad news in a while, in the world of biotech "no news" can be almost just as bad and it seems that the market has perhaps forgotten this name a bit.

Changing Course
Nektar has long been in the business of partnering with larger pharmaceutical companies and licensing its proprietary PEGylation technology. PEGylation basically introduces polyethylene glycol into a compound and alters its performance in the body - most notably by slowing the process of clearing in from the body. Companies including Amgen (NASDAQ: AMGN), Pfizer (NYSE: PFE), and Merck (NYSE: MRK) have licensed this technology for major drugs like Neulasta and PEG-INTRON, but Nektar gets only relatively small royalties for this technology.

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Nektar Therapeutics: Often Forgotten, But Worth A Look

Seeking Alpha: Amylin Wins A Battle, But The War Goes On

Amylin (AMLN) shareholders got a much-needed bit of good news Thursday evening, as the company reported that an FDA-mandated cardiac safety study of the company's one-weekly diabetes drug Bydureon reported positive results. With this information in hand, Amylin's partner Lilly (LLY) should be in place to submit a new application with the FDA in the third quarter of 2011 with possible approval in the second half of 2012.

tQT Looks A-Ok
Among the issues cited by the FDA when it rejected Bydureon back in October of 2010 was the risk that exenatide (the active ingredient) might cause QT prolongation. In simple English, the QT interval is the time that it takes the heart to repolarize (or recharge) between beats. If that interval gets too long, a number of bad things can happen to a person – including palpitations, fainting, and sudden death brought about by ventricular fibrillation and cardiac arrest.


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Amylin Wins A Battle, But The War Goes On

Seeking Alpha: It Might Be Time For Amylin And Lilly To Head To Divorce Court

It's not unusual for business partnerships to have their ups and downs, but it looks like the relationship between biotech company Amylin Pharmaceuticals (AMLN) and major pharmaceutical Lilly (LLY) may well be damaged beyond repair. Between Lilly's decision to market drugs from Boehringer Ingelheim, Amylin's decision to sue in response, and the information revealed through court documents that Lilly was apparently not expecting much from Bydureon, it seems as though the days of constructive partnership are over.

Restraining Order Has Only Limited Benefit
Despite nearly a decade of partnership, Amylin recently filed against Lilly, arguing that Lilly's decision to market competing diabetes drugs with the same salesforce that markets Byetta will compromise the company's sales strategy and revenue potential. Although the agreement between Lilly and BI was reached in January of this year, it is likely that Amylin attempted to resolve this more amicably. What's more, prior to the FDA's approval of linagliptin in mid-May, it was more of a theoretical risk anyway.

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It Might Be Time for Amylin and Lilly to Head to Divorce Court

Seeking Alpha: Confusing Cross-Currents With Amylin's Data

Biotech investing is known for having more than its fair share of equivocal, confusing, or hard-to-interupt data. That's just really the price for sitting down at the table. The case of Amylin Pharmaceuticals (AMLN) seems to be taking that to a new level, though, and investors can be forgiven for not knowing quite what to do with this one.

Bad News First – DURATION-6
Amylin, along with partners Lilly (LLY) and Alkermes (ALKS) dropped a bombshell on investors last week when they announced disappointing results from the companies' DURATION-6 study of Bydureon, a once-weekly version of Amylin's successful Byetta GLP-1 analog for Type 2 diabetes. The study, designed as a marketing study and not a pivotal clinical trial, was destined to show similar efficacy to Novo Nordisk's (NVO) once-daily Victoza; the idea being that similar efficacy from Bydureon along with a more convenient dosing schedule and softer side-effect profile would establish Bydureon as the market leader if and when it gets approval.

Unfortunately for the AMLN-LLY-ALKS triumverate, it didn't work out that way. This study showed the lowest-ever seen efficacy rate for Bydureon (as measured by HbA1c) at 1.3%, lower than the 1.5% seen for Victoza. While the side-effect profile did look better for Bydureon (less than half as much nausea, vomiting, and diarrhea), the drop-out rates were similar.

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Confusing Cross-Currents With Amylin's Data

Maybe It's Time To Abandon Amylin

Dear Amylin,

We've been together a long time and, hey, you were great. But I think it might be time for us to see other people. No, it's not me, it's you.

...

The Latest Problem...
Okay, today's stock reaction to the Duration-6 study is probably overblown, but clearly Amylin (Nasdaq: AMLN) has some serious issues. This latest study basically demonstrated that Amylin's weekly drug Bydureon is less effective in controlling diabetes than a rival daily drug from Novo Nordisk (NYSE: NVO) called Victoza.

Designed to show non-inferiority, the study instead showed that Victoza lowered HbA1c by 1.5%, while Bydureon lowered it by 1.3%. That's not a huge difference, but it is still significant and you can rest assured that Novo Nordisk will market the hell out of it if or when Bydureon is approved. On a somewhat more positive note, Bydureon did show half of the side-effects of Victoza (nausea, diarrhea, and vomiting are common side effects for this class of drugs).

Now that's good (and part of the point of the study was to show a better side effect profile for Bydureon), but there did not appear to be any meaningful difference in drop-out rates, so the side effects of Victoza weren't enough to make its users quit in greater numbers.

Unfortunately, this could have some long-tail effects for Amylin (as well as Lilly (NYSE: LLY) and Alkermes (Nasdaq: ALKS). The FDA is very focused on risk-benefit these days and if Bydureon shows any hint of safety issues (and one could argue there have already been more than hints), the FDA may continue to refuse approval on the basis of Victoza being safer *and* more efficacious (even if less convenient for patients).

What Now?
So, what do I do with Amylin shares? I think this study clips the total market potential for Byrdureon, probably by $300-$500M. So, it could still be a $1B+ drug, but probably not much more than that. Working that all through my model moves the target price down to about $12 - higher than where it's currently trading as I write, but not enough to excite me.

Making matters all the worse, I once had a big gain here. This stock was a big performer a while ago (in the $50s) and I wondered at the time whether I should haven't sold at least half my position and let the rest ride. But oh no, I had to get greedy ... and I paid for it.

Anyways, now I need to figure out what to do. I could hold on and hope for the best, but that's not really a "strategy". I'm also seriously considering selling it and doubling up on Lexicon (Nasdaq: LXRX), another biotech I own that is arguably much more promising at present. A third option is just to go buy another biotech (Ziopharm (Nasdaq: ZIOP)? Celldex (Nasdaq: CLDX))? Luckily, I don't own much and it was never a huge part of the portfolio, so this whole debate is more about a bruised ego than a bruised wallet.

I would probably SELL Amylin ... unless you're really, really patient

Disclosure: I own shares of Amylin and Lexicon