ACAD: Second Quarter Conference Call ($20.77)

The Acadia 2nd quarter conference call went extremely well.  The company still targets the end of the year to file the NDA for PDP. What's even more important is they plan to file an application in the EU for Parkinson's Disease Psychosis six to nine months after filing the NDA with the FDA here in the U.S.  The EU filing has been an overhang on the stock for some time now.  If the company had to run another Phase 3 trial in the EU for PDP, it could take up to another three years and a huge cash drain for that trial.

Future Trials:
Sleep disturbance trial (2014-2015) for Parkinson's patients.  Trial is currently being designed.
Schizophrenia (2015) as Mono-therapy for maintenance stage and symptom control.  Patients cannot tolerate staying on the current approved drugs for an extended period of time.

Safety Stats:
250 patients have been on Pima for one year or longer, 100 patients at least two years or longer, with the longest single patient exposure exceeding eight years.

Bottom Line:  The new information learned today from the company, was related to the potential filing of a marketing authorization application (MAA)  in the EU 6-9 months after filing the new drug application with the FDA.  In other words, they are using the NDA as a fore runner for filing the MAA in the EU. The company is in a very strategic position with patent expiration until 2028, and the company holds worldwide rights to Pimavanserin.  Thank you for reading.

SNSS: Sunesis Pharmaceuticals ($6.08)

We have been positive on MEI Pharma (MEIP).  Sunesis is a competitor to MEIP in the area of AML and MDS.  This post examines the current trials with the drug Vosaroxin that Sunesis is currently running, that may compete directly with MEI Pharma.

Phase 3 Trial:  THIS TRIAL FAILED TO MEET THE END POINT
Study of Vosaroxin or placebo in combinatin with Cytarabine in patiens with first relapsed or refractory Acute Myeloid Leukemia (AML).  The trial is also known as Valor and results should be released any day.
Phase I/II Trial:  THIS IS THE ONLY ACTIVE TRIAL
Study of Vosaroxin IV and Decitabine IV combination in older patients with Acute Myeloid Leukemia and high-risk Myelodysplastic Syndrome. This is primarily a dosing trial to find maximum dose limiting toxicity.  This trial competes head to head with MEI's front line AML study for elderly patients currently in a phase 2 trial.
Phase I/II Trial:  THIS TRIAL HAS NOT PROGRESSED
Vosaroxin alone for intermediate-2 or high-risk MDS after failure with hypomethylating agent based therapy. This is another trial that will eventually compete with MEIP currently running a phase II MDS trial for patients that had previously failed hypomethylating therapy for MDS intermediate-2 or high risk.  
Bottom Line:
The two phase I/II trials that Sunesis has running will compete with MEI's drug Pracinostat. One differentiating factor is that the Sunesis drug Vosaroxin is currently delivered as an IV infusion, as opposed to Pracinostat which is an oral that is taken three days a week, Monday, Wednesday and Friday.  MEI Pharma is further along in the trials, as both phase II trials should yield results by the end of 2014, and the Sunesis trials are in early phase I/II designed to confirm maximum tolerated dosing limitations.

Contact:  586-431-8000

Elliott Wave Principle

Elliott Wave is a form of technical analysis that attempts to analyze market cycles and forecast trends. If you can identify repeating patterns in prices, and figure that pattern in the context of the market today, you may be able to manage risk more effectively in the future.  In general, you may be able to identify the highest probable move with the least risk.  Below is a chart with Elliott Wave applied.

From the chart above, we have an upside target of $202.00 on the S&P 500, and a 3rd - 4th quarter to arrive at that upside price.  So we are just around 3% from that target price.  Once reached, primary wave three will be complete, and corrective primary wave four will be in play.  A -15% minimum correction wave four is forecasted.

Bottom Line:  Using technical analysis helps us remain objective while managing risk.  Elliott Wave attempts to identify the highest probable move with the least risk based on cycle counts and time patterns.  Thank you for reading.

MEIP: MEI Pharma ($5.94)

MEI Pharmaceuticals has the potential to become best in class as an oral HDAC inhibitor (histone deacetylases) for MDS - Myelodysplastic Syndrome and AML - Acute Myeloid Leukemia.  The company recently presented at two conferences, the Bank of America last week and UBS just yesterday. As usual CEO Dr. Gold did a good job of presenting the story what their lead drug Pracinostat has shown to date, and the best in class HDAC inhibitor it could potentially be.  This post will compare what the best standard of care (Vidaza) has already achieved in Myelodysplastic Syndrome (MDS), and what current competitor's (Vorinostat/Vidaza combo), (Mocetinostat/Vidaza combo) have accomplished with similar patients that MEI is targeting in their phase 2 trial for patients with intermediate-2 to high risk MDS.  These comparisons can serve as benchmarks when MEI presents data from their trials.

Current Standard of Care - Vidaza:
Vidaza Intermediate - High Risk MDS
CR = 17%
PR = 12%
Median overall survival of 24.5 months.
Vidaza is FDA approved for all subtypes of MDS.
Celgene Vidaza US patent expired in 2012.

Mocetinostat with Vidaza:
Phase 2, 22 Patients.  (Manero Trial)
Mocetinostat 90-110mg 3x/wk and Vidaza 75mg.
High Risk MDS.
ORR (CR+CRi+PR+HI) 64%
ORR (CR+CRi+HI) 55%
ORR (CR+CRi+PR) 59%
ORR (CR+PR) of 18%
CR (CR+CRi) of 50%
CR of 9%
Median overall survival was 12.4 months.
The above results are based on a subset of 22 patients with characteristics for a planned registration phase 3 trial second half of 2014.

Vorinostat with Vidaza:
Phase 2, N=33.  (Silverman Trial)
Vorinostat 300 mg twice daily and Vidaza 75mg.
Intermediate-1 (23%), Intermediate-2 (31%), High-Risk (31%) MDS.
ORR (CR+CRi+HI) 73%
CR (CR+CRi) of 42%
CR of 30%
Median overall survival was 37 months for (300mg / twice daily + Vidaza 75mg).

Pracinostat with Vidaza:
Phase 1, 10 Patients.  (Manero Trial)
Pracinostat 60 mg 3x/wk and Vidaza 75mg.
Intermediate Risk-2, or High Risk.
ORR (CR+CRi+PR) of 90%
ORR (CR+PR) of 70%
CR (CR+CRi) of 80%
CR of 60%

50% achieved a complete cytogenetic response and proceeded to stem cell therapy.

Pracinostat with Vidaza:  (Manero Trial)
Clinical Trials
Phase 2, 100 Patients in Progress.
Pracinostat 60 mg 3x/wk and Vidaza 75mg.
Intermediate Risk-2, or High Risk.
ORR (CR+PR)  ______
CR of  ______
OS of ______

Potential Market Statistics:
Estimated 101,000 MDS Patients in the US and EU.
Estimated 25,000 are Int-2 and High Risk MDS Patients in the US and EU.
2013 WW Sales of MDS/AML Products $1.4 Billion.
Vidaza and Dacogen:  560M + in U.S. 2012 Sales.
Celgene reported $800 million Vidaza w/w sales in 2012, lost U.S. patent protection in 2011.
Celgene holds patent exclusivity in the EU for Vidaza until December 2018.

Quantitative Easing 2012-2013

The markets can be simplified down to a few different variables over the past few years.  QE also known as quantitative easing = risk on, no QE = risk off. It is that simple. Currently we are about half way through the tapering process, or elimination of QE.  At the peak of QE the Federal Reserve was providing $85 billion per month.  At present that amount has been tapered down to $45 billion.  How will the markets react in the absence of QE?  Let's go back a few years to see what kind of corrections were exhibited at different phases of QE.  Below is a 2012 chart of the S&P 500 at the time when QE was running $45 billion per month.

There happened to be two corrections, one was -10.6%, and the other was -9.1% during the year of 2012 while there was $45 billion each and every month available to aid the economy. The chart below fast forwards to 2013 to see what transpired with QE at $85 billion per month (almost double from 2012) granted from the Federal Reserve to aid the economy.

The corrections/pullbacks were small in percentage and duration with the average pullback around -4.9% and the steepest being -7.3%.  In 2013 it was risk-on, which meant every dip was bought that led to new highs in the market, and the high beta sectors benefited from the excess $85 bllion per month liquidity compared to 2012's $45 billion per month.

Bottom Line:  If added liquidity in the form of quantitative easing was the fuel for the markets in 2013, the lack of additional liquidity in 2014 due to the tapering off of approximately $10 billion per month may have the reverse effect.  Due to the lack of stimulus, steeper and longer duration corrections similar to 2012  (-10.6% and -9.3%) could be the new norm in the future. Thank you for reading.

MEIP: MEI Pharma ($8.10)

MEI Pharmaceuticals Inc., a development-stage oncology company, focuses on the clinical development for the treatment of cancer.  The companies lead drug Pracinostat, an orally available inhibitor is currently in phase 2 trials for the treatment of myelodysplastic syndrome (MDS), and acute myeloid leukemia (AML).

Financial Statistics:

$59.8 million cash

Debt - None

27.9 million fully diluted shares outstanding 

4.9 million shares in warrants, strike price $3.50

223 million market cap

Intellectual Property:

Pracinostat - Composition of matter to 2028, methods of use 2025

ME-344 - Composition of matter and methods of use to 2025

PWT 143 - Composition of matter 2031 and methods of use 2032

Market Opportunity Potential:

$1,491 Billion market in the U.S.

Safety:

Tested in 200+ patients in multiple phase 1 and phase 2 clinical trials.

Readily manageable side effects consistent with current drugs of this class.

Timeline Catalyst:  

Pracinostat:  Front Line MDS study Intermediate-2 and High-Risk Patients.

-Expect to complete enrollment in Q3 2014, and unblind study in Q1, 2015.

Pracinostat:  Refractory MDS Study - Failure after initial HMA Therapy.

-Preliminary data expected at Ash December, 2014. 

Pracinostat:  Front Line AML study for elderly patients not suited for intensive chemotherapy.

-Preliminary data expected at Ash December, 2014.
Below is a daily chart of MEIP.

Bottom Line:  By the end of 2014 we should have a good grasp of how Pracinostat has been performing in three phase 2 clinical trials for MDS and AML.  Their lead drug  is an oral (as opposed to IV) therapy that has been well tolerated in over 200 + patients to date.  There is an unmet need for a well tolerated solution for the elderly population who are victims of MDS or AML.  Pracinostat is well tolerated, orally available, and MEI Pharma holds worldwide exclusivity on the drug.  Thank you for reading.  

Assessing the Recent Selloff

We're in the middle of a market pullback or correction.  The S&P is now down -4.3% from the high just last week.  A technical picture of where we stand today is below with comments.

Since 2013 the 140 day exponential moving (purple line) average has been good support for the S&P 500 index ETF SPY.  Also note that the RSI has hit the 30 reading or close on the prior pullbacks we have experienced.  To summarize this chart.  We are getting close to a moving average trend line and a 30 low reading on the RSI (relative strength index).  Both these areas have provided market pullback support in the past.

During the most recent pullback in February, we had hit the fibonacci 50% retracement level before reversing higher, and this current pullback (chart above) that we are experiencing is sitting right on the 50% retrace level, which is a typical retrace for an index prior to reversing higher.

The above chart illustrates what has currently occurred since we hit an all time high of 189.70 just recently. We have pulled back -4.3%.  I am targeting a -6% pullback which would run very similar to prior sell offs and put the index at support areas, from the first chart above.

Bottom Line:  Most of my technical indicators are signaling that we are getting close to at least a short term bottom on this current sell off.  We are close to the first chart above's support line (140 exponential moving average), we hit the 50% retrace on the middle fibonacci chart, and we are currently in the range of prior pullbacks experienced over the past year (third chart) of -4% to -7% range.  There has been no technical damage done to the intermediate to longer term time frame chart perspective for the S&P 500 from where we currently stand today.  Thank you for reading.  

Investor Complacency

The greatest danger to investors is complacency.  It is usually when investors are most complacent that they are blind sided when a real market correction takes hold and their portfolios take a hit.  I am using the word complacent because that is exactly the sentiment that the majority feel about the markets at this time as only 17.5% have a bearish bias according to Investor Intelligence Survey Percent Bears.
Since 2012, the largest correction the markets have experienced has been a -10.4% move lower in the S&P 500, and the largest pullback since 2013 has only been -7.3%.  Each pullback has the Federal Reserve assuring investors that more Quantitative Easing (QE) tools are available at their disposal.  The chart below shows the market pullbacks since 2012 and the amount of QE that was being issued during that time.

Notice that in 2012 when we were running single QE of $45 billion per month the corrections were -10.4% and -9.1%.  In 2013 when the fed increased the stimulus package and was running double QE, or $85 billion per month compared to $45 billion per month in 2012, the pullbacks only averaged around -5%.  Is there a correlation between the extent a market pulls back and the amount of QE that is being issued at that time?  Or is it just a matter of investors feeling assured that the Federal Reserve has their backs, and that buying the market dips regardless was the plan.

So, fast forward to the present.  The QE has been tapered down from the peak of $85 billion per month in December of 2013, to currently $55 billion starting in April. Essentially it's QE in reverse.  Below is a chart showing just how far down a market correction of say, -15% to -20% could take the market to.

The chart above only shows the maximum correction of up to -20% that I chose to display, which historically is a healthy market correction, but we potentially could expect something more severe than that, or even a bear market, which is more than -20%.  With readings so complacent, (per the Investors Intelligence Survey Bears of only 17.5% being bearish) are investor portfolios positioned for the possibility of a market correction of up to -20%? Tough question to answer.   

ACAD: Acadia Pharmaceuticals ($28.19)

After the close, Acadia Pharmaceuticals announced the planned secondary raising of $150 million by selling 5.3 million shares. The timing is excellent, as the stock is just off it's all time high and dilution will be minimal.

3-6-14:  The offering was oversubscribed so the end result is that the company is selling 6.4 million shares at $28.50 instead of the original 5.3 million share capital raise.  The underwriters also have the right to acquire .96 million shares in the next 30 days.  Baker Brothers Advisers bought $15 million worth of shares or 526 thousand shares, 8% of the offering.

Bottom Line:  Good move by management to raise cash while the stock is near all time highs.  The company should exit 2014 with a minimum of $290 million in cash for commercialization and future trials.  Thank you for reading. We currently hold shares of ACAD.

ACAD: Fourth Quarter Conference Call ($28.30)

Acadia held their 4th quarter conference call on Thursday after hours.  A brief of what I found interesting is below.

• The company keyed on the potential for Pimavanserin to be used for schizophrenia patients (in addition to Parkinson's and Alzheimer's patients), both as an add to with a low dose of Resperidone, and as a single therapy for a younger demographic patient.  The company expects to share new information regarding a schizophrenia trial later in 2014.
• The side effects induced by the atypical agents for schizophrenic patients may include weight gain, non-insulin dependent (type II) diabetes, cardiovascular side effects, sleep disturbances, and motor disturbances. The company believes that these side effects generally arise either from non-essential receptor interactions or from excessive dopamine blockade.
• In the released 10-K, it states "Parkinson's disease psychosis is a debilitating disease that occurs up to 60% of patients with Parkinson's disease."   
• The company believes that psychosis from Alzheimer's disease occurs in approximately 25%-50% of patients.
• The company has hired 14 new employees for the commercial launch of Pimavanserin, which I believe could occur in the first quarter of 2015.
• The company is pleased with all the pre-filing testing requirements that has occurred to date, and plans on meeting with the FDA for pre-NDA direction in the spring.

Bottom Line:  The highlight of ACAD's fourth quarter conference call pertains to the positive comments regarding Pimavanserin for schizophrenia patients and the two potential paths for trials they can focus on for this indication in the future. Also, the company is pleased with all required NDA filing testing to date, and will meet with the FDA in the spring. It was a solid conference call from Acadia's management again.  Thanks for reading.

ACAD: Acadia Pharmaceuticals ($28.84)

ACAD announced that their 4th quarter conference call will be held on Thursday February 27th at 4:00 p.m. The stock had a strong week gaining +20.52% and has moved up to prior resistance at the $29.00 area on heavy volume.

Bottom Line:  Looking forward to ACAD's 4th quarter conference call on Thursday, and will be listening for any new information regarding timelines related to the FDA process, and any update on the ongoing Alzheimer's phase 2 trial.  We are long term investors of ACAD.

IDRA: Idera Pharmaceuticals ($6.00)

IDRA will be presenting at the RBC Capital Markets' Global Healthcare Conference on Tuesday the 25th at 8:00 a.m.  IDRA stock had a solid week gaining +36%, and has broke above prior resistance on above average volume.

Bottom Line:  IDRA has almost doubled from the point we purchased the stock in the low three area. The company plans to disclose their phase 2 psoriasis trial results by the end of the first quarter which could be a stock moving event.  We continue to hold shares of IDRA.

Contact: portfoliomgt1@gmail.com