Omeros (OMER)

Omeros is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing products focused on inflammation, coagulopathies and disorders of the central nervous system. Below is a breakdown and timetable of potential catalyst for the stock.

OMS302 is at the top of the chart and has submitted a new dug application to the FDA in July.  The company should get notice by the end of September whether the FDA will accept the NDA.  If accepted it should be another eight months until the FDA either approves the drug or not.  Based on two strong phase III trials, the application should be accepted and the drug approved mid year 2014.  Even though the OMS302 program is the next potential catalyst on a timeline basis, the reason we have purchased OMER for investment is based on the PDE 10 inhibitor program for Schizophrenia, called OMS824.  We are mainly interested in the company for this central nervous system drug inhibitor PDE 10 or OMS824.  

  

OMS824 just began the enrollment stage for a phase II study evaluating patients with Schizophrenia announced on September 19th, with results to be released by years end.  There is currently no approved treatment, so this would be considered a drug for an unmet need.  The previous phase I studies showed that the drug, even delivered under high dosage, was well tolerated and safe for use, leading the company to start this very important phase II trial.  The potential pool of patients for this indication is around 2.2 million Schizophrenia patients in the U.S. with over $16 billion in sales of atypical Antipsychotics in 2009.
PDE10 Patent expiration:
2027 for composition of matter.

Risks:  The risks associated with OMER include financing, the phase II OMS824 upcoming trial, and the FDA approval processes.  The company will need financing shortly with only around $21 million in cash left and a burn rate of around $4.5 million per month.  The company also has increased it's debt level to $20 million and is paying 9.5% for it. So I expect some dilution within the next six months.  But that is typical for an early stage biotechnology company.  Below is a weekly chart of OMER.

Bottom Line:  The company is a high risk micro cap stock with just a $200 million market capitalization.  We are holding shares for their OMS824 Schizophrenia program that could have a huge payoff if they achieve significant results.  If the current phase II OMS824 program does show good results, then the market capitalization should double to $400 million or roughly $15.00 per share minimum.  The risk to reward at these price levels looks promising. Thank you for reading.

Contact: 586-431-8000

ACAD: ($22.63)

Acadia Pharmaceuticals (ACAD) presented at the Morgan Stanley Global Healthcare Conference on Monday at 9:25 a.m.  Here are a few takeaways from that conference.

A) CEO Uli Hacksell stated that they expect "very significant" pricing power of Pimavanserin once approved by the FDA, due to past new drug launch comparisons, safety, and the unmet need with victims with PDP.
B)  ACAD believes Pima can be used for all kinds of dementia outside of Parkinson's and Alzheimer's disease.
C)  The FDA and ACAD agree that there are no safety concerns with Pima regardless if the indication is for Parkinson's or Alzheimer's.
Overall, there were good questions asked from the Morgan Stanley analyst, and equally strong replies from ACAD management.
The priority list for ACAD was pointed out as being:
1.  To continue to gather all relevant information to submit an NDA (new drug application) to the FDA.
2.  To run a phase II trial for patients with Alzheimer's disease.
3.  Run a phase II Schizophrenia trial using Pima coupled with Risperdal.

The stock made a new all-time closing high on the day of the conference, which was Monday.  Below is a weekly chart.

Bottom Line:  ACAD is moving along nicely with their lead drug Pimavanserin and intends on submitting and NDA by the end of 2014.  They also plan on starting a phase II Alzheimer's disease trial by the end of 2013.

From my previous post Future Value of ACAD, I ran some revenue estimates and came to a near term price for ACAD of around $29.00.  Judging from Monday's stock making a new high, I think investors are starting to see the big picture of what Pimavanserin can potentially be......a new and safe blockbuster drug to treat Parkinson's, Alzheimer's and other dementia related disorders.  Thank you for reading.

Disclosure:  We hold ACAD equity and options, CBST, ONTX, and January puts on the SPY.

ACAD: Future Value of ACAD ($19.96)

The goal for this post is to compare any similar drugs on the market today, particularly a anti psychotic, and compare the prices with what Acadia's Pimavanserin might be able to sell for once the drug is approved for Parkinson's Disease Psychosis (PDP) and goes to market in 2015.  From there, we can come up with some revenue estimates and market capitalization and finally a fair stock price per share estimate based on peak revenues.

For comparison's, I have inquired about the price of Abilify, which is a anti psychotic drug used to treat various psychotic conditions and will remain a non generic drug until April 2015.  I choose Abilify because it is a non generic, and many anti psychotic drugs are the only treatments available at present to treat PDP off-label. Clozapine is another anti psychotic drug used, but, it is now generic, so an apples to apples comparison cannot be made.  I was quoted prices at CVS and Sam's Pharmacy for Abilify.

Cost of Abilify at CVS Pharmacy
$14,484.00 per year supply 30 mg daily tablet.
$1,207 for a 30 day supply of 30 mg tablet.
$40.23 per pill cost daily 30 mg tablet.

Cost of Abilify at Sam's Pharmacy
$11,587 per year supply 30 mg daily tablet.
$965.60 for a 30 day supply of 30 mg tablet.
$32.18 per pill cost daily 30 mg tablet.

We'll use the average of the CVS retail price and discounter Sam's to derive the annual cost of Abilify 30 mg tablets for comparisons purposes of what Acadia's Pimavanserin might be able to sell for once it reaches commercialization in 2015. Which is $40.23 + $32.18 = $72.41 / 2 = $36.20 per 30 mg Abilify daily tablet.
But to be conservative, I am going to discount the daily cost of the Abilify tablet down around -10% to $32.80 per daily use priced to the consumer.

Which equates to:
$11,808 per annual supply.
$984.00 monthly supply.
$32.80 per pill daily 30 mg tablet.

I am going to refer to different analyst revenue prediction reports and Acadia presentations to draw further conclusions on future revenue based on the overall US Parkinson's Disease Psychosis market.
1,000,000 With Parkinson's in US.
30% develop PDP or Parkinson's Disease Psychosis at some point.
300,000 total patients with PDP.
50% penetration rate of those with the psychosis.
150,000 the actual number treated for PDP with Pima out of 1 million Parkinson's total victims - conservatively.
$32.80 = retail price per tablet per day of treatment, based on the Abilify retail pharmacy prices.
$18.00 = Sales to Acadia per 40 mg tablet before all the wholesale roughly (35%) and retail (35%) markups prior to being sold to the consumer.
$6,480 = Per patient ACAD annual revenue, ($18.00 per day * 30 days * 12 months)
$972,000 million = Total peak revenue to ACAD, (150,000 patients * $6,480 annual revenue to ACAD) U.S. Parkinson's Psychosis indication only.

The average biotechnology acquisition is a market capitalization of 3-4 times peak sales.  So, at three times peak sales from Pimavanserin for U.S. PDP, we calculate a share price by taking peak annual revenue of $972,000 million * 3 =  $2.916B market capitalization / 100,000,000 (approx. shares outstanding) = $29.16 stock price. The stock is currently trading at $20.00 per share or just 2.0 times peak sales.

Assumptions to future stock value
A)  The price above of $32.80 per daily tablet, reflects the mark up by the wholesaler and the pharmacy company selling to the consumer, not the price Acadia sells from manufacturing.  I believe the figures above are close enough to work with and scale backwards.
B)  Pima can price at $32.80 per tablet to the public.
I view the $32.80 per tablet as fair given the fact that Pimavanserin has a clean safety profile compared to Abilify and there is not another drug to compete with Pimavanserin for PDP.
C)  ACAD can penetrate 50% of the US market (50% of  300,000) for the patients that develop PDP.
PDP has an unmet need, and Pimavanserin has a clean safety profile compared to other anti psychotics that are being used today that have black box warnings.

Further note, that these revenue figures only include PDP in the U.S. and not Alzheimer's Disease Psychosis or ADP which patient's have similar symptoms. The ADP market is roughly four times the size of the PDP market that I just ran revenue figures on above. The math get's a lot more fun if ACAD can prove through trials that Pimavanserin works as well with Alzheimer's patients as it does with Parkinson's Disease patients as they are planning a phase II Alzheimer's Disease Psychosis study by year end 2013.  Also, the company holds world wide rights to Pimavanserin and the above revenue potential does not include the rest of world outside of the US, nor does it include any potential off-label for other indications.  The U.S. patent for Pimavanserin runs until mid 2028, and European patent runs through 2024.  Thank you for reading.

Disclosure:  We currently hold shares of ACAD.

ACAD +12.64% Today

We first started buying ACAD in the $6.00 range here ACAD - Pharmaceutical in February.  Today the stock was up 12.64% to $16.58 on heavy volume.  There wasn't a public press release from the company today to prompt the move higher, so I expect it was general funds buying the story of long term potential.  Below is a daily chart of ACAD.

Bottom Line:  We have no intention of selling the shares anywhere near these prices, as the future opportunity looks strong for their lead drug Pimavanserin for both Parkinson's and Alzheimer's disease.  Thank you for reading.

ACAD Pharmaceuticals

We sold ACAD yesterday in the $14.20 range after the stock has doubled within the last few months.  We used the strength of the stock from being inducted into the Nasdaq Biotech Index as of Monday the 20th.  The nearest catalyst looks to be the starting of the Alzheimer's (ADP) phase II trial which the company guided for  the second half of 2013.  Since we are still bullish on the long term prospects of ACAD we will look to re-enter the stock at lower prices after working off severely over bought technical readings, not only on the stock itself, but on the overall market in general is also overbought.

Above is a daily chart of ACAD.  We may be interested in owning the stock again if it drops to around the $13.00 level or lower, approximately -10% lower than our sell price on Tuesday.  

Bottom Line:  Although we like the long term prospects of ACAD, we think the stock will retrace some of the move higher it has achieved over the last two months.  The retrace will be healthy and set the stage for new highs in the coming months ahead.  Thank you for reading.

ACAD Secondary Offering

ACAD is pricing 8 million shares at $12.50 for a total of $100 million.  The offering would bring their cash total to approximately $178 million at 2013 year's end company forecast.  I like the move, as it can help in potential negotiations for partnership or outright purchase by a larger entity.  The stock in pre-market is actually trading higher than the offering price which is extremely positive for now.  The cash will also aid in running the Alzheimer's (ADP) trial phase II, and a European Parkinson's trial if they wish to.  After the offering the share count will total around $88 million shares outstanding.  We hold shares of ACAD.  Thank you for reading.

ACAD: First Quarter Conference Call ($12.03)

Since ACAD is a emerging biotech, there is not much to read into the financial part of the news release, other than what their cash on hand and expected year end cash will be.
-ACAD currently has $101.5 million in cash and expects to end 2013 with around $78 million.
-With their impressive phase III results for Pimavanserin for Parkinsons disease psychosis (PDP), they are planning an expedited path to an NDA (new drug application) filing expected mid 2014.
-Plan on initiating a phase II study with their lead drug Pima for Alzheimer's disease end of 2013.
-During the conference call today the CEO also stated that the FDA has not approved any drug for the treatment for PDP, and that there is no current drug to effectively treat Alzheimer's (ADP) either.

The stock on a weekly basis above, is still overbought despite the pullback from the high upper 13.00 level.  Overall, the stock has held up quite well since doubling in price over the last few months.  

Bottom Line:  ACAD is in a very good position with plenty of cash for now, a long patent life to 2028, and a single, safe and effective drug for PDP and potentially Alzheimer's.  Thank you for reading.

Volatility Reigns

Volatility has been running high this week as the dollar more than anything is playing havoc with the markets. None of this volatility negates the uptrend that we are currently experiencing.  Technically, the markets are oversold at present in the short term.  Couple of charts below.

The S&P above shows a lot of volatility, but uptrend remains intact.

The TRIN is oversold significantly, and should retrace.  Thank you for reading.

Bottom Line:  What's moving the market is....
A)  US Dollar daily swings.
B)  Option expiration week.
C)  Subpar corporate earnings releases.

Normal Pullback Nothing to Fear

Using the last two pullbacks as history, a -4% move lower would be healthy.  Chart below.

Bottom Line:  Markets need these -4%-6% pullbacks while keeping the uptrend intact.  The last two pullbacks were -3% and -4% since implementing QE3 fully in September.  So I am looking for a similar move lower which would keep the uptrend intact and lead to new highs in the weeks ahead. Thank you for reading.

ACAD Up +50% Premarket

We originally bought ACAD around $6.00 per share here ACAD Pharmaceuticals - ACAD.  ACAD is up pre-market 50% to around $12.00 on news that it will seek FDA approval for Pimavanserin a Parkinsons disease psychosis drug.  After meeting with the Food and Drug Administration and based on data from a successful phase III study already completed the company will no longer conduct a confirmatory phase III study that was planned to start this month.  The company is currently targeting NDA submission (new drug application) by the end of 2014.
Bottom Line:  The phase III study that was released last November was statistically significant.  Having the opportunity to skip a second phase III study will eliminate approximately a year or more from potential approval to drug to market.  The company is a strong candidate for acquisition by large pharma as the patent  coverage for Pimavanserin is 2028.  Thank you for reading.

Nokia Trend Reversal

Nokia has had a couple of good days in a row, and has the look of displaying a trend reversal pattern shown from the charts below.

The daily chart above has been trading below the 20 day exponential moving average for over the last few months, but has cleanly broken above the moving average on higher than average volume today.

The weekly chart above, is shown with fibonacci re-tracement levels.  Typically a healthy pull back for a stock would be to move down to the 50% level.  Nokia did just that and has bounced off that level nicely.  The moving indicators are still bullish (green above purple line) despite the 50% re-trace over the last few months.

Bottom Line:  Nice technical picture developing with NOK, as it is trading above the 20 day ema, has volume above average, indicators still bullish, and bounce off the 50% retrace fibonacci level.  Thank you for reading.

Resilient Market

After a Friday jobs report that came in below expectations, the market has showed its resilience and has had a strong bounce back.

The chart above shows how the SPY pulled just below the 20 day exponential moving average (green line) similar to the last two small pullbacks and has headed higher since.  New highs should be attained soon.  

Bottom Line:  Many have been calling for a market correction to occur, but there is a continued bid under this market that has kept this uptrend. I am looking for new highs in the coming days to weeks.
Thank you for reading.