Tap, Tap, Tap Cyclacel Does It Again

In an August 22nd article entitled: Cyclacel Pharmaceuticals: What You Don’t Know, I mused upon the motivations behind Andrew Fein’s $173 price target on an equity that was trading for a scant $4.48 on the day prior to publication.  Was this based upon the notion conveyed by Cyclacel’s controversial CEO Spiro Rombotis in a promotional video found here that indicated a slower than expected evolution of the trial since enrollment had closed in December of 2014?  Or was this the precursor to tapping an ATM agreement with FBR Capital Markets & Co struck in June?  The answer came within the Q3 2016 Report, issued on November 14th, which showed that Cyclacel had tapped that agreement for $5m.  That’s right!  $5M.  And then again in October for an additional $1.5m bringing their cash on hand to $19.5m at the time of publication.  This for a company sporting a market-cap today of roughly $17M according to Seeking Alpha and $12m according to Yahoo.  I suspect that the former is more accurate as they’re likely taking into account the added and highly dilutive shares.

I don’t know why I’m susceptible to falling into the retail investor trap that is Cyclacel Pharmaceuticals time and again but I am.  And it’s becoming a very expensive habit.  It’s undoubtedly one of the more difficult stocks to read.  And August 22nd was no exception.  We had Andrew Fein valuing the equity at $60 per share without (SEAMLESS) success.  I too found Cyclacel’s developmental pipeline to be underrated.  And the possibility remains that sapacitabine’s historically long tail at the end of the KM curve could still allow for an epic Hail Mary result but management’s greedy sale of shares tells a different story.  As disappointing as the fire sale has been to the value of our holdings, even more frustrating for me was viewing that video now posted on the Cyclacel website.  Nowhere within the 6m:52s conversation is any mention of the DSMB assessment that the study’s futility boundary had already been crossed indicating a likely failure to meet the 27.5% improvement in overall survival.  That makes the video not only promotional but highly deceptive as well.

At one point in the conversation, the staggeringly uninformed host recaps sapacitabine’s strengths by stating: “So, no more infusion therapy, caregivers are freed up, patients are in-home, um, fantastic technology.”  To which Spiro Rombotis responds: “Well, we think so.”  But there’s a problem.  The sapacitabine only arm was dropped in this trial due to, most likely, lack of efficacy.  The active arm is composed of alternating infusions with decitabine.  Consequently, there would be infusions upon approval and patients would be in home half of the time over the course of their treatment.  The drug could be given on its own but that would be done without proof of efficacy as a standalone therapy.  What bothers me is that Rombotis makes no effort to be forthcoming by correcting the mistaken perception.

If you want a good look at what the hidden hand of ATM dilutions looks like, feast your eyes on this screen grab featuring a typical day’s trading of CYCC.

Note the two large volume spikes just prior to noon and just after 3 PM.  They are most likely the handiwork of a value diluting investment banker and his desperate partner.  And just below is what the Cyclacel chart looked like on the day of Fein’s enthusiastic appraisal and after the ensuing punishment inflicted on us all by way of the ATM agreement.  If you’re wondering why Cyclacel resorted to this retail investor unfriendly method of financing its operations you need only ask yourself who would subscribe to a public offering of a company with a pivotal study that was sure to read out poorly.

Wrapping it up, I’m underwater (again) on CYCC and have no choice but to hold.  The chance of SEAMLESS success is about 100k -1 given the amount of money the company has raised.  I have a small amount of dry powdered that I’d be tempted to wager on the day of published failure but the ATM facility would, no doubt, leap into action were the equity to jump off the floor thereby mitigating any chance I’d have to recover my losses.  And since CYCC’s market-cap has swollen by nearly 50% since before this all began, Fein’s price target would of necessity be cut by at least a third or more.  Therefore, the upside is downsized, though it remains significant.  But only, however, if the company starts to think of its shareholders well being.

Always be well…

Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute any suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing information, the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including me has imparted to you is foolish at best. I have no better access to resources or gift of opinion formulation than you do. I sometimes make mistakes. There are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion upwards or downwards. These events can be of a wide variety not limited to news-related occurrences, managerial decisions, trial failures, stock manipulations and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence, invest at your own considerable risk attaining the just reward your efforts have wrought.

Madness

ava-in-the-black-and-white-room

I have no position in any of the stocks mentioned but may initiate a position in Sarepta (SRPT) in the next 72 hours.

Love

I wish I could help you to understand what it is I’m experiencing.  Or, perhaps, that would be to burden you unnecessarily.  Who wants to be the one to awaken someone from their slumber?  To intrude upon their self-imposed sleep.

I’ve failed miserably as an analyst.  But I was meant to fail.  For it is through the exertion of our futile efforts that we at last abandon all sense of self direction.  Amidst the cacophony of greed that is the biotechnology sector of the stock market one’s voice cannot possibly be heard.  If there’s one thing that trumps Love it is agenda.  It appears that the carefully laid plans of men are no match for the consciousness of Christ Jesus.  But appearances are, as they say, deceiving.

After recoiling in disgust from the hedge fund dominated platform of Seeking Alpha, I sought refuge in the salt mines of the Yahoo Message boards.  The very same venue that had caused me so much pain in the past.  The pain of betrayal.  The pain of realizing the weakness of men.  Only my naiveté could possibly lead me back to such misery.  But I retraced these steps of innocence time and time again.  I had to.  If only to learn that the same vested interests control the flow of communication there too.  It seems that the vested agents of finance are everywhere to be found.

It would be nothing more than folly to recite what it is that I said on the Sarepta (SRPT) message board.  But a wounded ego and loss of memory where the log in my own eye is lodged compels me to do so.

My Original Thesis

On Seeking Alpha I told you that Biomarin’s Kydrisa, or drisapersen, would be rejected at adcom.  This formed the basis of my investment thesis.  Namely, that one of these two drugs – eteplirsen or drisapersen would have to be approved.  And since drisapersen was not, eteplirsen would be.  Parenthetically it’s worth noting that the much reviled Ronald Farkas chaired the drisapersen adcom just as he did the eteplirsen debacle but with no complaints from the YMB crowd.

After Adcom

I stopped authoring content on Seeking Alpha following the publication of that article.  Amidst the ripples of negativity infusing that bureaucratic fiasco, I changed my investment thesis to: the FDA would have to approve the eteplirsen application due to the enormous political pressures exerted by DMD professionals; U.S. Congressmen (most notably Senator Marco Rubio of Florida); patient advocates (especially their parents); and because the performance of FDA representatives at adcom was so deplorable as to dissuade opening the door to public censure.  Board participants clung to the scientific precepts contained in the company NDA documentation.

A Warning

Although I repeatedly wrote of “disappointment” attending to Accelerated Approval which arrived in the most decelerated of fashions, I did so with the unpopular caveat that the FDA would include something in the wording of approval to discourage a rampant rise in the stock price.  This cautionary proviso of a poison pill, if you will,  brought upon me the universal disdain of board participants who sought to marginalize my effect on the platform viewership.  Sadly, it worked.  Several contributors to the conversation asserted that formal approval wasn’t typically accompanied by agency appraisals on the application but was, rather, a straightforward yes or no.

What I Stated

I repeated the following points based upon my Thaumaturgical analysis.

  • Approval would be disappointing to those with high expectations.
  • The share price upon approval would be between $45 and $60.
  • There would be something discouraging in the FDA official press release.

What Happened

The application was approved.  In that press release, the FDA unexpectedly required a confirmatory study in exon-51 that was not named (PROMOVI) or (ESSENCE).  It was these latter two trials that board participants focused upon.  The former, was believed to be sufficient by some as it was already designated conformational, and the latter, was thought to be the outgrowth of a cooperative effort between the agency and the applicant.  Neither proved to be true.  And it was this added burden assigned that kept the stock price from a sharp ascension that many believed to be inevitable.

If that wasn’t bad enough, the agency also formally requested that the study which had formed the bedrock of justification for scientific consideration of approval be invalidated.  For the most part, this latest jab at the company’s integrity has been ignored by the investment community.

What’s Next

On the conscious plane of thought, I’m writing this to alert you to an opportunity.  I’ve already made a good deal of money on this equity, albeit, while diminishing my holdings so as to reduce my risk exposure.  That said, I’ll be looking to reinitiate a position in light of my new findings.  Yes, the company is now at a hefty $3bn market capitalization.  But the recent equity raise participants, in at just below $60 per share, are due a boost up for their display of loyalty.  And I believe they’ll get it.  The source of this catalyst, or these catalysts, could come from the following quarters.

  • A positive readout from the Phase-1 flu study.
  • A European approval or talk of interest from the EU.
  • An ex-U.S. marketing partnership.  Yes, they’ve played this down but that’s a sure sign of interest in consummation.
  • A sale of the Priority Review Voucher, or PRV.  This was granted shortly after approval was given.  A PRV voucher is a highly prized asset that grants a reduced time frame of consideration relative to a commercial application.  Many are bought by big pharma companies not to take advantage of their intrinsic worth but to keep them from falling into the hands of companies with competing products to their own marketed drugs.
  • And finally, a big pharma buyout.  Yes, every desperate retail investor dreams of an acquisition that will double or triple their stake in an equity despite the fact that most of these occur at a modest premium to the previous days closing price (Allegan’s recent purchase of Tobira (TBRA) being a notable exception).  But in the case of Sarepta, the likelihood is greater if only because their product, Exondy51, will bring in an immediate flow of uncontested cash revenue.  That PRV voucher becomes an added bonus.

pents01rx

In Conclusion

I honestly believe that Sarepta will release stock tickling news this very morning.  It’s only fitting given the fact that I cashed out for a sizeable gain while other loyalist hung in there in my absence.  If that proves not to be the case, I’ll reinitiate a large position at the earliest opportunity.  Hopefully, fear of an assault on the outrageous price of therapeutics in the U.S. by our two presidential debate participants will cause the sector to stumble today and Sarepta right along with it.

Staking out a position in the equity at this point in time is an easy call for me.

Always be well…

Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute any suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing information, the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including me has imparted to you is foolish at best. I have no better access to resources or gift of opinion formulation than you do. I sometimes make mistakes. There are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion upwards or downwards. These events can be of a wide variety not limited to news-related occurrences, managerial decisions, trial failures, stock manipulations and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence, invest at your own considerable risk attaining the just reward your efforts have wrought.

 

 

Cyclacel Pharmaceuticals: What You Don’t Know

I am long (CYCC).  I wrote this article myself and have not be compensated for it by any party mentioned or unknown.

Spiro Rombotis

“We are pleased to report that subsequent to the end of quarter the required number of events have been observed in the study approximately 1.7 years after the last patient was enrolled.”

Spiro Rombotis – August 10, 2016 – 4:30 PM ET – On the Phase 3 (SEAMLESS) Trial

Investing in nano to small-cap biotechnology stocks is hit or miss gambling at its finest.  At its finest because unlike a roulette wheel the gambler has an informed, albeit, clouded idea of where the ball will land.  The better the idea, or investment thesis if you will, the better your chances are at winning.  And should you come across a piece of information that advantages your chances, such as the quote above, you will do better than those who don’t.  And while we all might read the same report, or listen to the same conference call, what we comprehend there will be different.  And those differences are what separate the winners from the losers in biotech investment.

As previously mentioned in my introductory video, I left Cyclacel Pharmaceuticals (CYCC) for dead back in December of 2014 after having been notified by the company that the Phase 3 (SEAMLESS) trial had crossed the futility boundary and would be unlikely to readout in a statistically significant way.  The stock, which had been in steady decline dropped nearly 50% on that day and has not since recovered.

To say that I was surprised when on August 12th, H.C. Wainwright’s analyst Andrew Fein put a price target on CYCC of $173 a share is to understate that by quite a lot.  It did, however, get me to thinking about his possible motivations for doing so.  Before I address these issues, it should be noted that Fein’s price target is based upon a (SEAMLESS) surprise.  His estimate, sans (SEAMLESS) success, is, nonetheless, a lofty $60 per share.

In An Asymmetrical Investment Opportunity The Downside Risk Must Be Limited

And the best way to achieve that buffering is to find an equity which is already significantly undervalued.  So, why then is Cyclacel, a biotechnology company in this most lucrative sector of oncology, so steeply undervalued?  The answer to this question can be sourced in two ways.

First, if we go to the most recent quarterly report, we find that Cyclacel has lost investors over $329m since its United Kingdom inception in 1996.  This birthplace of Cyclacel will be important to our operating thesis and referred to as this article unwinds.  In 2007, shares reached a relative value of $600 each.  Since then, the company has executed numerous and unexpected equity raises and several reverse stock splits which have undermined investor confidence.

Second, with the cloud of a negative report on the (SEAMLESS) pivotal trial in elderly Acute Myeloid Leukemia hanging overhead, investors are rightfully loath to jump in ahead of that storm.  If one already knows that bad news is on the other end of the ringing phone, why pick it up in the first place?  That’s logical.  But sometimes it’s best to abandon logic in favor of a deeper understanding of what the issues are.  Because, in some peculiar instances, the bad news is that you’re just not getting everything you’d hoped for.  Only half.  I’ll explain that later.

To give you an idea of just how undervalued Cyclacel is relative to other oncology focused developmental biotech stocks, I’ve constructed a comparative graphic for your consideration.  Cerulean Pharma (CERU), a company applying its nanoparticle drug conjugate technology to cancer therapy recently suffered a setback in the development of its lead compound CRLX101.  In a Phase 2 trial targeting Renal Cell Carcinoma, CRLX101 in combination with Avastin or standard of care (SOC) failed to demonstrate statistically significant benefit against SOC alone.  In fact, the control arm outperformed the active arm.  Shares of Cerulean were cut by more than half on this day and, yet, Cerulean is still valued 50% higher than Cyclacel.

Ceurlean Comp

As you will note in this graphic, Cerulean is nearly 85% dependent on the positive perception of CRLX101 as a measure of its importance to the developmental pipeline.  Yes, there are other opportunities when pairing this compound with existing therapies but that is cause for concern when assessing the potential commercial value of the asset moving forward.  Contrast this with Cyclacel’s pipe which features a good mix of attractive candidates including a CDK inhibitor; a variety of MOA’s; and addresses a good mix of therapeutic populations and you are left to the inevitable conclusion that Cyclacel’s real worth has yet to be unearthed.  In fact, it is my considered opinion, that were you take sapacitabine out of the mix entirely; rename Cyclacel as, for instance, AdromedaBio; and launch the company within the framework of a fresh IPO, the resulting market-cap would reach in excess of a quarter billion dollars.  And yet, here we sit at $20m.

Fein’s Price Target On A (SEAMLESS) Homerun Could Be Way Off

In the world of greed that is Wall Street banks and biotech companies, we must always speculate on the motives of sell-side analysts in establishing what to casual observers might be fantastical price targets.  In the already referenced Q2 2016 report, we can clearly see that Cyclacel entered into an At Market Issuance Sales Agreement with FBR Capital Markets & Co. on June 23, 2016 to sell $4m worth of the company’s common stock.  To suggest that Fein’s comments which led to a $3.43 or 64% climb in the share price over 3 market days didn’t open the door to executing on that ATM agreement would be to bury one’s head in the proverbial sand.  While not knowing the specifics of this particular contract, ATM’s are usually structured so that the investment bank (FBR) buys shares at the lowest price within a specified period of time and is thereby able to sell them later for a sizeable profit.  That speculative bit of expedience noted, let’s see if we can’t find some logic in Mr. Fein’s generous assessment.

The Long Tail Of The Sapacitabine Kaplan-Meier Curve

In my last, and most critical, article on Cyclacel published June 10, 2014 I included the following graphic provided by the company depicting a long tail to the Kaplan-Meier curve.

Kaplan-Meier Plot MDS

And here is what the clinical trial leader of the (SEAMLESS) study, Hagop Kantarjian M.D., said at Cyclacel’s presentation regarding the shape of that curve.

You know, we’re noticing this in the long-term follow-ups, because people say there are no cures but when you look at the long-term follow-up of the frontline, and Dr. Manero makes that point, there is a tail to the curve which is in the range of 10 – 20%, even without the transplant. And these are patients who continue therapy. So it is possible. He makes that point consistently and people just dismiss it, but there is a tail of the curve with hypomethylating agents, even in the frontline setting. So it’s possible that maybe in the salvage set that that’s what we’re seeing in that context with sapacitabine. That is, there could be a population of patients that’s more sensitive to a particular drug where they stay longer on it.

So essentially, what is being said is that patients who respond well to sapacitabine tend to respond very well.  They live considerably longer creating a longer tail to the curve.  This is important because, unlike other molecules in other studies that may have crossed the futility boundary early, sapacitabine in the (SEAMLESS) setting may have been late to separate from control.  This study was supposed to have concluded in late 2015.  But the final events (deaths in both arms) didn’t happen until early in Q3 of this year.  Please go back to that first quote from Spiro Rombotis and reread it carefully.

The above graphic examines only 3 doses of drug and does not compare it to a control.  However, we can clearly see that early disappointment in survival by the majority of patients is met with encouraging longevity later.  I’m not saying that this will be enough to overcome an inauspicious start but I am saying that hope is still alive and in biotechnology investing that sentiment is meaningful.

Sapacitabine Remains Desirable If Only Because Oral Administration From Home Is Preferable To Intravenous Delivery In A Hospital

The population of patients in the (SEAMLESS) pivotal trial is age 70 and above.  Their constitutions don’t lend themselves to transplants or chemotherapeutic regimens that often save the lives of younger patients.  Many choose to simply die as peacefully and painlessly as possible in hospice settings.  Consequently, providing a milder treatment option that can be taken from home would be attractive to this sick and needy patient population.

Decitabine, commercially named Dacogen, was first approved by the European Medicine Agency on a failed Phase 3 trial (DACO-016) and is currently standard of care in elderly AML.  In the (SEAMLESS) trial, Dacogen is used alone in the control group.  This will give both the EMA and FDA their first look at the actual performance of decitabine in the clinical setting since 2011.  If sapacitabine, an orally administered alternative to Dacogen improves upon patient outcomes, both primary and secondary, even without being statistically significant, there is still a possibility that Cyclacel, originally a European company, could gain commercial approval there.  A nod in Europe would make access in the United States to sapacitabine almost mandatory on a patient-provider basis.

Additionally, Cyclacel is in ongoing conversations with the EMA to open the door to investigational trials involving sapacitabine in the pediatric population.  Positive trends in (SEAMLESS) will, no doubt, widen possibilities there as well.

Catalysts

Cyclacel is perhaps the least promotional company in biotechnology today.  Among the many that I’ve followed, Cyclacel is the least likely to toot its own horn.  And while, selfishly, I wish this weren’t so, I can appreciate the integrity of that approach.  Regardless, CEO Rombotis mentioned several upcoming catalysts that could drive the price higher.

  • (SEAMLESS) Phase 3 data report in Q4 2016
  • DNA Damage Response Program (Seliciclib + Sapacitabine) Progress Phase 1 Extension Cohort in a breast cancer patient population enriched for BRACA mutations
  • CDK Inhibitor Program (CYC065) Report topline results of the Phase 1 trial in patients with solid tumors
  • Investigator Sponsored Trials in Rheumatoid Arthritis and Cystic Fibrosis Report data when made available

It should be noted that recent and prior data readouts from some of the aforementioned trials were very positive with stock surges in excess of 50%.

In Conclusion

Cyclacel is becoming somewhat of the lovable loser on Wall Street.  Once thought to be underwhelming, the company’s early stage pipeline is showing signs of efficacy and gathering investor interest.  (SEAMLESS) remains an eyebrow raising study that could open the doors to commercial approval in the EU even without demonstrating statistical significance on its primary endpoint of overall survival.  And while Andrew Fein’s outrageous price target of $173 per share on a (SEAMLESS) homerun might be the most eyebrow raising of all, it too could be a lowball estimate should that dream come true.  How much of the AML and off-label MDS market could sapacitabine capture is unknown.  While my estimates are considerably lower than others, I’m no expert on this or any other subject.  Many qualified assessments run as high as $500m.  Should that be the case, Cyclacel would fetch a market capitalization of roughly $2b.

I’ll leave it to you and your calculator to do the math.

Always be well…

Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute any suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing information, the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including me has imparted to you is foolish at best. I have no better access to resources or gift of opinion formulation than you do. I sometimes make mistakes. There are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion upwards or downwards. These events can be of a wide variety not limited to news-related occurrences, managerial decisions, trial failures, stock manipulations and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence, invest at your own considerable risk attaining the just reward your efforts have wrought.

 

 

 

Web Exclusive! Trevena’s Can’t Miss BLAST-AHF Catalyst

We are long, Trevena (TRVN).

1-yr Chart

I’ll admit it.  I love a biotechnology company whose scientific cofounder also happens to be head of Investor Relations – Jonathan Violin, Ph.D.  It doesn’t get any better than that!

Now, the last time I pounded the table on behalf of Trevena it was a quarter-billion dollar market-cap that has since more than doubled at the completion of the TRV130 Phase-2 abdominoplasty trial.  Many would-be investors view an exponential rise in value as a one-time phenomenon subsequently exiting their positions with a hefty profit.  And, there’s nothing wrong with that!  Additionally, there’s been a recent slump in the stock price that I’ll try to lend some context to at the end of this article.  But TRV130, now commercially named Oliceridine, isn’t the only blockbuster compound in Trevena’s stable of assets undergoing a catalytic Phase-2 study.

TRV027, prior to the hoopla surrounding Oliceridine, was Trevena’s lead therapeutic candidate in that it was partnered with Allergan who still holds an option to move the drug through to commercialization.  Though the company’s fortunes have turned remarkably for the better, the original terms of that option – $65M upfront, $365M in backend milestones and 10-20% sales royalties still seem generous enough.  Trevena, however, is positioning itself to happily keep the compound given the company’s focus on becoming an emergent-care, drug-distributing powerhouse.  Regardless, if for any reason Allergan were to pass on its option to partner TRV027, Trevena’s stock would suffer a perception setback until such time as the company meaningfully clarified the situation.  Of note, a pass on Allergan’s option would likely come days, or even weeks, after topline data was released thereby negating any negative impact from a trader’s perspective.  The important thing for you to keep in mind is that, like Oliceridine’s Phase 2 abdominoplasty trial, the BLAST-AHF topline readout will be impactful.

BLAST-AHF is Designed to Succeed

When I look to trade a stock, I carefully examine how a trial is constructed.  By doing so, I can then determine how likely it will be to readout successfully.  This is important because the headline furnished by the company conducting the trial has to be positive in order for the stock to appreciate, at least temporarily, in value.  A good example of this was Cara Therapeutics (CARA) recent Phase-2a trial of CR845 in chronic pain patients suffering from osteoarthritis.  It’s not hard to publish a glowing press release when your trial is examining 4 dose regimens without a control arm.  The stock, however, popped as I predicted it would but not nearly as much as investors had hoped for – something I also predicted.  You see, the larger investment community is wise to trial constructs and their implications.

The BLAST-AHF trial, on the other hand, has more to offer catalyst driven investors than any other Phase-2 trial currently in existence.  I realize that’s a bold statement.  But it isn’t predicated upon Trevena’s penchant for designing Phase-2 endeavors that pit their compounds against active control agents, or even upon the aforementioned reward tied to Allergan exercising its option.  Rather, it’s based upon these three truths.

  • The BLAST-AHF Phase-2 trial has already received positive, compound affirming, news.
  • Trevena’s G-Protein Biased Ligand technology undergirding TRV027 has already received affirmation through Oliceridine’s success in a similar Phase-2 format.
  • The numerous endpoints of this trial are not only immanently achievable but, even if only a few are met, the press release to convey topline results will likely be positive.

Consequently, what you’re about to read could put in you the driver’s seat of equity enrichment.  I thought of submitting this article to Seeking Alpha for Pro publication but already know that the editors there won’t see the value intrinsic to this opportunity, or appreciate the keen insight driving my ideation, because it doesn’t fit their preconceived notion of what a Pro article consists of.  Consequently, I’m publishing it here for free.  Since my only goal is to enable retail investors to become successful, I no longer wish to place myself in situations where the frustration of educating those with fixed ideas subtracts from my enjoyment of doing so.  It is my hope that eventually the editorial staff at Seeking Alpha will tire of depriving their Pro audience of truly actionable information if only because that information resides outside the walls of their captive thinking.

If there’s nothing else that I could communicate to you today, please take away this idea for your consideration: BLAST-AHF is constructed for success.  You see, acute heart failure is a therapeutic landscape that hasn’t been properly surveyed.  And because of this, it hasn’t been the subject of clinical trials with historically defined endpoints that can serve as comparators.  Therefore, BLAST-AHF is, more or less, a grand experiment.  In fact, any one of the following four composite study endpoints could be used as the primary endpoint in a pivotal study.

Dyspnea – difficulty in breathing characterized by shortness of breath and an overwhelming feeling of drowning.

Worsening Heart Failure While Hospitalized – a clinically assessed set of parameters.

Length of Hospital Stay – how many days until released both from intensive care and from the hospital itself.

30-Day Readmission and Mortality Rates – self explanatory.

Yes, BLAST-AHF is well constructed in that it’s double blinded, placebo controlled and very large – 620 patients.  More importantly, though, it contains this multitude of actionable targets any one of which could be declarative of trial success.  Additionally, it’s somewhat de-risked in two important ways.

  1. The G-Protein Biased Ligand Technology behind it has already been validated by Oliceridine’s notable success in Phase-2.  It’s highly likely that Oliceridine in Phase-3 will continue to demonstrate the clinical benefits of being more powerful, safer and with fewer tolerability issues than standard of care morphine.  This will enable wide-spread commercial adoption of Oliceridine in acute pain settings.
  2. The pre-specified interim analysis of TRV027 in the BLAST-AHF study not only identified the most promising dose – 5 mg, but also opened enrollment to more compromised patients.  This wouldn’t have been done had there not been some tangible therapeutic benefit observed.

From the March 9th press release covering the results of the interim analysis, we have the following insights.

The purpose of the planned interim analysis was to qualitatively and quantitatively evaluate safety and efficacy data to determine how best to allocate future patients in the study to generate the most robust data. Upon reviewing the data, the data safety monitoring board (DSMB) and the BLAST-AHF Steering Committee recommended that future enrollment be weighted to the most promising dose of 5 mg/hr. Remaining enrollment will be weighted 2:1:2:1 for placebo, 1 mg/hr, 5 mg/hr, and 25 mg/hr, respectively. In addition, the DSMB and Steering Committee determined that patients with lower baseline systolic blood pressure could safely enroll in the study; inclusion criteria have been modified accordingly. As a result of the increased target enrollment, Trevena now expects to release top-line data in the first half of 2016.

Casual observers of this increase in patient participants probably came to the erroneous conclusion that the study wasn’t achieving statistical significance when, in fact, that likely had nothing to do with it.  It was Allergan that chose to pay Trevena an additional $10M to not only allow patients with lower baseline systolic blood pressure to come on board, but to scrap the original plan to select and study only the most promising dose which turned out to be 5 mg in favor of continuing with the other dosing regimens.

What’s Up With The Insider Sale And Filing Of An S-3?

Well, I can’t be certain of that.  And I’m not about to contact investor relations inquiring into the private business of any insider at Trevena in regard to selling their shares.  That said, Chief Medical Officer David Soergel’s sale of 94% of his Trevana stock for a profit in excess of $287K wasn’t a promising sign.  To jump to the conclusion, however, that it was a bad omen is equally erroneous.

The company curiously continues to carry a small amount of debt when it doesn’t have to which is confounding to me.  And on December 14th filed an S-3 registering mixed shares of common and preferred stock, debt securities and warrants totaling some $250M.  They also bolstered their stock purchase and sales agreement with Cowen and Company to the tune of $75M.  I never like these latter arrangements which are almost always depressive to share price appreciation and, therefore, deleterious to retail shareholders.

The motivation to register these shares is somewhat, but not entirely, clear to me.  They needed to replace the available shares for public offerings which were utilized in the aftermath of the Phase-2 Oliceridine trial success.  And, if BLAST-AHF reads out well, something I’ve predicted, they will no doubt conduct yet another public offering to buffer themselves from an Allergan rejection.  Doing so will allow Trevena to bring TRV027 to Phase-3 themselves or allow the company to negotiate a partnership with another interested party from a position of strength.

Additionally, these shares may be used to entice a partner for TRV734, Trevena’s chronic pain compound, by offering an ownership interest in the company.  Though this is a long-shot, it isn’t entirely out of the realm of possibility as Trevena has stated a desire to enter into a developmental agreement.  Trevena may also elect to use them in the furtherance of an ex-U.S. commercial partnership with respect to Oliceridine with options on further commercialized product candidates from their growing asset portfolio.

Always be well…

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