Copy of Michael Murphy Investment letter and his take on FDA, SHorts and Politics concerning DNDN
Kopiert aus MB Investor Village
Here is a copy of today's Michael Murphy Investment newsletter.
He is still strong on DNDN. He also pulls no punches in regards to the FDA, Politics, Shorts and FUD.......
Biotech MegaShift
Dendreon (DNDN) jumped sharply today when the company announced exactly what I told you they would. With the huge short interest, though, I am not surprised that there is so much FUD (Fear, Uncertainty & Doubt) circulating about this company. I told you that the current clinical trial is under a Special Protocol Assessment with the FDA, and that Provenge will get approval if it shows a statistically significant survival benefit at either the interim peek at the data around April 2008 or the final data due in 2010. I also told you that the company has powered the interim peek for approval -- that means there will be enough patient data to meet the 95% statistical significance level if Provenge works as well in this trial as it did in the prior two.
Here's a typical negative response from Jonathan Aschoff, an analyst with Brean Murray & Co. He said that today's rally was unwarranted because the ongoing study will likely fail its primary goals, as did two earlier Phase III trials. "If this one fails, it will be the third time around" and likely doom the medicine, he said.
But what he neglected to say is the primary goal this time is survival, and the last two times it was tumor shrinkage. He also neglected to say that the two prior studies met the secondary goal of survival. I don't believe these are accidental omissions, because he went on to repeat the current FUD rumor on Dendreon: The prolonged-survival data was seen in a trial whose design may have favored Provenge, by including too many sicker patients in the placebo group and not enough such patients in the group taking the vaccine.
This is almost certainly completely false, because (1) this is an old trick that the FDA caught on to more than 20 years ago, and (2) Dendreon hired numerous ex-FDA examiners to hammer on the application during the rolling filing process, looking for any weakness, and stacking the deck with sick patients is elementary school stuff.
Pierre asked: "I have read with interest that any drug must meet the FDA's standard of 95% certainty that any positive results claimed for its use are not due to chance. What was Dendreon's score and can you comment on Richard Miller's (president and CEO of Pharmacyclics and adjunct professor of oncology at Stanford University Medical Center) piece that appeared in the Wall Street Journal of May 10?"
Dendreon hit 95% certainty on their secondary endpoint of survival. I talked about Richard Miller's similar turndown in the April 19 Radar Report, and I agree with him completely that the FDA must change its method of dealing with new biologics for terminal diseases. I go beyond his position, though -- I believe the FDA should put all its effort into insuring safety in Phase I and Phase II trials and leave efficacy decisions up to doctors and their patients. If any firm wanted FDA efficacy approval, they could voluntarily do a Phase III trial and then use FDA approval on their label.
Vic asked: "What about another company, a competitor -- could they get approval earlier? If so, the market will be occupied by them. The stock DNDN will not go up, right?"
No one else can get a prostate cancer personalized vaccine into the market before Dendreon. All of these diseases have multiple submarkets and often there is room for a cocktail of drugs to treat the problem. I am not worried about competitors, at this point. My main concern is just getting Provenge approved.
Roberto asked a series of questions: "I too smell a 'rat' with the massive shorting of DNDN and the volumes starting May 9, 2007. Please read this conspiracy- sensitive writer's article. I don't know if his figures are correct.
Yes, I saw this. There undoubtedly is naked short selling in DNDN. It is easy to hide with a complaisant market maker. In the last half of the 1980s, I had one of the largest short funds in the U.S. I know how it works, and what the shorts did was urge people like Dr. Fleming to write to the FDA. That's all it took for the bureaucrats to win over the Commissioner.
Have you or DNDN contacted Thomas Fleming PhD's about his thinking as to what constitute "more clinical data on efficacy?"
No need to, it is obvious. He wants to see the data from a trial with survival as the primary goal. That is precisely the trial that is now underway.
Hypothetically, when DNDN and FDA jointly unmask the test subjects, and Provenge-takers' incremental life span form a three-sigma normal-curve cluster that is at least four months longer than those in the normal curve fit for the longest living test subject on the placebo, will such constitute as the missing and now-FDA-required "more clinical data on efficacy?"
Yes.
If so, when will such "unmasking" take place within the chronology of the FDA Phase tests?
Next April or May.
Another ISSUE is the absence to-date of a Partner whose expertise is in the appropriate process control, and manufacturing. Otherwise, test results may not materialize on the larger target population.
All of the Provenge used in the trials comes from a large contract manufacturer certified by the FDA
Do you see the likes of established names line Genentech or Amgen getting involved? Is DNDN the holder of the requisite patents such that they may enjoy leverage as a valuable partner for the Big Boys?
Yes and yes. The overseas partner certainly will be a big company. DNDN will try to stay independent in the U.S., which is practical because most advanced prostate cancer patients are treated in less than 500 clinics around the country, so a relatively small sales force can cover most of the market. But DNDN does have the patents if it comes to a buyout.
Please comment on the above many bases for Dendreon's value even before you do your pencil pushing. In short, don't you think there is a possibility that the FDA's COMPLETE RESPONSE LETTER of May 9, 2007 (aka Approvable Letter) is the sugar coating around a bitter hoax that Provenge could still potentially be?
Nope.
How and what analyses have you done to rule this out?
Everything I have done on this stock and this drug has been aimed at whether it works and whether it can be approved. I was right on what the Advisory Committee would do because I was right on the science. I was wrong on what the FDA would do because I was wrong on the politics. The head of Chiron told me 25 years ago that developing drugs is not about curing patients, it is about getting FDA approval. Sadly, that hasn't changed.
In response to the delay of Provenge's approval, the company has cut 40 marketing people, or 18% of the work force, as they won't be needed for a year. DNDN remains a strong buy under $7, which I expect it to revisit as the shorts spread FUD. My target remains $40.
Isolagen (ILE) was the topic of a question from William: "I bought Isolagen's September 2007 call option (ILE IZ) on 4/10/07. At that time the stock was trading at $4.47. Now it is at $3.60 and I have lost a little over half of my investment. Do you expect some good news between now and the third Friday of September 2007 or should I cut my losses?"
They will restart the clinical trial in the next several weeks, but I'm not sure it will come in time to save your option position. In general, I don't buy options on stocks selling for less than $20 a share, and virtually never if they are under $10. ILE is still a good buy up to $4.50 for my $9 target next year