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To
OTC Journal Members:
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How Much Does
the Market Care About Treatments for Psoriasis? |
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As mentioned in our original profile
of Astralis/Hercules Development, there are 17 other drugs designed
to attack the cause of Psoriasis in various stages of the FDA Approval
process.
The three leading candidates in Stage
III clinical trials are:
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Amevive- developed by Biogen
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Xanelim- developed jointly by
Genentech and XOMA
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MEDI-507- developed by Medimunne
This past Friday there was news from
XOMA and Genentech which gives us a glimpse as to the importance the market
is placing on the development of drugs to treat Psoriasis.
Genentech and XOMA jointly annouced
there would be a delay in the application for final approval of Xanelim.
Manufacturing on a large scale was being moved from the small scale labs
at XOMA to the larger manufacturing facilities at Genentech, and the FDA
was requesting a study to confim the quality of the large scale manufacturing.
As a result of the announcement,
XOMA
(NASDAQ: XOMA) was down nearly 30% and lost $200 million in market capitalization.
Biotech behemoth Genentech (NYSE: DNA) was down 4%.
Stocks of companies with competing
products Medimmune (NASDAQ: MEDI) and Biogen (NASDAQ: BGEN) were both up
on the news, 3.6% and 1.5% respectively.
It is clear the market is very interested
in treatments for Psoriasis. There is currently no known drug commerically
approved drug which causes clinical remission of Psoriasis, and the market
is enormous for new entrants.
XOMA currently carries a $1/2 billion
market capitalization with only about $12 million in annual sales. Therefore,
the announcement of a significant delay in the development of Xanelim had
a major effect on the value of the stock.
If Astralis/Hercules were to eventually
achieve the same market capitalization as XOMA, the stock would
be trading at about $18 per share.
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Technology
Differences |
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Most of the 17 drugs in the FDA approval
process are derived from monoclonal antibodies. The three leading drugs;
Amevive, Xanelim, and MEDI-507 are all monoclonal antibodies.
None of these drugs could be considered
a true vaccine, as the introduction of anitbodies into the bloodstream
will eventually cause the body to build up an immunity to the treatments.
Psoraxine, Astralis's drug,
is truly a vaccine. Psoraxine is a peptide developed because Astralis
has identified a gene. Therefore, there will be no build up of immunity
in the body.
MEDI-507 is the leading candidate
and most effective of the three drugs nearing the completion of the FDA
Approval process. However, in clinical trials MEDI-507 was able to reduce
the PASI value by 75% in 39% of cases.
In clinical trials in Venezuela,
Psoraxine was able to reduce PASI values by 75% in 74% of cases, making
the drug twice as effective as the leading competitor.
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Conclusion |
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Many risk factors still exist going
forward with this company. Hercules needs to close the purchase of Astralis.
The OTC Journal has spoken with representatives of Astralis and
Hercules, and we believe the transaction will be completed late this month.
More importantly, third party validation
of the technology would probably take the stock to the next level. We need
a multinational biotech or pharmacuetical company to express an interest
in investing in Psoraxine. The OTC Journal does not have the expertise
to evaluate eight years of clinical trials done in Venezuela. However,
companies in the industry do.
If and when the announcement comes
that Astralis has a major partner it will be too late to own the stock
at these levels. This is the nature of risk. Those willing to take the
risk will be rewarded if and when the event comes.
Since the initial one day sell off
in Hercules, the stock has been trading higher everyday. The chart tells
us there should be good support just under $3.20, but a break above $3.55
could send us over $4.
Wall Street has a great deal of interest
in treatments for Psoriasis as demonstrated in last week's trading
activity. Clearly, other companies will be introducing Psoriasis treatments
into the market long before Psoraxine, this does not mean Psoraxine
will not be an enormous commercial success. The best treatment is 1/2 as
effective as Psoraxine in clinical trials, and Wall Street will
assign a value to the drug years before it becomes commercially available.
Assuming Psoraxine will not
be commercially viable because of early competition is like assuming there
has been no market for pain killers since the introduction of aspirin.
Stand by for further updates as news
comes out this month.
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