AGIX and PDLI- the big pharma movers of the day

I have followed Atherogenics from a a distance for a while. I was a cardiology fellow at Emory University- the birthplace of AGIX. They were born out of a few labs at Emory which focus on the anti-oxidant hypothesis for fighting coronary dz. The primary agent is a very potent anti-oxidant. I subsequenly practiced with a group who was involved in enrolling patients in the phase 3 trial for this drug. Recent IVUS trial failed to show improvement in the coronary plaque or cardiac events. The trial was most remarkable for very creative data manipulation. The result where supposed to be analyzed at one lab- and for no good reason a new core lab was chosen and the data was reanalyzed in mid trial. In addition, a subset of the study was analyzed and the result of this group( which were apparently positive) were released at one point causing the stock to soar, before it finally came crashing down. The only true positive thing to come out the trial was a lucky finding that the drug worked for diabetes ( with similar efficacy to Ranexa- which I recently talked about in a previous posting- and Januvia) The company announced today that they will be starting a phase 3 designed for diabetes. My advice is to run- not walk- away from this one as fast as possible. The management of this company is not very good- they seem to no hesitance to play loose with their data. Also, my experience from their phase 3, the drug is very poorly tolerated. Our drop out rates were very high. I can't imagine that this drug will ever be a commerical success- if it does get to the market- which is far from certain.

The other company that moved today was Protein Design Labs. They are a very interesting company. They own the patent on a process of making monoclonal humanized antibodies( I barely understand this- so don't worry if you dont) which have lead to a rich royalty stream from most of Genentech's drugs as well as a few others. In addition, the have a few drugs, they acquired along the way- most prominently Cardene IV- a great antihypertensive for patients whose blood pressure is very high and needs to be managed in an intensive care setting. They also have a pipeline of several drugs in different stages of development- both internal and some which are outlicensed to Biogen. I bought a stake in this company a while back after they announce results from a phase 2 trial on one of these drugs Ularitide which suggested that it might be a much safer version of natrecor- for the treatment of severe decompensated CHF- a very large potential market. I luckily sold the stock recently at 27 ( for no good reason). They have had several disappointing trials on their internal pipeline- and announced another failure today- on Nuvion which was about to enter phase 3 for Inflammatory bowel disease. Today they also announce that they will be reorganizing their company. Looking to sell their CHF pipeline drug Ularitide ( which will likely be sold for much less that it is worth)- as well as their commercial products. Instead they will focus on oncology and immunologic diseases. All in all, it is a strange decision. Ularatide has been the most valuable part of their pipeline and they didn't pursue phase 3 trials over the past two years while they looked for a partner to split the cost of an expensive trial. So instead, they will sell it. The sale of their other commercial drugs makes sense- they bought them to buy a salesforce for the drugs they thought would be coming forth from their pipeline. So what will be left?- an annuity of royalty payments and a pipeline of what seems to be mediocre oncology and immunologic drugs. The oncology drugs had some recent underwhelming phase I trials and the immunologic drugs would presumably be more agents like the recently failed Nuvion. If I were them, I would sell those too, and just collect their royalties. That is the only profitable part of the company and this revenue stream more than supports the current stock price.

I suspect this is a good buying opportunity for PDLI. They will likely do OK on the sales of Cardene and Ularitide( although they would have done better if this didn't look like a firesale) Those are both valuable assets. Also, their royalties are very lucrative. Equally importantly, their CEO who seems to be incompetent is likely on his way out. Third point has a large stake- and had been calling for his head even when the stock was doing relatively well. In better hands, this company could really turn into something interesting.