Two Biotech Catalysts That May Be Cancelled With Government Shutdown Print E-mail
By Brian Wilson-Lead Contributor   
Wednesday, 02 October 2013 07:35
While the market hasn’t reacted dramatically to the events unfolding in Washington, the shutdown of various US government entities directly affects pharmaceutical developers that are relying on action from the FDA in the near term.  This situation will essentially delay or cancel catalysts that should have created opportunity for binary events in particular biotech stocks.

It seems that there may be a delay in the scheduled PDUFA goal date for Pfizer (PFE) and Ligand Pharmaceuticals’ (LGND) NDA for their bazedoxifene/conjugated estrogens (BZA/CE) for the preventative treatment of postmenopausal osteoporosis and for the treatment of modern to severe vascomotor symptoms (VMS) and vulvar and vaginal atrophy (VVA) associated with menopause.  The original scheduled PDUFA date, which would provide the official FDA decision on its approval, may be delayed due to the partial shutdown of the government.

While approval will be a positive for the company, it’s worth noting that Ligand Pharmaceuticals appears to have already priced everything in with its 120% rally since the start of the year. A complete response letter (CRL) is unlikely, but potentially damaging to LGND due to the royalty payments that the company would not receive if the product is not marketed in the US. Pfizer, with its $191 BB market capitalization, should barely see any movement.

The same problem has been introduced to the Amarin Corp. (NASDAQ: AMRN) trade due to the ongoing government shutdown. As Amarin traders know, the company is scheduled for an advisory committee meeting on October 16th, 2013 for its flagship drug Vascepa (icosapent ethyl). The panel will hold a vote on the approvability of Vascepa in a new indication (the ANCHOR indication), which should influence the final decision for the FDA to approve or reject the current sNDA. If approved, Vascepa will be approved for use in patients with triglyceride levels between 200-500 mg/dL.

Although the adcom meeting does not guarantee any results with the final FDA decision (due on December 20, 2013), investors on both sides of the Amarin trade have been heavily debating the approvability of Vascepa into this expanded indication. Also important is the cardiovascular risk portion of the indication, which significantly expands Vascepa’s prospects.

Options activity in AMRN was very hot – particularly in the October ’13 and November ’13 contracts. The general implication is that investors were expecting a big move in AMRN as a result of the October 16th adcom meeting. The October ’13 contracts, which expire on October 19th, would have been perfect for an adcom-related play since they would expire right after the meeting.

However, it seems that many heavy speculators have lost their appetite for AMRN due to the possibility of a cancellation of the adcom. This provides an interesting opportunity for investors who believe that the meeting will actually take place, since options have gotten cheaper. The overall sentiment of the adcom panel and the extent of the move in AMRN is still hard to predict at this point, although it has become less expensive to make a play on volatility in this stock.

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