Opus Biotech Update · 2015. 2. 6. · 1 Opus Biotech Update February 6, 2015 Biotech 2014: A...
Transcript of Opus Biotech Update · 2015. 2. 6. · 1 Opus Biotech Update February 6, 2015 Biotech 2014: A...
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Opus Biotech Update February 6, 2015
►Biotech 2014: A Retrospective
►Best Ideas for 2015
Michael S. Weiss
Lindsay A. Rosenwald, M.D. Portfolio Managers
Disclosures No assurance can be given, that the Partnership will achieve its objectives, and investment results may vary substantially from period to period. Additionally, your individual returns may be different than the overall performance of the Fund as a result of, among other reasons, Special Investments made prior to the date of your investment, as to which you will not participate. -The information contained herein does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product. Any such offer or solicitation may only be made by means of delivery of an approved confidential offering memorandum. All information herein is for informational purposes only and should not be deemed as a recommendation to buy or sell. The information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it. Before making an investment, prospective investors are advised to thoroughly and carefully review the Confidential Private Placement Memorandum, and any supplement thereto, for all details regarding the offer and disclosure of the risks involved. The recipient is urged to discuss the risks involved with their financial, legal and tax advisers to determine whether an investment such as the Fund is suitable for them. This Investment may be illiquid and no secondary markets for the Interests exist. In addition, the Fund has limited operating history. This document and any information contained herein contains restricted, privileged and confidential information and are intended for distribution to authorized persons only. The distribution of this document may, in some countries or jurisdictions, be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of and observe these restrictions. If you are not the recipient of this document directly from the Investment Manager or its authorized representatives, you must not disseminate, modify, copy or take action in reliance upon it unless expressly permitted by the Investment Manager. None of the information contained herein may be used, reproduced or transmitted, in any form or by any means whatsoever, including but not limited to electronically, mechanically, by way of recording or by the use of any information storage and retrieval system without the written permission of the Investment Manager. -The Fund has not been registered under the Investment Company Act of 1940, as amended, and the Interests have not been registered under the Securities Act of 1933, as amended (the “1933 Act”), or any state or foreign securities laws. The Interests will be offered and sold only to “Accredited Investors” as defined in Regulation D under the 1933 Act. 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This document is as of the date indicated, is not complete nor has it been audited, and does not contain certain material information about the Fund, including important disclosures and risk factors associated with an investment in the Fund and is subject to revision at any time and the Investment Manager is not obligated to inform you of any changes made. -Certain information contained in this material constitutes forward-looking statements, which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the funds described herein may differ materially from those reflected or contemplated in such forward-looking statements. -Past performance is no guarantee of, and is not necessarily indicative of, future results. The Fund’s proposed investment program involves substantial risk, including the loss of principal, and no assurance can be given that the Fund’s investment objectives will be achieved. Among other things, the practices of short selling, private placement investing, use of leverage and other investment techniques as described herein can, in certain circumstances, maximize the adverse impact to which the Fund’s investment portfolio may be subject. All investments involve risk including the loss of principal. The Fund may also use varying degrees of leverage and the use of leverage can lead to large losses as well as large gains. Trading guidelines and objectives may vary depending on market conditions.
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Opus Point Healthcare Innovations Fund Snapshot as of January 31, 2015
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1 Includes capital seeding a long-only strategy that is not currently being marketed as well as a separately managed account
• Long-bias, long/short equity biotechnology fund
• Target net exposure 50%-100%
• Experienced PMs; 15+ years working together; 45+ years of combined experience investing in biotech
Executive Overview
• Fund AUM: ~$105MM
• Firm AUM: ~$152MM1
• Partners Capital: ~40% of Innovations Fund AUM Assets
• Prime Broker: Goldman Sachs
• Administrator: Orangefield-Columbus
• Auditor: KPMG, LLP
Service Providers
1 Assumes sales of securities will not represent >20% of the daily trading volume
Key Investment Principles
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Maintain a highly liquid portfolio
Maintain a diversified portfolio
Target position size: ~3%
Number of positions: 40-60 Long - 20-30 Short
Avoid single day risk events/binary events (e.g. clinical or FDA results)
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Performance History
$2,753 $11,089
20%
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Growth of $1000 Since Portfolio Inception
$800
$1,300
$1,800
$2,300
$2,800
$3,300
$3,800
$4,300
Nov
Feb
May
Aug
Nov
Feb
May
Aug
Nov
Feb
May
Aug
Nov
Feb
May
Aug
Nov
Feb
May
Aug
Nov
Feb
May
Aug
Nov
2008 2009 2010 2011 2012 2013 2014
Opus Innovations
Fund
S&P 500
Healthcare (HCX)
S&P 500 (GSPC)
Compounded Annual Return
~26.45%
Performance returns are calculated net of fees and expenses
Portfolio Trades
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Long Book Short Book
Revenue-Generating (aka Post-FDA)
• Large Cap biotech
• Most likely to be acquired;
utilize Pharma Acquisition
Pricing Model
• Pipeline’s offer exceptional
upside optionality
• Broader healthcare
• ETF basket to hedge out
macro risk (eg “risk-off”
trade)
• Manage to net exposure
Development Stage (aka Pre-FDA)
• Small and Mid-cap biotech
• Take advantage of
inefficiencies in pricing
based on time
• Event driven but avoid
binary events
• Expensive and Far Away
• Priced to perfection with
too much time to next
event and many chances
to fail
• Classic “Over-Hyped”
stories
Current Portfolio Construction Current net exposure: 65%
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Small 8%
Mid 19%
Large 73%
Market Cap
74%
26%
Stage of Development
Post FDA
Pre FDA
Revenue Generating
Development Stage
Commentary on Current Positioning:
• Concentration in best Large Cap biotech offers attractive growth returns while providing
level of protection from a biotech specific or macro correction
• Large Cap biotech entered a new innovation cycle a few years ago that we believe will continue; best leveraged to take advantage of “genomic revolution” underway
• More balanced approach across market caps and stage of development following a correction
NASDAQ Biotechnology vs S&P 500 The Great Recession: May 2008 – March 2009
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NASDAQ Biotechnology vs S&P 500 2011: Volatility Shocks the Market
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Biotech Outperformed in 2014
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DJIA
• ▲7.52%
Nasdaq
• ▲13.4%
S&P 500
• ▲11.39%
NBI
• ▲34.1%
Source: Yahoo Finance
Another Great Year for Biotech IPO
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Source: IPOscoop.com; EY Life Sciences Center; Opus Point Partners Research
FDA approved record number of new drugs
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In 2014…
CDER approved 41 New Molecular Entities (NMEs)
CBER approved 16 BLAs
CDRH approved 37 PMAs
Notable Approvals
New Immuno-oncology drugs Keytruda (pembrolizumab) by Merck (MRK) and Opdivo
(nivolumab) by Bristol (BMY);
New antibiotics Dalvance (dalbavancin) by Durata (DRTX), Sivextro (tedizolid phosphate)
by Cubist (CBST);
New HCV antivirals Harvoni (ledipasvir/sofosbuvir) by Gilead (GILD) and Viekira Pak by
Abbvie (ABBV);
New IPF drugs Ofev (nintedanib) by Boehringer (Private) and Esbriet (pirfenidone) by
InterMune (ITMN);
Northera (droxidopa) by Chelsea Therapeutics (CHTP) for NOH
Otezla (apremilast) by Celgene (CELG) for psoriatic arthritis,
Zydelig (idelalisib) by Gilead (GILD) for CLL;
Blincyto (blinatumomab) by Amgen (AMGN) for ALL.
Top Biotech Events in 2014
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New Immuno-Oncology Drugs Approved
• On September 4, 2014, Merck (MRK) received Accelerated Approval of KEYTRUDA (pembrolizumab). On December 22, 2014, FDA approved Opdivo (nivolumab) by Bristol-Myers Squibb (BMY) for advanced melanoma.
Pedal to the Metal for CAR-T IPOs
• In 2014, there are several new IPOs of companies developing Chimeric Antigen Receptor (CAR-T) Therapies for cancer, including Kite Pharma (KITE), Bellicum Pharmaceuticals (BLCM) and Juno Therapeutics (JUNO).
2 New Drugs for IPF
• On October 15, 2014, FDA approved Esbriet by InterMune (ITMN) and Ofev by Boehringer (Private) for idiopathic pulmonary fibrosis.
New Antibiotics Approved
• On June 20, 2014, FDA approved Sivextro by Cubist Pharmaceuticals (CBST) to treat skin infections. On August 6, 2014, FDA approved Orbactiv by The Medicines Company (MDCO) to treat skin infections. On December 19, 2014, FDA approved new antibacterial drug Zerbaxa by Cubist Pharmaceuticals (CBST).
PI3K-delta Inhibitor Approved
• On July 23, 2014, FDA approved Zydelig (idelalisib) by Gilead Sciences (GILD) for Relapsed Chronic Lymphocytic Leukemia, Follicular Lymphoma and Small Lymphocytic Lymphoma.
HCV Competition Intensifies
• On October 10, 2014, FDA approved first combination pill Harvoni by Gilead Sciences (GILD) to treat hepatitis C. On December 19, 2014, FDA approved Viekira Pak by AbbVie (ABBV) to treat hepatitis C.
Ferric Citrate Approved
• On September 4, 2014, Keryx Biopharmaceuticals (KERX) received FDA Approval of Ferric Citrate for Dialysis Patients with Hyperphosphatemia.
New Targets for Leukemia
• On April 6, 2014, Agios Pharmaceuticals (AGIO) reported initial Phase 1 Data demonstrating clinical activity of AG-221 in advanced blood cancers. On November 18, 2014, eported early Phase 1 Data showing clinical activity of AG-120 as a single agent in AML.
Source: Opus Point Partners Research
Diversity of Returns in 2014
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Performance by Stage of Development
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Selected 2014 Top Opus Performers
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InterMune, Inc. (ITMN)
2014 Performance: 402%
12/31/13 Average Cost/Share: $10.66
2/25/14: Positive Phase 3
Pirfenidone Data in IPF 8/24/14: Roche Agrees to Acquire
ITMN for $74 per share
Selected 2014 Top Opus Performers
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Receptos, Inc. (RCPT)
2014 Performance: 323%
12/31/13 Average Cost/Share: $28.37
6/9/14: Positive Phase 2
RPC1063 Data in MS
10/27/14: Positive Phase 2
RPC1063 Data in UC
Selected 2014 Top Opus Performers
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Achillion Pharmaceuticals Inc. (ACHN)
2014 Performance: 269%
12/31/13 Average Cost/Share: $3.08
6/10/14: Initiation of ACH-3422
Dosing and Ability to Resume
Sovaprevir Clinical Program
6/9/14: IDIX Acquired by MRK for
24.50 per share (229% premium)
11/8/14: 100% SVR12 in
Phase 2 Combination Study
With ACH-3102
Attribution: Binary Event Trades
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Total Return: 51.0%
Holding Period: 10.0 Months
Time Before Event: 8.9 Days
Binary Events: Ph 2/3 Data
Advisory Panels
Regulatory
Decisions
2014 Binary Event Trades
Selected 2014 Binary Event Divestments
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BioDelivery Sciences [BDSI]Avg Cost Avg Price Months IRR
$3.73 $9.43 16.4 97.4%
1/23/13: Initiated Position
6/5/14: Exited Position
6/9/14: FDA approves
BUNAVAIL for Opioid
Dependence
Selected 2014 Binary Event Divestments
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2/15/13: Initiated Position
2/5/14: Exited Position
2/12/14: Data from Ph 3 Study
of VEN 307 in anal fissures
Ventrus Biosciences [VTUS]Avg Cost Avg Price Months IRR
$2.61 $4.06 11.7 57.8%
Hot Investment Areas in 2015
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Chimeric Antigen Receptors (CAR-T)
Target? Tumor type?
ENT
“The ear… is the new
eye”? (NYT 1/9/2015)
Gene Therapy + Orphan
Diseases
AAV? Lentivirus?
Immuno-Oncology PD-1, PD-L1, other checkpoints
Oncology (as always)
Cancer metabolism, epigenetics,
novel kinases
Hepatology (post-HCV)
HBV, NASH, etc
What we like and don’t like for 2015
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Positive on…most large cap
biotech…masters of innovation and growth
Positive on…mid-cap companies with
unequivocal activity at discounts to
success…clear path to approval
Good Science
Good Stocks
What we like and don’t like for 2015
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Concerned about…drug pricing…
competition …biogenerics:
most at risk: AMGN, GILD, ABBV
Concerned about…over-hyped and over-
valued small and mid-cap companies…any
rotation out of biotech or macro correction
will have a dramatic negative impact
Good Science
Good Stocks
Medivation Inc. (MDVN)
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Stock Info: Market Cap = $8.0B; Price = 103.51.
XTANDI (Key Drug): Approved in pre- and post-chemo metastatic castration-resistant prostate cancer; 2014 WW net sales of $1.2B.*
Zytiga has been on the market for <4 years (approval in 4/2011) Zytiga + XTANDI = $3.4B WW sales.
DCF Assumptions:
XTANDI achieves $5B in Peak sales by 2026 for approved indications.
Additional $2.4B in unadjusted peak sales (60% POS) in earlier stages of prostate cancer.
Terminal value: 5x FCF multiple (limited terminal value).
Thesis:
Current price is in line with DCF, 37% below target acquisition price of $142.
Room for upside:
Attractive acquisition target highly accretive to Astellas.
XTANDI potentially favored in pre-chemo setting; unlike Zytiga, XTANDI does not require use of steroids.
Positive readouts for ongoing XTANDI clinical trials in non-metastatic PC and breast cancer.
Better than expected data could yield an additional $2B in WW sales.
* Annualized run rate in 3Q14
Regeneron Pharmaceuticals, Inc. (REGN)
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Stock Info: Market Cap = $42.1B; Price = 413.87.
Eylea (Key Drug): Approved in wet AMD, DME, and RVO; 2014 WW sales of $2.7B.*
DCF Assumptions:
WW Eylea peak sales of $6B and WW Alirocumab (PCSK9) peak sales of $3B.
Terminal growth rate of 2%.
Thesis:
Current price is 28% below target acquisition of $530.
Room for upside:
Continued pipeline success.
Sarilumab and Dupilumab both in Phase 3, could achieve >$1B in WW sales.
Greater than expected market share for Eylea and Alirocumab (PCSK9 sales could cross $3B).
* 2014 WW Bloomberg sales estimate
Clovis Oncology Inc. (CLVS)
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Stock Info: Market Cap = $2.3B; Price = 66.91.
Rociletinib (Key Drug): Oral inhibitor of activating EGFR and T790M resistance mutations being studied in NSCLC.
NDA and MAA submissions expected in mid-2015.
DCF Assumptions:
WW Rociletinib unadjusted peak sales (85% POS in T790M+ and 60% POS in T790M-) of $1.8B.
WW Rucaparib unadjusted peak sales (80% POS) of $400MM.
Zero terminal value.
Thesis:
Current price is 51% below target acquisition of $101.
Room for upside:
Highly accretive acquisition target easy tuck away.
Continued pipeline success for Rociletinib, Rucaparib and Lucitanib.
AZN9291 setback/better than expected Rociletinib data.
Receptos, Inc. (RCPT)
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Stock Info: Market Cap = $3.3B; Price = 108.01.
RPC1063 (Key Drug): Oral S1P1R modulator; similar mechanism to NVS’s Gilenya (2014 WW sales of $2.5B, approved in 9/2010).
Appears safer than Gilenya potential best-in-class profile.
DCF Asssumptions:
WW RPC1063 unadjusted peak sales (85% POS in RMS and 60% POS in UC) of $2.9B.
Zero terminal value
Thesis:
Current price is 84% below target acquisition price of $199.
Room for upside:
2014 oral drug market share in RMS was 25-30% in 2014 could approach 50% by 2018.
Continued pipeline success for RPC1063 in RMS and UC.
Positive Phase 2 data in Crohn’s Disease.
Binary Events – Systematic Approach
Long? TBD Short?
~200 stocks with events in 2015
and beyond
Assessment of clinical programs
and probability of success
Input other factors such as financing
risks, stock performance, etc
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~60-70 stocks with critical events
in 2015 and beyond
Event Tracking in 2015
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Source: Opus Point Partners Research
Phase 2b, Phase 3, PDUFA, Adv Com
“Expensive & Far Away” Stocks
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What are they?
Some stocks are “expensive and far way”
“Expensive”: fully priced for success (eg NDA approval)
“Far Away”: actual approval may be a lot farther away than company / street projections
Over-valued than its actual value
Examples:
Intercept Pharma (ICPT)
Puma Biotech (PBYI)
Intercept Pharma (ICPT)
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Stock Info:
LP: $201.26; MC: $4.30 B
Key Program:
Obeticholic acid OCA (FXR Agonist) for PBC,
NASH, and PSC, all serious liver diseases;
Stock up significantly after reporting “positive”
Phase 3 data for PSC and positive Phase 2 data for
NASH.
Problem?
PBC: Phase 3 surrogate endpoint different from Phase 2 endpoint and is less likely to be predictive of
disease progression of PBC (based on our review of literature).
NASH: Phase 2 surrogate endpoint is not validated. In fact, based on current FDA/AASLD workshop,
there is not definitive endpoint for drug approval for NASH. (Unclear BTD designation will change
anything.)
Overall safety concern from elevated LDL (bad cholesterol).
What’s Next?
PBC NDA submission by 1H2015; FDA decision potentially 1H16
NASH: Phase 3 initiation 1H2015; ? Completion date?
Source: Yahoo Finance
Puma Biotech (PBYI)
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Stock Info:
LP: $211.48; MC: $6.38 B
Key Program:
PB272 neratinib (HER2 inhibitor) for various
HER2+ breast cancer and other cancers.
Stock up significantly after reporting “positive”
Phase 3 data for HER2+ extended adjuvant breast
cancer.
Problem?
Overall tolerability issue with GI tox and Grade 3/4 diarrhea.
Highly competitive market with Roche/DNA dominating with combo antibodies
FDA requested preclinical carcinogenicity studies with NDA filing. PBYI delayed NDA filing from 1H2015
to 1Q2016. We found this highly unusual for FDA to request for carc data for a cancer drug. In addition,
we expect carc studies significantly longer than 1 year to conduct. (3-4 years from start to finish).
What’s Next?
Neratinib NDA submission by 1Q16; Additional clinical study data updates.
Source: Yahoo Finance
Contact Information
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Opus Point Partners, LLC
3 Columbus Circle, 15th Floor
New York, NY 10019
Marketing & Investor Relations
Jenna Bosco
(P) 212.554.4351