While the FDA usually follows advice stemming from its AdCom meetings, it isn’t required to do so.  In fact, there have been several high-profile situations where the FDA has gone against such recommendations.

For example, many investors recall the volatility of Dendreon Corporation’s (DNDN) stock around the time of an AdCom meeting for the company’s Provenge® [sipuleucel-T] product candidate back in March 2007.  Share of Dendreon, which were trading below $5 per share before the AdCom meeting, reached $25 following a positive 13-4 vote in favor of the product’s efficacy.  Several months later, however, shares of Dendreon once again traded at $5 after the company received a CRL from the FDA.

More recently, InterMune, Inc. (ITMN) suffered a similar fate with its EsBriet™ [pirfenidone] product candidate for the treatment of mild to moderate idiopathic pulmonary fibrosis [IPF], a progressive and fatal lung disease.  Despite a 9-3 AdCom vote in favor of approving the drug, InterMune received a CRL from the FDA in May 2010, causing the value of its stock to decline from nearly $50 per share to less than $10.  Ironically, shares of InterMune rebounded significantly in December 2010 following a positive recommendation from the scientific body of the European Medicines Agency [EMA], which is responsible for reviewing all Marketing Authorization Applications [MMAs].

With this in mind, we tabulated the results from select FDA AdCom meetings conducted during 2010-2011 and compared the outcomes with the FDA’s ultimate decision to gauge how often the agency goes against its AdCom recommendations.  For the period, we found outcomes from 27 AdCom meetings for new drug applications [NDAs].  Of the 27 AdCom meetings, the FDA has not yet ruled on seven NDAs.  See Table 1 for details.

No Means No

Of the 20 AdCom meetings with corresponding decisions from the FDA, the agency agreed with all 9 of the negative AdCom recommendations and sent each of the sponsors a CRL.  In other words, a “no” vote from an AdCom meeting was unlikely to be overturned by the FDA during the period.  This doesn’t bode well for Eli Lilly & Co.’s (LLY) liprotamase product candidate for pancreatic insufficiency, which received a negative AdCom recommendation in January 2011 and is awaiting final FDA action.

In one situation where the AdCom vote was negative, the sponsor took action before the FDA rendered its final decision.  On December 17, 2010, King Pharmaceuticals, Inc. (KG) and Acura Pharmaceuticals, Inc. (ACUR) submitted an NDA for Acurox® (oxycodone HCl) without niacin following a 19-1 AdCom vote in April 2010 against approval of Acurox® with niacin.

Yes Means Maybe

During the period, the FDA went against the positive recommendation of its AdCom members 5 out of 10 times [50%] and issued a CRL to the sponsor.  This includes one unanimous vote [13-0] in favor of the efficacy for ezogabine, which is being developed by GlaxoSmithKline plc (GSK) and Valeant Pharmaceuticals International, Inc. (VRX) for the adjunctive treatment of adults with partial-onset seizures.  GlaxoSmithKline and Valeant indicated that the FDA cited non-clinical reasons for the CRL, but investors aren’t privy to the content of such documents.

The FDA is transparent with regard to drug approvals and withdrawals, but the contents of CRL’s are considered confidential because they represent part of an ongoing dialog between the agency and drug sponsor.  While many companies disclose whether or not a CRL contains a request for new clinical studies, translating into an investment of more capital and time, ambiguous phrases describing the contents of a CRL often leave investors in the dark with regard to handicapping the sponsor’s ability to address the issues in a timely and efficient manner – if at all.  Such secrecy has come under fire by members of the media, as evidenced by an October 2010 Forbes article titled “Why FDA Communications Must Be Public.”

For now, investors are warned that in the face of a positive AdCom recommendation, there is only a 50/50 chance that the FDA will promptly approve a product based on recent data.

Going Forward

The FDA has yet to rule on 7 product candidates with recent AdCom meetings, as indicated by “TBD” under FDA Action in Table 1.  While many of these AdCom meetings have positive outcomes, industry observers can flip a coin to determine whether or not the FDA will ultimately follow the AdCom’s advice in these situations based on recent data.  Even unanimous, favorable recommendations from AdCom members do not necessarily guarantee success with the FDA, although both Bayer AG (BAYRY.PK) and Oceana Therapeutics, Inc. (private) received such support for approval of their respective product candidates.

Investor’s expectations are very high for Human Genome Sciences, Inc. (HGSI), which was among the largest percentage gainers in the NASDAQ Composite with a staggering quadruple-digit return of +1,342% in 2009 following positive Phase 3 study results with its Benlysta® [belimumab] product candidate for the treatment of systemic lupus erythematosus [SLE].  The FDA is expected to render its decision by the Prescription Drug User Fee Act [PDUFA] date of March 10, 2011, and the company’s stock remains relatively unchanged around $25 per share following a positive 13-2 AdCom vote in November 2010.

Of the pending group, MELA Sciences, Inc. (MELA) appears to have the lowest probability of success with the FDA in view of the very narrow 8-7 AdCom vote in favor of the product candidate’s safety, efficacy and risk/benefit ratio, which led to new 52-week lows for the company’s stock.  The company is developing MelaFind®, a non-invasive and objective multi-spectral computer vision system designed to aid physicians in the detection of early melanoma, or skin cancer.

NEW – Click here to view this article in PDF format.

Table 1: AdCom Meetings and FDA Outcomes During 2010-2011

With few exceptions, companies with monoclonal antibody platforms have significantly outperformed the NASDAQ Biotechnology Index® (NBI) since the end of 2008 [see Table 1].  Accordingly, the purpose of this article is to offer several key factors that help explain the above average returns for monoclonal antibody companies during this +18-month period – a trend that we believe is likely to continue.

Table 1: Select public companies with monoclonal antibody platforms

Higher rate of success

In order to determine the appropriate current value for a biotechnology company, an investor would normally consider projected future cash flows resulting from product sales, probability of success, and a discount rate to reflect the risks that the company faces.

With regard to probability of success, one of the greatest considerations for a biotechnology company is the fact that new drug candidates must receive approval from the Food and Drug Administration [FDA] before they can be marketed in the United States.  Receiving FDA approval is dependent, in part, on the drug candidate successfully passing a series of clinical trials that are generally conducted in three sequential phases.

Successfully transitioning from the early stages that establish safety [Phase I] to later phases where efficacy is demonstrated [Phase III] will improve the approval success rate [e.g., the odds that the drug will ultimately reach the market].  Interestingly, researchers from the Tufts Center for the Study of Drug Development at Tufts University recently analyzed the average approval success rates for investigational drugs first tested in humans from 1993 to 2004 [Ref 3] and found substantial differences between large molecules [32% success rate] and small molecules [13% success rate].  Monoclonal antibodies represented the largest group [47%] of the large molecules evaluated in the study.

In view of the fact that nearly one-third of large molecule product candidates entering the clinic ultimately receive FDA approval and that they are nearly 2.5-times more likely to ultimately receive approval than small molecule compounds, companies that are developing monoclonal antibodies should be awarded higher valuations due to the higher probability of success.

Reduced concerns from biosimilars

The Patient Protection and Affordable Care Act [PPACA], which was signed into law on March 23, 2010, included a provision amending the Public Health Service Act [PHSA] to permit approval of biosimilar biological products through an abbreviated biological license application [ABLA] submitted to the FDA.  Under the law, originators have a 12-year exclusivity period before a biosimilar is approved.

While many questions remain about the specifics of the ABLA process until the FDA releases its guidance, the PPACA does state that to support approval of a biosimilar, the sponsor must show that the product is “biosimilar to the reference product” based upon data derived from analytical, animal, and clinical studies.  As a result, it is unlikely that monoclonal antibody products will represent the first class of biosimilars on the market due to the fact that they have very specific binding properties and are typically larger and more complicated than other biologic drugs.

Regardless, according to a recent article by Ludwig Burger for Reuters, analysts expect price discounts of only 20 to 30 percent in markets affected by biosimilar competition, which compares with an average markdown of 90 percent for generic versions of small molecule drugs. This is likely due to the fact that development, production and marketing of a biosimilar costs more than making a generic copy of conventional chemical drugs.

Lastly, for those individuals that believe manufacturing biologic drugs is easy, a review of Genzyme Corporation’s (GENZ) recent challenges offers a different perspective.  See “Genzyme’s Manufacturing Disruption Highlights Investment Opportunities in Lysosomal Storage Disorders.”

Manufacturing processes have improved

In contrast to small molecule therapeutics that can be synthesized for $1 per gram and simple proteins like insulin that can be efficiently produced in bacterial hosts, monoclonal antibodies are normally produced in mammalian cells at a cost of $300-$5,000 per gram [Ref 4].

Fortunately, in parallel with the clinical and commercial success of monoclonal antibodies there have been major advances in cell line development, bioreactor construction and operation, purification strategies and analytics. For example, cell culture productivity has improved more than 100-fold in the last 15-years.  With these advances, global protein output using mammalian cell culture increased from under 500 kilograms in 2000 to 3,600 kilograms in 2005 and manufacturing costs have been reduced.

In addition to the aforementioned advances, new sources of inexpensive antibody production are being explored.  For example, antibodies have been expressed successfully in genetically modified plants and have been shown to retain their native functional forms.

Evolution from acute to chronic treatment

In the early 1980’s, most monoclonal antibodies were derived from mouse genes with major limitations such as inducing human anti-mouse antibody [HAMA] responses in patients, lack of effector functions and short plasma half-life [Ref 5].  Later that decade, genetic engineering techniques made chimeric and humanized versions available for study.  Until this point in time, most therapeutic monoclonal antibodies had been studied as acute treatments for cancer or immunological diseases [Ref 6].

By the late 1990’s, methods to produce human monoclonal antibodies were developed, including phage display and transgenic mice.  With the availability of human antibodies with reduced immunogenicity and increased efficacy, the biotechnology industry began studying monoclonal antibodies for the chronic treatment of non-life threatening diseases, which opened new market opportunities.

In this regard, KaloBios Pharmaceuticals, Inc. (private) is applying its proprietary Humaneering™ technology platform to produce antibodies that are close to human germ-line in sequence while retaining the specificity and improving the affinity of the reference antibody.  KaloBios is developing an anti-GM-CSF human monoclonal [KB003] for the treatment of patients with autoimmune and chronic inflammatory conditions, such as rheumatoid arthritis and asthma.  Sales of two marketed monoclonal antibodies indicated for the treatment of rheumatoid arthritis, Humira® [adalimumab] and Remicade® [infliximab], are projected to reach $15.8 billion in combined sales by 2016 according to Evaluate Pharma [Ref 2].

In January 2010, KaloBios partnered with Sanofi Pasteur, the vaccines division of sanofi-aventis Group (SNY), to develop the company’s Humaneered™ antibody fragment KB001 for the prevention and treatment of Pseudomonas aeruginosa (Pa) infections. KaloBios received an upfront payment of $35 million and is eligible for development, regulatory and commercial milestones totaling $255 million in addition to royalties on eventual product sales.

In addition, MacroGenics, Inc. (private) entered into a global strategic alliance with Eli Lilly & Co. (LLY) in October 2007 valued at approximately $500 million for teplizumab, a humanized anti-CD3 monoclonal antibody currently being studied in a global pivotal Phase II/III clinical trial for individuals with recent-onset type 1 diabetes.

Licensing, merger, and acquisition dynamics

The higher average approval success rates with large molecules compared with small molecules appears to be partially reflected in the economics of some recent licensing and M&A transactions.

For example, in June 2010 OncoMed Pharmaceuticals, Inc. (private) partnered with Bayer Schering Pharma AG (BAYRY.PK) to discover, develop and commercialize novel anti-cancer stem cell therapies including multiple antibody, protein therapeutics and small molecules targeting the Wnt signaling pathway.  For each drug candidate successfully developed through Phase III clinical trials and regulatory approval, OncoMed’s payments from Bayer could total up to $387.5 million for each biotherapeutic drug compared with $112 million for small molecule drugs.  Accordingly, potential payments for large molecules are 3.5 times greater than for the small molecules.

As another example, Eli Lilly & Co. (LLY) acquired ImClone Systems, Inc. for $6.5 billion [5x sales of $1.3 billion], while Astellas Pharma, Inc. paid $4 billion for OSI Pharmaceuticals, Inc. [3.3x sales of $1.2 billion].  Both ImClone and OSI received royalties on product sales from corporate partners.

ImClone’s marketed product Erbitux® [cetuximab] is a monoclonal antibody that inhibits the epidermal growth factor receptor [EGFR] and is indicated for the treatment of certain types of colorectal cancer and as a single agent or in combination with radiation therapy for head and neck cancer.  OSI’s comparable product Tarceva® [erlotinib] is a small molecule antagonist of EGFR and is indicated for the treatment of non-small cell lung cancer and pancreatic cancer.  While this is not an apples-to-apples comparison, it does help support the fact that premiums are being paid for monoclonal antibodies versus small molecules.

Investors are also likely placing M&A premiums on monoclonal antibody companies due to robust activity during the past five years [see Table 2].  In fact, there has been at least one deal announced each year during this period.

Table 2: Select M&A among monoclonal antibody companies

Access to capital

Despite a challenging financing climate, many public monoclonal antibody developers referenced in Table 1 have been able to raise capital through public offerings.  For example, ImmunoGen, Inc. (IMGN) raised $77.6 million at $8.00 per share in May 2010, Micromet, Inc. (MITI) raised $80.5 million at $7.00 per share in March 2010, and Seattle Genetics, Inc. (SGEN) raised $136 million at $10.75 per share in August 2009.  This demonstrates strong investor appetite for monoclonal antibody companies, which could bode well for future initial public offerings [IPOs] given the paucity of public options in the sector due to M&A activity over the past few years.

Summary

Biotechnology companies developing monoclonal antibodies have been outperforming the broader sector for the past 18-months, a trend that is likely to continue based on higher average approval success rates, reduced concerns from biosimilars, improvements in manufacturing and resulting impact on margins, broadening utility beyond treating cancer and inflammation, robust partnering and M&A activity, and access to capital.

References

1. Roche Annual Report 2009 (www.roche.com/gb09e.pdf)
2. Evaluate Pharma World Preview 2016 Report
3. DiMasi, JA. Et al. Clin Pharmacol Ther. 2010 Mar;87(3):272-7. Epub 2010 Feb 3.
4. Chen, C. Trends in Bio/Pharmaceutical Industry. 2009 5(3).
5. Chan, A. Et al. Nat Rev Immun. 2010 May;10.
6. Reichert JM. Curr Pharm Biotechnol. 2008 Dec;9(6):423-30.

Product pricing and reimbursement

The cost of Provenge has been set at $93,000 for a course of treatment, which consists of three infusions at approximately two-week intervals.  In view of the fact that Provenge has been demonstrated to extend survival by 4.1 months, this translates into an average cost of $23,000 per month of added survival.

In comparison, Taxotere® [docetaxel] by Sanofi-aventis (SNY) is indicated for the treatment of patients with androgen independent [hormone refractory] metastatic prostate cancer and administered every 3 weeks for 10 cycles.  Assuming an average monthly cost of $4,000 for Taxotere [source: Cancer Res 2009;69(24 Suppl):Abstract nr 1076], this is an approximate total cost of $40,000 per patient. In the pivotal TAX 327 study, median survival for prostate cancer patients receiving Taxotere was 18.9 months versus 16.5 months in the control arm, which results in an average cost of $16,666 per month of added survival.  Unlike Provenge, however, treating common adverse reactions with Taxotere, such as infections, neutropenia, anemia, nausea, diarrhea, and others, increases the total cost of therapy – so the pricing of Provenge doesn’t appear completely out of line. [note: updated survival analysis of the TAX 327 study demonstrates a 2.9 month survival advantage, which lowers the average cost to $13,793 per month of added survival with Taxotere.  Source: Journal of Clinical Oncology, Vol 26, No 2 (January 10), 2008: pp. 242-245.]

Nonetheless, the Centers for Medicare and Medicaid Services [CMS] has initiated a National Coverage Analysis [NCA] of Provenge. In CMS’s announcement of the NCA, CMS is requesting public comments on the effects of Provenge on health outcomes in patients with prostate cancer. While the news doesn’t reflect a change in Medicare coverage policy or impact existing coverage decisions and a decision isn’t expected for a year, it does highlight sensitivity on the part of payors over the pricing of certain cancer treatments.

Supply constraints

Dendreon is making Provenge available through approximately 50 centers, all of which were approved Provenge clinical trial sites, and expects to increase capacity over the next year.  The increased capacity will be a result of the anticipated licensure of its expanded New Jersey, Georgia and California facilities in mid-2011.

In the short term, however, Dendreon officials have indicated that the company will only be able to supply 2,000 treatments to patients.  At a cost of $93,000 per treatment, this limits potential sales to approximately $186 million.

According to a June 28 article by Bloomberg reporter Tom Randall, Dendreon’s Chief Operating Officer Hans Bishop indicated that facilities will be able to churn out medicine each year valued at between $1.25 billion and $2.5 billion by the end of 2011.

Competitive landscape

In early April 2010, we published a 150-page industry report titled “Cancer Vaccine Therapies: Failures and Future Opportunities,” which included an overview of the cancer immunotherapy market, interviews with several key opinion leaders, profiles of nearly 40 companies, and a discussion of the scientific, clinical, and commercial considerations for the major industry participants.

In the report, we highlighted the fact that numerous active immunotherapies are in late-stage clinical development for prostate cancer.  In fact, nine product candidates are in clinical trials for the treatment of prostate cancer, representing the largest therapeutic area within the active immunotherapy market.  Beyond competition from other active immunotherapies, however, Provenge could also face competition from small molecule products.

For example, Johnson & Johnson (JNJ) acquired Cougar Biotechnology, Inc. for approximately $1.0 billion in cash in 2009.  Cougar Biotechnology’s oncology portfolio included abiraterone acetate [CB7630], an orally active acetate salt of the steroidal compound abiraterone.  Abiraterone acetate, which can suppress testosterone production by both the testes and the adrenals to castrate-range levels, is currently in two Phase III clinical trials for the treatment of prostate cancer according to ClinicalTrials.gov [Trial identifier numbers NCT00638690 and NCT00887198].  Both studies list a primary completion date of mid-2011.

Insider sales

Trading conducted by corporate officers, key employees, directors, or significant shareholders must be reported to the Securities and Exchange Commission [SEC], usually within a few business days of the trade.  Some investors follow the activity of insiders, believing that they might have better insights into the health of a corporation and that their trades convey important information – although this isn’t always the case.

In this regard, according to a Form 4 filed with the SEC, Dendreon’s Chief Executive Officer [CEO] beneficially owned 555,211 shares of the company’s common stock as of April 29, 2010 – the day Provenge was approved by the FDA.  The CEO sold more than half of those shares at prices ranging from $51 to $54.70, reducing his beneficial holdings to 224,359 the next day.  Other insiders also sold during the period.

Priced for perfection

Recall that Eli Lilly & Co. (LLY) purchased ImClone Systems for $6.5 billion back in 2008.  ImClone’s only product – Erbitux® [cetuximab] – had generated annual sales of approximately $1.3 billion in 2007.  Therefore, ImClone was valued at a 5x multiple to prior year sales.

At its 52-week high, Dendreon had a market capitalization of approximately $7.8 billion.  At a 5x multiple, this would imply an annual revenue run rate of $1.56 billion, which is consistent with the company’s planned manufacturing capacity by the end of 2011 and many analyst projections over the coming years.

But Dendreon isn’t generating $1.56 billion in annual sales yet and concerns over pricing, reimbursement, and competition, combined with insider selling, help explain the decrease in market valuation since the approval of Provenge.

Perhaps the most prominent shareholder activist in biotechnology is billionaire investor Carl Icahn, largely through his Icahn Management LP investment fund.  He has created value for some biotechnology stakeholders, including a very quick return with MedImmune, Inc. and a longer-term payoff with ImClone Systems, Inc.

MedImmune, Inc.

On February 14, 2007, Icahn Management LP disclosed that it purchased 2.8 million shares of MedImmune, Inc., or just over one percent of the company.  The stock had ranged from $25 to $37 over the prior 12-months and Icahn had threatened to nominate a slate of opposing directors to MedImmune’s board unless the company put itself up for sale, adding that the firm suffered from “very lackluster management.”  In less than two months, MedImmune announced that the company hired investment bank Goldman Sachs to help evaluate whether third parties would have an interest in acquiring the company at a price and on terms that would represent a better value for its stockholders than having the company continue to execute its business plan on a stand-alone basis.  Less than two weeks later, AstraZeneca plc (AZN) announced the $15.6 billion acquisition of MedImmune Inc. for $58 per share in cash, representing a premium of approximately 53% to MedImmune’s share price the day before it was disclosed that the company was for sale.  At the time, MedImmune had several marketed products and posted $1.3 billion in 2006 sales.

ImClone Systems, Inc.

Icahn Management LP’s success with ImClone Systems, Inc. took a little longer to materialize – in fact, nearly a decade.  Icahn first reported a 5.1% stake in ImClone in October 1999 through a Securities and Exchange Commission [SEC] filing, including the purchase of 594,100 shares from September 29, 1999 to October 10, 1999 at prices ranging from $22.09 to $32.05 a share.  At that time, Icahn Management LP reported owning a total of 1.29 million shares of ImClone.

The price of ImClone’s stock reached a high of $74 in early December 2001, but dropped to $14 by February 2002 after the U.S. Food and Drug Administration [FDA] raised serious doubts about test results for the company’s Erbitux® (cetuximab) product candidate for the treatment of colon, head and neck cancers.  Investigations, scandals [eg, Martha Stewart] and lawsuits ensued.

By March 2002, Icahn received clearance from the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Act to acquire up to $500 million of ImClone’s stock, or about 40% of the company.  In August 2006, Icahn reached an agreement with ImClone to avoid a possible proxy contest by accepting the company’s offer to have him and three of his recommended candidates on the management slate of director nominees for the 2006 annual stockholders meeting.  The three nominees were Alexander Denner, a current ImClone director, as well as Charles Woler and Richard Mulligan.  Icahn replaced David M. Kies as chairman of ImClone and ousted Joseph L. Fischer, ImClone’s interim chief executive officer [CEO].  At the time, Icahn also reported in the filing that he increased his stake in ImClone to 12.89%.

It wasn’t until October 2008 that Eli Lilly (LLY) agreed to pay $70 per share in cash for a total of $6.5 billion for ImClone Systems, a 51% premium to ImClone’s closing price on July 30, 2008, the day before an initial $60 per share offer by Bristol-Myers Squibb (BMY) was made public.  At the time, ImClone had one drug on the market, Erbitux, which posted $1.3 billion in 2007 sales worldwide, up 18% from 2006.

Three Recent Activist Wins

In view of major coups with MedImmune and ImClone, we reviewed Icahn’s current biotechnology holdings as reported in SEC filings (see Table 1) and identified three companies that have significantly underperformed the NASDAQ Biotechnology Index (NBI) over the past five years, but have very recent successful activist outcomes that could positively impact future performance.  In particular, Alexander Denner, who has served as Managing Director of entities affiliated with Carl Icahn and as a director of ImClone, has recently been elected as a director at each company.  Consider the following:

• Biogen Idec Inc. (BIIB): On June 9, 2009, Biogen Idec Inc. reported that Icahn won two seats on the board, giving him leverage to push for change at the company.  Alexander Denner and Richard Mulligan, both formerly with Icahn at ImClone, were appointed to Biogen Idec’s board.  Icahn owns about 5.6% of Biogen Idec, his largest current biotechnology holding, and has urged the company to consider a break-up or sale to a large pharmaceutical company.  Biogen Idec, with more than $4 billion in annual revenue for 2008, sells three FDA approved drugs for cancer, multiple sclerosis [MS] and rheumatoid arthritis.  While Biogen Idec possesses a strong pipeline with several drugs in Phase 2 and Phase 3 development, the company’s flagship product Avonex® (interferon beta-1a) will soon face competition from Extavia®, a branded version of interferon beta-1b by Novartis AG (NVS) for the treatment of MS that will be introduced this fall.  Avonex represented more than half of Biogen Idec’s revenue in 2008.
• Amylin Pharmaceuticals, Inc. (AMLN): On August 24, 2009, three months after a high profile proxy battle resulted in the ouster of its chairman, Joseph C. Cook, Jr., Amylin Pharmaceuticals announced the appointment of a new chairman.  Paulo F. Costa, who formerly headed the U.S. operations of Novartis AG as President and Chief Executive Officer of Novartis U.S. Corporation, took over as chairman after gaining a seat on Amylin’s board in May 2009.  At that time, two board members recommended by Icahn and Eastbourne Capital Management, Kathleen Behrens and Alexander Denner, were also elected.  Amylin’s top drug Byetta® (exenatide), which it sells with partner Eli Lilly & Co (LLY), is a GLP-1 agonist for patients with type 2 diabetes that is administered twice daily as a subcutaneous injection.  Amylin, with more than $840 million in annual revenue for 2008, has set a goal of becoming operating cash flow positive by the end of 2010.  An important near-term catalyst for the company, Amylin, Eli Lilly, and Alkermes, Inc. (ALKS) are working together to develop exenatide once weekly, which would represent the first weekly therapy to treat type 2 diabetes with glucose control and weight loss.  A New Drug Application [NDA] for exenatide once weekly was accepted for review by the FDA in July 2009.
• Enzon Pharmaceuticals, Inc. (ENZN): In May 2009, Alexander Denner and Richard Mulligan, both formerly with Icahn at ImClone, were appointed to Enzon’s board.  More recently, on July 23, 2009, Enzon appointed Alexander Denner as non-executive Chairman of the Board, separating the role of CEO and Chairman.  Jeffrey H. Buchalter, who previously served as executive Chairman, continues to serve as a Director as well as President and CEO.  DellaCamera Capital, which beneficially holds approximately 8.3% of the shares of Enzon had been making a case for removal of Jeffrey Buchalter as CEO due to excessive compensation, poor stock performance, and questionable expense levels.  DellaCamera recently withdrew its consent solicitation to remove the CEO in order to better allow the Company`s new Chairman and new independent director to bring positive change to the Board.  Enzon, with more than $48 million in annual revenue for 2008, has a portfolio of four marketed products, Oncaspar®, DepoCyt®, Abelcet® and Adagen® along with a royalty revenue stream from licensing partnerships for other products developed using Enzon’s PEGylation technology.

Table 1: Icahn’s biotechnology holdings (as of 6/30/09)

A Word of Caution

Not all of Icahn’s biotechnology investments turn out like MedImmune and ImClone, so investors should conduct their own due diligence regarding Biogen Idec, Amylin, and Enzon before blindly following the billionaire investor.  For example, shares of Telik, Inc. (TELK) plunged more than 70% in a single trading session – falling from over $16 per share to below $5 per share – in late December 2006 after the company reported that its most advanced development compound, Telcyta® (canfosfamide HCI), failed to improve survival in patients with advanced lung cancer or in patients with ovarian cancer.  At one point, Icahn Management LP reported nearly a 10% holding in Telik but reported holding zero shares as of December 31, 2008.  Shares of Telik recently traded below a dollar.

# # #

About MD Becker Partners LLC

MD Becker Partners is a boutique management and strategy consulting firm focusing on both public and private companies in emerging growth industries, such as pharmaceuticals, biotechnology, medical devices, and cleantech. The firm’s mission is to bring experience-based insights gleaned from the three independent disciplines of investor relations, strategic advisory and operational improvement together and apply them to carefully conceived and expertly enacted strategies that help companies increase visibility, unlock value and access resources to grow their business. For more information, visit the website: http://www.mdbpartners.com/

Disclaimer: This article contains the author’s own opinions, and none of the information contained therein constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in the article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.