September 2007 Issue Research.doc - 11wall-west

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Dec 3, 2012 (4 years and 8 months ago)

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September 2007 Issue 57
CoPath Research

I.
The BioBreak Portfolio

The BioBreak
is an independent newsletter focused on investing in biotechnology companies. My
approach is to find

viable companies that are developing novel drug candidates targeted at large

unmet medical needs. My ever
-
evolving

portfolio of biotech stocks enables the investor to share
in the profits of this growing industry.

There are currently six companies held in
TBBP
.

Below is a monthly graph displaying the month
-
end closing dollar value

of
TBBP
. A total of 121
buy/sell transactions have

occurred over the 56 month lifespan of the portfolio. All trades are
listed on the transaction log appendix on pages 5
-
8. All

new stock purchases are funded from the
sale of existing portfolio shares.

In
August
The BioBreak Portfolio
(
TBBP
) continued rebounding
rising 14.05% bringing the year
-
to
-
date decline to

8.36%. Over the 56 month life of the
newsletter the
TBBP
has risen 169.75% to $269,753 after starting with a fixed

amount of $100,000 on 1/2/03. Be
low is a listing of
TBBP
compared to other biotech indexes and
broad market indexes

such as Nasdaq and the Dow Jones Average.



Indexes


August
-
07

YTD 2007


Since 1/2/03


The BioBreak Portfolio
14.05%

-
8.36%

169.75%

BioTech Index $BTK


2.55%

2.90%

129.48%

Nasdaq BioTech Index 3.75%

1.91%

63.77%

Nasdaq


1.97%

7.50%

94.41%

S&P 500

1.29%

3.93%


67.53%

D
ow Jones


1.10%

7.18%

60.13%



Portfolio Members


Value


% of Portfolio

% Gain/Loss


Isis Pharmaceuticals (ISIS)

$81,753



30.31%


11.24%

Vertex Pharmaceuticals (VRTX)

$77,920



28.89%


17.74%

Arena Pharmaceuticals (ARNA)

$46,230



17.14%

70.46%

Amgen (AMGN)

$40,589




15.05%

-
13.86%

Human Genome Sciences (HGSI)


$20,723


7.68%



-

28.83%

AVI BioPharma (AVII)


$2,401

0.89%


-

65.97%

Cash


$137

0.04%

Total
$269,753


100.00%



II. Portfolio Update

TBBP
was up 14.05% in August following a 4.32% increase in July that reversed a major se
ll off
in which
TBBP
had been down seven of the previous eight months as the timing of stock
selections were out ahead of supporting news flow and product development progress. Below is
an update on each company in
TBBP.


The BioBreak Portfolio Market Cap
8/31/07


%Gain/Loss Update


Amgen Inc.

Symbol: AMGN

www.amgen.com

Anchor Segment

$54

Billion
-
13.86%

Amgen won an early round in a legal battle w/ Roche regarding a competing EPO drug

candidate that Amgen contends infringes one of its patents. The legal tr
ial begins in early

September. Amgen's stock price has been under pressure due to concerns with

reimbursement rates and growth prospects for both Aranesp and Epogen due to higher

death rates and spiraling costs treating cancer patients for anemia. In late
July the Centers

for Medicare and Medicaid Services issued final National Coverage Determination (NCD)

guidelines which were not as severe as preliminary guidelines issued in May but limited

reimbursement to only patients with hemoglobin levels below 10 g/
dl (the previous

hemoglobin level was 12 g/dl). Amgen will challenge the 10 g/dl decision based on the

need for increased blood transfusions and a lower quality of care for cancer patients.

Financially Amgen released Q207 numbers with a 3% increase in reve
nue to $3.7 billion

along with a 7% improvement in earnings compared to Q206. In June Amgen added to their

pipeline by acquiring two smaller biotech companies Ilypsa and Alantos.





Vertex Pharmaceuticals

Symbol: VRTX

www.vpharm.com

Late
-
Stage Drug Segmen
t

$5.1Billion 17.74%


Vertex's stock price began to move upward in late July after announcing that updated

Phase 2b data on Telaprevir for hepatitis C will be presented at ICAAC September 16
-
20,

2007, earlier than the previously anticipated November presen
tation of updated data. Vertex

also anticipates starting its Phase 3 trial with Telaprevir in the second half of 2007.

Telaprevir (formally VX
-
950) for hepatitis C is currently in three Phase 2b trials (Prove 1
-
3)

and in April presented Prove 1 results sho
wing that 138 out of 175 (79%) patients receiving

Telaprevir along w/ interferon and ribavirin (interferon and ribavirin are the current standard of

care) achieved a rapid viral response (RVR) below the level of detection. RVR is a good

indicator of longer

term cure rates. Vertex also presented data on sustained viral response

(SVR) on 9 of 17 patients who meet previous RVR criteria and didn't drop out of the trial

due to adverse events (11%). 6 of these 9 patients remain viral undetectable at week 20

follo
wing the last dose of Telaprevir (SVR20). Vertex owns all U.S. rights to Telaprevir while

licensing non U.S. commercial rights to Johnson and Johnson.



Arena Pharmaceuticals

Symbol : ARNA

www.arenapharm.com

Late
-
Stage Drug Segment

$818Million 70.46%


Sept
ember will be an important month for Arena as six
-
month echocardiogram data on

Lorcaserin in obesity and Phase 2 data on APD125 for insomnia will be released.

Lorcaserin is in a 3000+ patient Phase 3 trial in obesity and the echo data will be taken at

key
points in the trial to ensure that no heart value damage occurs as a side effect.

Lorcaserin targets a serotonin receptor 5HT2C which is the same receptor targeted by the

once highly popular diet drug fen
-
phen. As you may recall fen
-
phen was removed from t
he

market due to side effects associated with heart value damage related to stimulating the

5HT2B receptor as well. Lorcaserin has been designed to be much more specific for the

5HT2C receptor. Elsewhere in the pipeline ADP791 for thrombosis started a Phas
e 1 trial.

As of March 31,2007 Arena had cash/equivalents of $356 million.




Isis Pharmaceuticals

Symbol: ISIS

www.isispharm.com

Technology Value Segment

$1 Billion 11.24%


In July Isis received a $26.5 million fee from Alnylam (ALNY) as its portion of th
e

RNAi partnership between Alnylam and Roche Holding. In 2004 Isis licensed patents

and technology to Alnylam in exchange for a percentage of upfront fees, milestones

and royalty payments. Also in late July another Isis partner, OncoGenex,

announced positi
ve Phase 2 prostate cancer data using an Isis discovered antisense

drug candidate targeting the cell survival protein clusterin. The main news driver for

Isis is ISIS 301012, a LDL cholesterol lowering drug which has produced strong data

in patients who co
uld not achieve targeted LDL levels using current therapies and in

familial hypercholesterolemia, a genetic condition in which patients have extremely

high LDL
-
cholesterol levels. Later in 2007 a longer term Phase 2 trial with ISIS

301012 will be initiated

at 200 mg per week and is targeted to achieve a 50% LDL

reduction. ISIS 301012 is an antisense drug that reduces the production of apoB
-

100, a key protein involved with the production and transport of LDL cholesterol.




Human Genome Sciences

Symbol: HGS
I

www.hgsi.com

Technology Value

$1.2Billion

-
28.83%



Human Genome Sciences' (HGS) stock price rebounded in August after being under

pressure as no near
-
term news flow is anticipated as two large longer
-
term Phase 3

trials continue with LymphoStat
-
B for lu
pus and Albuferon for hepatitis C. The value

proposition for HGS centers on its $1.0 billion market cap level balanced against the

potential from two Phase 3 drugs, a one time $160 million sale of anthrax antibodies

to the U.S. government, $700 million in
cash/equivalents, a broad product

development pipeline, a large scale manufacturing facility, and an extensive patent

estate as a pioneer in genomic sequencing. LymphoStat
-
B is being developed

worldwide with GlaxoSmithKline (GSK) in a 50/50 sharing of cost
s and profits.

Albuferon, a longer acting alpha interferon is being tested in hepatitis C and is

partnered with Novartis after receiving a $45 million upfront payment along with up to

$507 million in milestone payments and 50% of U.S. rights along with roy
alties on

sales outside the U.S.




AVI BioPharma

Symbol: AVII

www.avibio.com

Technology Value Segment

$140

Million

65.97%



In October 2007 AVI BioPharma along with its partner Global Therapeutics (a Cook

Medical Company) will announce six month Phase 2
follow up data using a micro

particle drug delivery version of a c
-
myc gene inhibitor for restenosis. In July AVI

BioPharma's partner Global Therapeutics announced that preclinical studies using

an antisense drug candidate AVI
-
5126 successfully inhibited t
he c
-
myc gene, a

major contributor to restenosis (re
-
blockage of a coronary artery after angioplasty).

Global Therapeutics plans on starting clinical trials later in 2007 combining AVI
-
5126

with bare metal stents to capitalize on the negative results obtai
ned using drug

coated stents. AVI BioPharma is a small $140 million market cap biotech company

that employs a drug development platform based on antisense technology in which

small snippets of synthetic DNA are designed to attach to a complementary stretch

of RNA limiting the ability of a virus to reproduce or the human body to make

specific proteins. On the management side, a search continues to replace CE0

Dennis Burger who resigned his position of CEO and board member.

ortfolio P urchase