Lisa Conte, Napo’s interim CEO and Jaguar's president and CEO

The proposed merger of Jaguar Animal Health (NASDAQ:JAGX) and closely-held Napo Pharmaceuticals is expected to create a combined company with prescription product revenue, potential line extensions and an expanded pipeline.

“We are confident that this merger will enable both companies, through a joint management team, to access efficiencies and enhance potential value creation,” Lisa Conte, Napo’s interim CEO and Jaguar's president and CEO, says in an interview with BioTuesdays.

Under the accord, which was unveiled on Feb. 8, Jaguar would be the surviving company, with Napo, which currently owns 19% of Jaguar, operating as a wholly-owned subsidiary.

“The merger would be a transformative event, combining Napo’s FDA-approved Mytesi product indicated for the symptomatic relief of non-infectious diarrhea in adults with HIV/AIDS on antiretroviral therapy, and Jaguar’s key lead products under development for animal health,” she adds.

In addition to centralized management, Ms. Conte points out that the combined company would have manufacturing economies of scale, R&D synergies and a common messaging in commercialization.

Mytesi is indicated for the symptomatic relief of non-infectious diarrhea in adults with HIV/AIDS on antiretroviral therapy

Ms. Conte explains that the active pharmaceutical ingredient in Mytesi is crofelemer, which is derived from the sap of the South American tree, Croton lechleri.

Crofelemer is also the active pharmaceutical ingredient in Canalevia, Jaguar’s lead prescription drug candidate for companion animals, which is being evaluated for treatment of acute diarrhea and chemotherapy-induced diarrhea (CID) in dogs and is the subject of a recent collaboration with Elanco US, a subsidiary of Eli Lilly.

“Because Mytesi and Canalevia share the same formulation, risks related to the chemistry, manufacturing, and controls sections of Jaguar’s New Animal Drug Applications for Canalevia and commercial supply chain readiness are mitigated,” she adds.

Napo launched Mytesi last October, and in the second quarter of this year it plans to deploy eight field sales reps combined with telesales to promote Mytesi to top antiretroviral therapy-prescribing doctors in the U.S. The company forecasts Mytesi will generate about $7-million in net sales this year.

“The only difference between current Mytesi prescribers and non-prescribers is awareness,” she contends. “If the approximately 2,000 high prescribing HIV specialists prescribe at the same rate as known prescribers, a market opportunity of about $100-million in sales could be achieved.”

More than 50% of the HIV/AIDS population in the U.S. have been living with the virus in their gut for more than 10 years, a common cause of chronic diarrhea. Approximately 20% of patients on antiretroviral therapy report experiencing diarrhea, according to a study published by University of North TX System College of Pharmacy in 2016.

Napo is continuing development of Mytesi for other anti-diarrhea indications, with investigational studies completed in irritable bowel syndrome, cholera, traveler’s diarrhea, and in pediatric patients, as well as two planned investigator-initiated trials of the product in breast cancer patients suffering from CID and funded by Genentech-Roche and Puma Biotechnology.

Diarrhea is the most common adverse event reported from IV chemotherapy agents, especially for the treatment of colorectal and gastric cancers, and from newer oral agents, such as epidermal growth factor receptor (EGFR), tyrosine kinase inhibitors and EGFR monoclonal antibodies for the treatment of breast, lung, and other malignancies.

In addition to Mytesi’s current indication for diarrhea in HIV/AIDS patients, Ms. Conte suggests Mytesi has the potential to access substantial markets worldwide as the company continues development for irritable bowel syndrome-diarrhea, CID and diarrhea in pediatric patients.

Canalevia is for the treatment of various forms of diarrhea in dogs

According to life sciences commercial intelligence firm Evaluate, the U.S. irritable bowel syndrome and inflammatory bowel disease market alone is expected to rise to $6.7-billion by 2019 from $5-billion in 2014.

“There is an economy of scale benefit to the COGS in the manufacture of crofelemer. We are currently manufacturing in a new FDA-approved GMP commercial manufacturing facility for both the human and animal health markets,” she adds.

jaguar has commercialized a non-prescription product line, Neonorm Calf and Neonorm Foal

Napo also is seeking geographic partners outside the U.S for Mytesi in order to attract non-dilutive funding for product development in the U.S. Ms. Conte points to regions such as the Middle East and Korea, where there were partnering discussions before Mytesi was approved and where the company is actively seeking opportunities for a deal. 

In its animal health arm, Jaguar is developing two prescription products – Canalevia for the treatment of various forms of diarrhea in dogs and Equilevia for the treatment of gastric ulcers in high performance horses – and has commercialized a non-prescription product line, Neonorm Calf and Neonorm Foal, to help preweaned dairy calves and foals retain fluid, respectively.

Ms. Conte says Jaguar has received a Minor Use in a Major Species (MUMS) designation from the FDA for Canalevia to treat CID in dogs. MUMS is similar to orphan drug status and can lead to conditional approval based on a reasonable expectation of efficacy.

The company completed a proof-of-concept study in 2015 to demonstrate Canalevia’s mechanism of action and beneficial effect in treating acute diarrhea in dogs, and expects to release pivotal top-line efficacy data by the end of March for this indication. “We’re aiming to have the product on the market by the end of this year,” she adds.

For the general companion animal population, globally, Jaguar at the end of January entered a global collaboration with Eli Lilly’s Elanco unit for the development and co-promotion of Canalevia for acute and chronic diarrhea.

In addition to an upfront payment, Jaguar is eligible to receive milestone payments in an aggregate amount of up to $61-million payable throughout the term of the agreement, with all of its Canalevia expenses paid retroactively to last October. Jaguar retains the MUMS indications and would be reimbursed to promote Canalevia in the U.S.

“The commercial launch for acute diarrhea is expected in early 2018,” Ms. Conte suggests, adding that a second-generation chew product for ease of chronic administration is under development.

According to Ms. Conte, the largest potential market opportunity in Jaguar’s pipeline is an ulcer drug, Equilevia, for equine athletes. It is another equine-friendly, sustainably-harvested pharmaceutical formulation of a botanical extract from the Croton lechleri tree in South America.

There are an estimated four million high performance horses in the U.S. and seven million worldwide, with an 87% incidence of squamous and glandular gastric ulcers. There is no FDA-approved treatment for glandular ulcers.

Ms. conte explains, botanical extract from the Croton lechleri tree in South America can be a sustainably-harvested pharmaceutical formulation

In a proof-of-concept study last year, Equilevia demonstrated a statistically significant improvement in glandular ulcerations, compared with placebo. Jaguar expects to release results from a dose determination study for equine ulcers in the first quarter of this year.

“A distinguishing feature of Equilevia is no requirement for treatment withdrawal prior to racing,” Ms. Conte says, noting that an existing chronic treatment for squamous ulcers must be withdrawn from the animal three days before racing.

While the dose determination data is still blinded, “we were able to observe racing results during the study and, no matter how you look at, whether it was compared with previous results; win, place or show; or dollar winnings, horses on treatment with Equilevia performed better than placebo,” she adds.

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Dr. Andrew Salzman, CEO and CMO

Kalytera Therapeutics (TSX-V:KALY) has put its bone repair and osteoporosis research programs on the back burner in order to focus on the development of a new cannabidiol (CBD) therapeutic for the treatment of acute Graft versus Host Disease (GvHD).

“We conducted a portfolio review this past summer and concluded that we had to broaden the scope of our activities into other disease indications and pursue an opportunity to acquire a closely held Israeli company, Talent Biotechs, which is advancing a clinical program in the use of CBD to treat and prevent GvHD,” Dr. Andrew Salzman, CEO and CMO of Kalytera, says in an interview with BioTuesdays.

“While this review was going on, we had a research program underway at my lab in northern Israel and we have now generated a pipeline of six prodrugs, or derivatives of CBD, for six different indications,” he adds. Kalytera completed the acquisition of Talent last week.

All of Kalytera’s GvHD and prodrug molecules consist of the synthetic form of CBD. “We have shied away from using botanical CBD because of regulatory and legal complexities,” Dr. Salzman contends. “We are not a medical marijuana company.”

GvHD is an orphan condition that can arise following stem cell or bone marrow transplants. GvHD occurs when the transplanted cells attack a patient’s organs, leading to acute and chronic illness and infections, disability, reduced quality of life, and death.

GvHD is an orphan condition that can arise following stem cell or bone marrow transplants

In January, Kalytera announced preliminary results of Talent’s 12-patient Phase 2a study evaluating the safety and efficacy of prolonged use of CBD in the prevention of GvHD. Final results of the trial will be announced on Feb. 22.

Preliminary results of the study demonstrated that only 15% of patients in the CBD treatment group developed Grade 2-4 GvHD, compared with a 60% to 70% incidence predicted by historical data used as a control.

“These results are outstanding, and mark a major milestone in the potential prevention of this serious and disabling disorder following allogeneic hematopoietic cell transplantation,” Dr. Salzman contends. “The acquisition of Talent is a game changer for Kalytera.”

According to Dr. Salzman cannabis, or marijuana, has over 80 chemical constituents, known as cannabinoids, which alter the release of neurotransmitters from the brain. Two of the most active and studied constituents of cannabis are tetrahydrocannabinol (THC) and CBD. THC is the major psychoactive component of cannabis, while CBD acts on many of the same receptors as THC, but without the psychoactive side effects.

“Cannabidiol has significant homeostatic properties to reset inflammation and immune activation in a way that is potentially useful across a number of serious unmet medical conditions,” he adds.

In addition, he points out that CBD has an established history of use in more than 80 clinical trials, “giving us an extensive safety database and reassurance that its use will be well tolerated in humans. So we have a molecule that is potent, active against a number of important targets and most likely safe. That’s an exciting combination.”

Dr. Salzman notes that Talent Biotechs has conducted four successful Phase 2 clinical trials with its CBD molecule for the treatment and prevention of GvHD. “Our focus is to move forward with a definitive proof-of-concept study for the treatment of acute GvHD,” he says, adding that other GvHD conditions, such as the prevention of acute and chronic GvHD, and the treatment of chronic GvHD, will be pursued at a later date. “We have promising preliminary data in these additional conditions.”

According to Dr. Salzman, Kalytera plans to conduct a short study to measure and obtain data on pharmacokinetics of its molecule, hopefully in the fourth quarter of this year

Prior to beginning the proof-of-concept study, hopefully in the fourth quarter this year, Dr. Salzman says, Kalytera plans to conduct a short study to measure and obtain data on pharmacokinetics of its molecule.

The proof-of-concept study, which effectively is a Phase 2b trial and will enroll some 160 patients, will be conducted at clinics in Israel, Australia, New Zealand, the U.S., Canada, and parts of the EU. “Our intent is to seek FDA approval that if this trial is successful, we can move immediately to a registration trial,” he adds.

In addition to GvHD, Dr. Salzman says Kalytera’s pipeline of six CBD prodrugs are indicated for acute renal failure, traumatic brain injury, inflammatory bowel disease, congestive heart failure, adult respiratory distress syndrome, and a topical for acne.

“These prodrugs have been constructed either to change the physical and chemical properties of CBD and make them more amenable to different routes of administration or to combine two active molecules with distinct mechanisms of action into a single combination molecule,” he adds. The company has filed patent applications on the new chemical entities.

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chiara russo

As a specialty pharmaceuticals analyst with Cantor Fitzgerald for the past 2 1/2 years, Chiara Russo covers developmental-stage companies that are on the cusp of changing the medical landscape as we know it. A philosophy major with an MBA from the Olin School of Business at Babson College, Ms. Russo was a R&D innovation consultant for Cubist Pharmaceuticals before becoming a sell-side equity research analyst. On the Street, she has been a research associate at ThinkEquity and VP and specialty pharmaceuticals analyst at Janney Montgomery Scott. In this interview with BioTuesdays, Ms. Russo discusses industry trends and some of the stocks she likes.

How does Cantor differ from other investment banks?

One of the reasons I was drawn to Cantor was the vision of where the company was headed in terms of building out the research platform and making the product as best as it can possibly be. I think where we differ is we’re willing to put our money where our mouth is. What I mean is we’re putting a lot of resources into building out the department and putting out an exceptional product. 

What topics are hot in biotech?

Oncology and gene therapy, which has very exciting science and at times, very humbling science, are key topics these days. In my universe, I focus on companies developing pain therapies, as well as the opioid epidemic in the country. I’m also starting to look at antibiotics as well.

according to russo, the opioid epidemic is a problem that requires coordinated effort, from appropriate initial screening, follow up, physician and patient vigilance and insurers making access to abuse-deterrent formulation and alternative therapies easier

Do you have some thoughts on tackling the opioid epidemic?

The opioid epidemic did not just happen overnight. It look about 20 years to get where it is and it would not surprise me if it gets worse before it gets better. This is a problem that requires a substantial coordinated effort, from appropriate initial screening, follow up, physician and patient vigilance, physicians embracing the spectrum of analgesics available and insurers making access to abuse-deterrent formulation and alternative therapies easier. We also cannot penalize the patients that are in excruciating pain that require opioid medication.

As primary care physicians decide to write less and less opioid scripts and funnel their pain patients up to pain management specialists, I can see some strain being placed on the system. I think that abusers that find it more difficult to get pills will turn to cheaper and more dangerous substances like heroine and synthetic fentanyl.  Though we have the ACA and the 21st Century Cures Act making treatment a priority, I think there is a lack of knowledge about that in the general population and that there aren’t enough facilities and skilled nurses and physicians to handle the population. It’s a work in progress.

How do you view investor sentiment these days?

Over the past 24 months, we’ve seen a definite shift in the risk/tolerance of investors. In 2014 and 2015, you couldn’t put money into biotech fast enough and even bad news didn’t cause the precipitous drops in valuations that we see today. Investors are definitely skittish these days and there’s a lot of uncertainty about the underlying infrastructure of what the healthcare system in this country is going to look like. And that’s had an influence on investment strategy.

Pricing pressure is a persistent theme in the sector. People these days are much more aware of the high deductibles of insurance plans and the upfront costs of expensive branded pharmaceuticals. A couple of bad apples have highlighted some unjustified increases in drug costs but otherwise, I don’t think the sector is out to gouge the American public.

according to russo, trial data DEFINITELY dictates value expansion in biotech, but it comes down to the quality of data and market potential

What’s the outlook for consolidation?

M&A has petered out for the time being because of uncertainty of the direction the government is going to take on health care. Of course, the dynamic would change if corporate taxes are reduced and overseas cash is returned. M&A also will depend on whether the market has a positive first half.

How does trial data influence consolidation?

Trial data definitely dictates value expansion in biotech. The question is whether the asset is something that Large Pharma can capitalize on with its resources. But what it comes down to is how good the data is and how good is the market potential. For the most part, though, we aren’t seeing acquisitions based on data. If a biotech has good Phase 2 data, Large Pharma is taking a wait-and-see attitude and if you have good Phase 3 data, let’s see if you can get through the approval process. In general, the point of acquisition is getting pushed down the time line.

Let’s talk about some stocks you like.

My top picks for 2017 are CARA Therapeutics (NASDAQ:CARA), which has a market cap of about $450-million; Paratek Pharmaceuticals (NASDAQ:PRTK), which has a market cap of about $345-million; and Flexion Therapeutics (NASDAQ:FLXN), with a $500-million market cap.

What do like about CARA?

CARA has a novel approach to pain and itch with a kappa-opioid that if successful could be the first non-restricted opioid on the market with an indication in itch as a backstop to valuation. 2017 will be a year of potentially transformative data read-outs, including Part B Phase 2/3 data in itch by the end of 2017, with oral formulation data in the current quarter, as well as a Part A read out.  CARA’s Phase 2b in an oral formulation in osteoarthritis pain is expected to read-out in the first half this year, with an interim look at the Phase 3 in IV post-operative pain in the first half as well. I rate the stock at “buy” with a $24 price target. On Friday, CARA closed at $14.85.

What do you like about Paratek?

Paratek plays in the antibiotic space developing broad spectrum antibiotics for pneumonia, skin infections and urinary tract infections: the “Big 3” of the antibiotic world. In 2017, Paratek will also have significant data read outs, which we have a high degree of confidence in, including an oral Phase 3 in skin infection in the second quarter, with a Phase 3 IV-to-oral in pneumonia in the third quarter. Allergan partnered product, sarecycline, for acne is expected to have Phase 3 data in early 2017 as well. I have a “buy” rating and $28 price target on Paratek. The stock closed at $15.50 on Friday.

Flexion is developing Zilretta, an intra-articular, extended-release corticosteroid injection for osteoarthritis pain of the knee

And finally, what do you like about Flexion?

Flexion is developing Zilretta, an intra-articular, extended-release corticosteroid injection for osteoarthritis pain of the knee, which is unique in that there are no extended-release steroids currently available on the market. Flexion filed an NDA for Zilretta in December, with approval anticipated in mid-2017. Zilretta should launch in early 2018 into a large market, with clinical data demonstrating Zilretta is statistically better than the current standard of care in terms of pain, stiffness and function, which should be appealing to orthopedists, the main targeted end-users. I rate the stock at “buy” with a $37 price target. Flexion closed at $18.48 on Friday.

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