Biotech portfolio update – Jumping into gene therapy

After a long summer break it is time to review recent events and update the portfolio. As far as clinical readouts go, my portfolio had a brutal summer with one complete P3 failure from Array Biopharma (ARRY), a mixed data set from Aurinia (AUPH) and a win from SAGE (SAGE) that resulted in limited share appreciation. This was offset by strong performance from Exelixis (EXEL), my biggest holding which is up 48% quarter to date.

For the remainder of 2016 I plan to gradually increase exposure to gene therapy, which I hope will become one of the industry’s primary growth drivers in the coming years. In parallel, as I am still pessimistic about the biotech field in general (R&D productivity, pricing, biosimilars…), I intend to keep my short ETFs and a significant cash position.

Data readouts – Array and Aurinia disappoint, SAGE delivers

Array Biopharma – Astrazeneca’s (AZN) selumetinib, originally developed by Array, failed to improve PFS or overall survival in KRAS-mutated lung cancer. This P3 failure demonstrates once again the challenges in corroborating positive P2 data and joins a series of disappointing news for MEK inhibitors. In 2015, selumetinib failed another P3 study in uveal melanoma and earlier this year, Array terminated a P3 study for its wholly-owned MEK inhibitor, binimetinib, in ovarian cancer. Recent P3 data for binimetinib in NRAS+ melanoma was technically a success but benefit was underwhelming (improvement in PFS without a survival benefit).

MEK inhibitors are still being explored in multiple indications that may enable developers to expand their use beyond BRAF+ melanoma. At ASCO 2016, Roche and Exelixis reported an intriguing efficacy signal with Cotellic in KRAS+ colon cancer. Another indication that is not discussed much is neurofibromatosis type 1 where selumetinib demonstrated strong efficacy but timelines and registration strategy are not clear. Later in 2016, Array will report data for binimetinib in BRAF+ melanoma, where two other MEK inhibitors (Mekinist and Cotellic) are already approved. Array hopes to demonstrate a differentiated safety profile but penetrating the BRAF+ market is going to be challenging.

Aurinia – Aurinia reported results from a P2b evaluating two doses of its calcineurin inhibitor (voclosporin) in lupus nephritis. While voclosporin demonstrated superiority over the control arm at the low dose in inducing remission (32.6% vs. 19.3%), there was no effect with the high dose and there was an alarming imbalance in deaths between the low dose cohort (13 cases overall, 10 of which occurred  in the lower dose arm). The fact the active arm had such a high mortality obviously raises safety concerns but also casts a shadow on the efficacy signal and trial design.

SAGE –SAGE reported a strong efficacy signal for its lead program, SAGE-547, in a placebo- controlled P2 in postpartum depression (PPD). Despite the typically high placebo response in depression trials, the drug led to a clinically meaningful reduction in depression with a ~12 point reduction from placebo on the HAM-D scale. Importantly, the effect had a quick onset and appears durable almost a month following treatment cessation.


These results are very significant for SAGE-547 because they validate the initial signal observed to date in single arm open label trials or case studies, which are rightfully viewed as unreliable (especially in CNS indications). Despite the small sample size, the strength and consistency of the PPD data imply the drug is active and de-risk the program.

Going forward, SAGE decided to focus on SRSE with SAGE-547 (P3 data pushed out to 1H:2017) while pursuing PPD as well as other CNS diseases (essential tremor, Parkinson’s) with a next-generation oral drug (SAGE-217). This decision makes sense in light of the different clinical settings (SRSE patients are hospitalized and need immediate solution for their seizures whereas PPD may require more prolonged treatment). SAGE-217 appears more potent and selective than SAGE-547 with good pharmacologic profile based on P1, but it is still not validated in the clinic.

Momentum continues to build around gene therapy

There have been some notable news in the gene therapy space including three data readouts and an acquisition. This gradual but consistent progress helps to build confidence around gene therapy and makes it one of the most important segments in the industry.

The combined recent data set from all gene therapy companies still comprises less than 100 patients with limited follow up, but for the first time in more than 25 years, we are starting to get positive answers on three major questions: Efficacy, durability and safety. With tens of active clinical programs, strong data across multiple domains (liver, CNS, retina, bone marrow) and an armamentarium of tissue-specific vectors, gene therapy may be ready for primetime. The field will surely see its share of failures but the path to commercial success with gene therapy is finally visible.


Biomarin (BMRN) made a big splash with its hemophilia A treatment, BMN-270, demonstrating that gene therapy can lead to a functional cure (at least for a period of time). Results from 7 patients treated at the highest dose demonstrated quick and robust expression of factor VIII (hemophilia A is caused by low factor VIII activity). Strikingly, all but one patient achieved normal levels and this was accompanied by a dramatic reduction in bleeding events despite taking patients off prophylactic FVIII treatment. Follow up is still limited (up to 20 weeks) but Factor VIII production appears to be stabilizing or even increasing in some cases.


The study was a major win but there were two safety signals:  ALT elevation (marker for liver damage) and an above normal FVIII levels in two patients.

ALT elevations are closely watched in every liver-targeted gene therapy study because earlier products led to ALT elevations (probably an immunogenic response against the viral vector) that led to clinically relevant elevations and were associated with loss of transgene expression. There is still not enough follow up to rule out any chronic liver toxicity but according to Biomarin, the ALT elevations were not clinically meaningful and appear to be manageable with steroids (in some cases patients were taken off steroids and liver functions returned to normal). Fortunately, the ALT elevations do not seem to correlate with loss FVIII expression as production continued to rise or stabilized during these events.

The excessive FVIII levels in two patients are troubling on paper (especially if production keeps going up) because elevated levels of FVIII are associated with higher risk of thrombotic complications according to several studies, reviewed here. This demonstrates a primary concern with gene therapy – it’s irreversible and cannot be “switched off”. While the company disclosed patients are not experiencing any thrombosis-related events, they will have to be monitored and potentially treated in case FVIII continue to climb or any abnormalities emerge. Going forward Biomarin plans to evaluate a lower dose to avoid such cases.

Overall, Biomarin’s hem A data are impressive and together with data from hemophilia B programs from Spark (ONCE)/Pfizer (PFE) and UniQure (QURE), they lay the groundwork for registration programs in hemophilia potentially next year.


While Biomarin’s gene therapy for hemophilia demonstrated both protein production (FVIII in the blood) and clinical improvement (bleeding incidence), Avexis’ (AVXS) AVXS-101 demonstrated only the latter. Nevertheless, the dramatic clinical signal coupled with the fact that the target tissue are neurons make AVXS-101 one of the most important gene therapies in development (and personally speaking, the most intriguing one).

Last month, Avexis provided an update from a clinical trial evaluating AVXS-101 for SMA1, a fatal disease in infants that affects the motor neurons and is invariably fatal by 2 years of age. Following the previous data readout (which I discussed here), the clinical effect appears to hold with unprecedented functional and survival improvements over historical data. All but one patient on the high dose cohort had a dramatic functional improvement vs. the expected persistent decline that is the hallmark of SMA1. Importantly, none of the patients had an “event” (defined as ventilation or death) despite crossing 8 months of age where a recent study showed an event rate of 50%. Duration of the effect is still unknown due to limited follow up (appears to be at least 1 year).

AVXS101The trial did not have a control arm but the difference is so dramatic that I find it hard to believe it is just a statistical artifact.  The recent breakthrough therapy designation the FDA granted to AVXS-101 is another testament to the robustness of the data. Biogen (BIIB) and Ionis (IONS) reported P3 success for nusinersen in SMA1, which validates the signal observed in a previous single-arm study and this strengthens the notion that single-arm trials in SMA1 can generate a reliable signal. Although nusinersen can theoretically be seen as a competitive threat to AVXS-101, if both drugs are approved, nusinersen will probably be used on top of a one-time gene therapy like AVXS-101.

AVXS-101’s effect, if real, implies that AAV9 vectors Avexis utilizes can cross the blood-brain-barrier and reach the central nervous system. This could have dramatic implications for many rare genetic diseases (and down the road more prevalent diseases like Parkinson’s and Alzheimer’s disease) where the nerve system is damaged but cannot be modulated by existing drugs. In this perspective, companies like REGENXBIO (RGNX) and Abeona (ABEO) are very interesting opportunities as both target neurologic diseases (or ones with neurologic manifestations) with AAV9-based gene therapies.


Spark reported updated results from its pivotal trial for its RPE65 gene therapy (Voretigene neparvovec) for inherited retinal disease. The study was overwhelmingly positive and will likely be the basis of the first ever FDA approval for gene therapy next year. In contrast to other gene therapy programs in development, Spark’s program has up to 3 years of follow-up and so far the effect appears to hold.

RPE65 gene therapy is to retinal diseases what hemophilia gene therapy is to liver diseases – a proof of concept that paves the way for other genetic retinal diseases like XLRS, XLRP, achromatopsia and choroideremia. Spark will have first clinical data for its choroideremia program later in 2016. AGTC (AGTC) is expected to report initial clinical data in XLRS and achromatopsia also in 2016.

Spark also has a Hemophilia A program (SPK-8011), which is about to enter P1. Despite being more than a year behind Biomarin, recent results for Spark’s Hemophilia B program (partnered with Pfizer) were very encouraging and may point to some advantages with Spark’s vectors. These include better potency and lower immunogenicity that could translate to a more compelling clinical profile (i.e achieving the required protein levels with limited immune reaction, and down the road better durability and dosing flexibility).

Pfizer acquires Bamboo

One item that went relatively unnoticed is the acquisition of Bamboo by Pfizer. Bamboo is developing gene therapies for neuronal and neuromuscular indications with a program in P1 for Giant Axonal Neuropathy. Despite the modest deal size ($150M upfront), it is an important milestone in big pharma’s venture into gene therapy, which historically has not been aligned with the pharma business model (one time genetic treatment vs. recurring sales of small molecules or biologics). The title of Pfizer’s press release (“Pfizer aims to become industry leader in gene therapy with aquisition of bamboo therapeutics”) clearly demonstrates this trend.

If gene therapy is indeed going to become a central component of the biopharma industry, the demand for validated platforms with clinical data and CMC capabilities could grow dramatically in the near future. In contrast to cell therapies such as CARs and TCRs, gene therapy may be more palatable to pharma because the end product is still a drug in a vial and not a process.

Portfolio updates

Given the early stage and inherent risk in gene therapy, I intend to build a diversified portfolio with the goal of starting 2017 with 7-8 stocks that will comprise a third of the portfolio. Today I am starting with Spark, Avexis, REGENXBIO and Abeona  (Next on the list is Bluebird going into ASH 2016…)

I am selling Array Biopharma, Aurinia, Genocea (GNCA) and Conatus (CNAT). In addition, I am selling part of my ArQule (ARQL) and Foundation Medicine (FMI) position.

Lastly, I am initiating a small position in Kura Oncology (KURA) following an early signal in HRAS+ H&N cancer.

Portfolio holdings – September 4th, 2016

Portfolio holdings - 4-9-2016 - after changes

biotech etfs - 4-9-2016

134 thoughts on “Biotech portfolio update – Jumping into gene therapy

  1. Bouschka (REGN/OCUL/ADVM) – I would say it’s somewhere in between. Even if wet AMD becomes amenable to gene therapy this is a long term solution and so far the technology used by ADVM and other companies is probably not good enough. The REGN/ADVM collaboration is on rare retinal diseases from what I recall. I view this is a short term solution that can help protect eyelea from Avastin and Lucentis biosimilars.

    Alex (GLYC) – Sorry don’t know them.

    lgonber (ESPR) – I also think it’s cheap. The data were not a home run but a major de-risking event. Next catalyst is PCSK9 outcomes data which is still 3-6 months away.
    Don’t know ADXS well.

    Kevin (TTPH/IMGN) – Don’t have a strong opinion on those names. The recent data from SGEN in bladder cancer made me more optimistic about ADCs in general and IMGN clearly has a validated technology.

    Stefan Mauer (SGEN) – Hard to say. BB have a huge position, don’t know what the plan is….

    jose miranda (EXEL) – Thanks! I prefer not to recommend specific stocks for a specific investor as each one of us has a different investment profile. I personally intend to hold EXEL as the risk is quite low imo and upside is still there (buyout, Japan deal, more visibility for the PD-1 combos for cabo or cobi etc.). I still plan to sell a portion of shares in the virtual portfolio simply because the position is dysproportionally large.

    Peter (EXEL) – I assign a 20-25% likelihood of success in HCC

    Jack (ABEO) – Hope the data are good although it is still unclear what exactly will be reported and how they can prove they reach the CNS…



  2. Hi Ohad,

    “Peter (EXEL) – I assign a 20-25% likelihood of success in HCC”
    That is too low, given the data to date (in all indications), imo.
    I’d say 50-55%


  3. Is ABEO ok to buy at current stock price? Do you see pullback and might have better entry point in future?

    Any other company competing for the same diseases, and how far ahead are they with it.

    Which is the best gene therapy stock, you have in your portfolio – that you see has good potential

    Thanks always for your inputs


  4. Any thoughts on xencor? Saw you were negative on mgnx cd123. Do you like loxo at the current valuation? Any thoughts on adding xlrn to the portfolio? Thanks


  5. 677727 198724It is a shame you dont have a donate button! Id without a doubt donate to this brilliant weblog! I suppose for now ill settle for book-marking and adding your RSS feed to my Google account. I appear forward to fresh updates and will share this weblog with my Facebook group. Chat soon! 836014


  6. Bispecific antibodies – in the past there were many questions about companies advancing these therapies like MGNX and XNCR. Is there any specific reason you stay away from these field?
    Talking about bispecifics, any thoughts about MRUS? They have two readouts by the end of the year.


  7. Ohad

    Dnai is trading at a 50m mkt cap.they have 120 million in cash,no debt.can you explain in general why a biotech would be trading at such a discount to their cash holdings,or if your familiar with the company and can share some thoughts.


  8. Hello Ohad
    what do you think of trvn? it’s in a decline trend..
    what do you think about selling before the election?, seems either way bio will be hit


  9. JuliaVeganLove – Sorry, prefer not to comment on CAR/TCR companies.

    Peter (EXEL) – P2 2 data were very impressive but if cabo generated a similar level of efficacy in P3, the trial should have been stopped by now imo.

    Ruhu (ABEO) – Hard to predict stock fluctuations. I view it as a long term position especially after last week’s results which were very encouraging imo.
    Regarding competition – There is not a lot of competition in Sanfilippo A. Lysogene expects to start a P2/3 using a different viral vector (AAVrh10) that has to be injected directly to the brain. Shire has an enzyme replacement therapy program with intra-thecal administration but status is unclear.
    The closest competitor is Esteve (also uses AAV9) which expects to be in the clinic soon :

    Sanfilippo B is more crowded – ALXN has an ERT program from GEVA (given IV), BMRN has another ERT that needs to be injected to the brain (via reservoir), QURE has an AAV5 program that needs to be injected directly to the brain. ALXN and QURE demonstrated encouraging data but are not a single IV administration like ABO-201.

    Hard to pick a single gene therapy stock. In such a risky and early stage field I prefer owning a basket.

    Mike –
    XNCR – NVS deal was impressive imo but I am still pessimistic about bsAbs until more clinical data emerges.
    LOXO – I still like them but valuation is not attractive enough imo.
    XLRN – I like the MDS program (not threatened by gene therapy) but the RCC program isn’t attractive imo and valuation is too high imo.
    PIRS – Still not convinced anticalins are superior to antibodies.

    Andre – I was originally very optimistic about bsAbs but so far clinical data have been underwhelming without a single success story except Blincyto. Therefore I am cautious about all bispecific platforms although many are robust engineeringing-wise.

    Christian (BDSI) – Sorry don’t know them well.

    Dave (DNAI) – When a stock is traded under cash it means the market assigns a negative value to the pipeline (leads to cash burn without any real hope for positive data). Chk1 and Cdc7 have already been explored without much success so skepticism is understandable.

    Alex –
    ARQL – I am not optimistic about the HCC data so decided to decrease exposure. Still like the other programs.
    FMI – Market penetration has been slower than expected (as well as reimbursement)
    TRVN – I still like the company and plans to add more early next year. No idea about how elections will impact the stock or the general markets.



  10. Ohad -why havent $exel started new trials? Been over 1.8 years since RCC top line results? They have raised $260 from ipsen, could have parterned with Japanese co; yet the chose to pay down debt and conserve cash?! All signs point to preparing for buyout or negotiating BO deal? Please comment. Also could Q3 earnings surprise $60-70m range trigger deal ?


  11. Hi Ohad,

    You say: “P2 2 data were very impressive but if cabo generated a similar level of efficacy in P3, the trial should have been stopped by now imo.”

    Precisely. P3 data does NOT have to be as strong as P2 ones to gain approval.
    It just needs to be strong enough… Not stopping the trial early is the rule, even for later to be approvel compounds. Stopping early was never in the cads, and would have been very surprising, imo.


  12. Ohad said: “PIRS – Still not convinced anticalins are superior to antibodies. ”

    Wow… quite a statement!
    Anticalins have all of the binding capabilities and therapeutic potential of mAbs, but are smaller, easier to manufacture, far more tunable in kinetics, easier to create bi-specific and tri-specific binding regions, and can be dosed inhaled and potentially even orally.
    There’s really no area where I see mAbs superior, unless you are looking for some sort of in vivo created approach


  13. XENE

    Hi Ohad,

    are you still holding XENE? Do you think its a good buy here in front of the results for P1 coming and the platform in general?



  14. Hi Ohad,

    Pfizer just discontinued their PCSK9i bococizumab. With recent positive topline Phase 3 results, how do you think this readout will affect the future of ESPR? I see it as a negative if a major Ph3 player does not have faith in the field —

    Thank you


  15. Hi Ohad,

    TRVN share price has never been Lower. Do you see any reason for this weakness except for market conditions? Do you plan adding in your next portfolio update?


  16. $EXEL What do you think of Exelixis valuation , do u think it makes them a stronger buyout candidate now, they seem to be setting themselves up to be a buyout candidate. What would be your valuation now ?


  17. $EXEL ~286m shares now outstanding, @11.75 =$3.36b market cap. Assume a 55% premium puts the price at $18.2 or $5.2b takeout price. They will end the year with ~$480m in cash and $200m in debt. Assume they add $250m via Japanese partnership plus royalties. They have $1b in write offs; Cottelic revenues negligible in the near/ perhaps long term. All eyes on Cabometyx sales -assume on track to make $200m in the next 12m RCC alone. $40m/y for Cometriq. ~$150m 2016; $250m 2017?; $400m 2018?; $600m 2019?


  18. Ohad, thanks for taking your time to write this blog and answer questions.
    Are you, or anyone on here, familiar with a Swedish company called Hansa Medical,
    HMED? Rod


  19. Steve (EXEL) – I think they realized they had to contain costs after starting 3 pivotal programs (prostate, RCC, liver). Don’t forget they have a broad CRADA program with the NIH (CABOSUN was part of this agreement) so there are additional active trials.

    Jack (ABEO) – I think the offering makes sense after the significant move and the need to aggressively pursue MPSIIIA/B following the encouraging data with ABO-102.

    Mike (ArgenX) – Haven’t looked at them for awhile… I remember they had a strong platform but it was hard to find a near term value creating events. The FcRn approach is interesting but will take time to generate data in MG or ITP.

    EXEL – Happy to be wrong here…
    PIRS – The challenge is translating these technical advantages to clinical ones. So far I haven’t seen this.

    curiousgeorge (EXEL) – I was hoping for a slighlty highe sales figure for Cabometyx ($35M) but $31M is clearly a strong launch.

    Horst (XENE) – Yes I am still holding (but growing impatient…). Genentech should have communicated their plans by now for the NaV1.7 program. The acne program is interesting but less lucrative imo. I still like the approach of looking for extreme phenotypes as a way to identify drug targets, was hoping to see more drugs in development by now.

    Garry Xo (ESPR) – I think it is a combination of the disappointing PCSK9 launches and some specific issues related to PFE’s antibody. I still believe ESPR’s has a lot of value as an oral LDL lowering agent and that PCSK9 CVOT will validate the LDL hypothesis.

    Chris (TRVN) – I don’t see any reason for the weakness, yes I plan on adding early next year.

    Kevin (ONCE) – I don’t think it’s a major setback as the liver enzymes were contained with steroids and FIX expression may still continue (need more follow up for that)

    curiousgeorge (EXEL) – I think they are close to be fairly priced based on 2nd/3rd line RCC. There is still upside from label expansion (PD1 combo data in bladder was attractive imo) but I don’t see the stock go beyond $15 soon.

    Steve (EXEL) – I think the sales trajectory makes sense (especially if they get 1st line approval).

    Horst (AVXS) – I don’t plan to sell shares despite the high MC, especially given the very favorable feedback from the FDA. SMA1 is quite rare but other SMA types may increase opportunity to $2B long term so valuation may be justified if data continue to hold,

    ABEO – I think they still don’t get credit as a “professional” pure play gene therapy play. Agree there is a valuation gap especially if we count the MPSIIIB in.

    Rod Gex – Sorry don’t know them.



  20. Stock promoters responsible for numerous biotech wipeouts run this “company,” while ABEO temporarily trades near the highest market capitalization in its 20-year history.ABEO’s auditor Whitley Penn cited by PCAOB repeatedly for “audit deficiencies”. This is the same tiny auditor who oversaw the alleged UDF “Ponzi scheme” exposed by Kyle Bass.Insiders have collected a shocking ~$35m in compensation, which exceeds 50% of ABEO’s R&D spending since 1996, while losing over $325m of shareholder cash, and yet accomplishing apparently nothing.ABEO insiders have accumulated multi-decade track records of shareholder wreckage including several prior companies that went to essentially zero.ABEO is set to decline 92% as its science fails and the stock promotion comes unwound, just like other Steven Rouhandeh biotech stocks.ABEO appears to be a bottomless pit of self-enrichment for the long-time stock promoters who run this “company” ABEO’s science is completely unviable, calling into question the very reason for the company’s existence. ABEO’s 20 Year History: Crummy Reverse Merger Penny Stock with Ties to Insiders Convicted of Fraud. Abeona is essentially a failed rollup of Blech and Rouhandeh investments that each collapsed. Abeona is the end product of a more than 20-year history of failure and shareholder value destruction that has ties directly to a convicted felon who served jail time for biotech securities fraud.
    An in depth review of Rouhandeh’s past involvements revealed an alarming pattern of repeated shareholder value destruction. Abeona has been nothing short of remarkable as what appears to be a bottomless pit of cash burn and value destruction. Abeona has lost over $325 million since 2006 and the cash burn has accelerated in recent years Millions of dollars have been shuffled into the hands of ABEO insiders and their affiliates Why is Abeona paying its largest shareholder millions of dollars for investor relations? We looked back and could not find a single important scientific discovery in the entire history of Abeona Estimated ABEO insider compensation has exceeded $34 million. ABEO stock is tantamount to simply giving your money to insiders: You get the dilution, they keep the cash. ABEO’s Auditor Currently Entangled in “Ponzi-Like Scheme” Allegations. ABEO’s auditor issued 8 “unqualified going concern” opinions from 2006 to present.


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