Does A Full Room At BIO CEO Indicate A Company Past Its Tipping Point?
By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
At the 7th Annual BIO CEO & Investor Conference in New York City, 160+ public and private companies, as well as patient advocacy groups, conducted presentations. Of these, it is fairly easy to determine the companies investors consider hot. All you have to do is follow the Twitter hashtag #BIOCEO15 and look for the tweets touting “standing room only.” Two companies that fit that description are Sutro Biopharma, focusing on antibody drug conjugates (ADCs) and multispecific antibody-based therapeutics, and Inovio Pharmaceuticals, which touts its synthetic immune therapy technology platform. Another buzz-worthy company at the conference was Kite Pharmaceuticals, which focuses on developing novel cancer immunotherapy products. One person tweeted, “Kite pharma CEO talks about toxicity and the stock is up 5%,” and another shared, “This room is not big enough!!” While the folks at Kite have to feel proud for receiving a tweet with TWO exclamation points in a social medium that restricts you to 140 characters, perhaps my favorite and most illustrative tweet came from Brad Loncar — “Overheard twice today at #BIOCEO15: ‘We’re going to be starting up a CAR-T company’” CAR-T is in reference to using chimeric antigen receptors (CAR) T-Cell therapies to engineer patients’ immune cells to treat their cancers. Loncar’s tweet, as well as those denoting significant presentation attendance at the BIO CEO & Investor’s Conference, reminds me of a philosophy held by football coaching legend, Vince Lombardi, — “If you are 10 minutes early, you are already late.” In other words, when it comes to identifying BioPharmas or technologies that have yet to reach their tipping point, at BIO CEO, if the room is already full, it has already tipped. Now you may be thinking, “But Rob, at the annual J.P. Morgan Healthcare Conference you made a point of talking about being in jam-packed Q&A sessions of the hottest of the hot and the biggest of the big.” Yes, that’s true. In BioPharma, if you want to know what is hot today, a full Q&A session at J.P. Morgan is a great barometer. However, if you want to know what is going to be hot tomorrow, the BIO CEO & Investor Conference is where you need to be — just not in the room where everyone else already is. Instead, try to seek out those companies receiving a little less attention, working in interesting therapeutic categories, and being led by folks with a track record of success. I want to know what those leaders see today that is so intriguing it will influence other people to start their own companies tomorrow.
My Top 3 Most Interesting BioPharma Companies From BIO CEO
While I attended a number of presentations at BIO CEO, there are three companies which stood out to me as being “interesting” – ContraFect Corp., Dipexium Pharmaceuticals, and Recro Pharma. Full disclosure, at the writing of this article I am not yet a personal investor of any of these companies. Here (in alphabetical order) are some of the insights I gathered from these companies’ presentations, which took place in rooms with plenty of seating left.
ContraFect
ContraFect’s (NASDAQ: CFRX) presentation was conducted by its CEO, Julia Gregory, who began by highlighting the company’s focus on developing first-in-class anti-infectives for life-threatening, drug-resistant infections (e.g., CF-301). Having the first Lysin (CF-301) to be allowed by the FDA to enter human clinical trials is one reason I find ContraFect interesting. While Gregory highlighted the importance of generating new drugs to treat infectious and resistant diseases, citing the GAIN Act and the rising death toll of Americans from methicillin- resistant Staphylococcus aureus (MRSA) (another reason I find ContraFect of interest), actions of Big Pharma indicate the company to be working in a space others find expensively interesting. For example, Merck recently acquired the antibiotic company, Cubist Therapeutics, for $9.5B. Actavis, which has been on a buying binge (e.g., Allergan for $66B, Warner Chilcott for $8.5B) added Durata Therapeutics for $675 million in an effort to strengthen its emerging infectious disease business. According to Gregory, about 120,000 staph infections occur in both hospital and community settings in the United States annually, many of which result in a significant hospital stay (i.e., 21 days at a cost of $114,000). Even if just half of these cases stayed in the hospital for just half this amount of time, the cost in the U.S. alone would be $3.4 B. When you factor in the impact of these hospital stays on our lost economic productivity, MRSA is a significant, yet increasing, unmet medical need, and another reason I find this company interesting. Further, in animal models, in combinations with vancomycin or daptomycin, CF-301 increased survival significantly when compared to treatment with antibiotics alone, which also appeals to me. Finally, ContraFect is not a one-trick pony, as it is also working on an influenza vaccine, CF-404, a universal therapeutic cocktail for both seasonal and pandemic flu varieties. In addition to the pipeline and the company’s area of focus, I also like the look of the leadership team. Now, while Louis Garguilo notes how we can easily misjudge leadership in our industry, having watched Gregory present, my intuition says ContraFect is worth taking a deeper look.
Dipexium
Dipexium Pharmaceuticals (NASDAQ: DPRX) is in late-stage clinical development of Locilex, which could become the first antibiotic FDA-approved specifically for mild infections of diabetic foot ulcers. Roughly 10 percent of the U.S. population has diabetes, 15 percent of which will have diabetic foot ulcers. David Luci, president and CEO of Dipexium, who conducted the BIO CEO presentation, estimates that if Locilex is approved, the cost of treatment for these 3.1 million patients will be around $600 each. If the company just got half of these patients it would be nearly a billion-dollar drug. But the drug also has shown promise in helping to close wounds, as well as with acne. If the company is able to gain additional indications in these areas, it could be a mega blockbuster.
All of the above points are reasons why I find Dipexium interesting. However, what I really like about this company is the conviction of the leadership team. You see, Locilex has been under development since before 1998. One of the key people involved in those early Locilex days just so happens to be Benjamin Lipsky, M.D., one of the world’s leading experts on the diabetic foot and current Dipexium scientific advisor. David Luci and Robert DeLuccia, Dipexium co-founders, had become aware of Locilex when they had served together at a previous company that had tried and failed to get the drug FDA approved. In other words, Luci and DeLuccia had the benefit of a “CARFAX” in the form of Lipsky on Locilex, and not only believed the manufacturing issues cited by the FDA (i.e., physical instability and unacceptable impurity) could be overcome, but the conviction to go out and buy the asset for Dipexium. But there are other reasons why Locilex is intriguing, such as 16 years of patent life, and the fact that its topical application allows for delivery of a higher concentration of antibiotic to the infected area relative to oral and intravenous antibiotics. Further, as it does not absorb into the bloodstream, Locilex is less likely to develop resistance or have drug-to-drug interactions with other medications.
Recro Pharma
Recro Pharma (NASDAQ: REPH) is a clinical-stage specialty pharmaceutical company developing non-opioid therapeutics for the treatment of pain, or as their president and CEO Gerri Henwood stated in her presentation, “We’re focused on non-addictive pain products, initially for acute pain.” Rather than go into the statistics behind opioid addiction and why this seems like such a good opportunity, I have two simple thoughts to why Recro is “very interesting.” The first is the number one reason for why any person calls their doctor for an appointment or goes to an urgent care or ER facility — pain. The second reason I find this company interesting is the intranasal pain product they have in clinical trials, dexmedetomidine (Dex-IN). Dex-IN has extensive history dating back to the 1990s as an approved sedative. So, I feel confident the leadership team has a good idea of what it is going to take to get this product approved, as well as a solid understanding of the drug’s safety and side-effect profile. However, there is another reason I find Recro interesting and it is less about the product and more about the leader, who has a nose (no pun intended) for success. She founded Auxilium in 1999, which was acquired for $2.6B by Endo International (NASDAQ: ENDP) last year. Prior, she founded a CRO, IBAH, which grew to become the fifth largest in the world before acquisition in 1998 by Omnicare, a $7.5B company today (NYSE: OCR). From my perspective, Henwood is visionary and patient. For example, she founded IBAH in 1985 and built it over 14 years before it was acquired, roughly the same amount of time she spent building Auxilium. I can’t see a tenured executive like Henwood taking the reins of an organization without having done her due diligence on the market or the financials, as well as having a good gut feel for a high probability of success.
When trying to find that next “big thing” in BioPharma, don’t restrict yourself to going with the crowd. Though being in a herd can make you feel safe and secure, having a herd mentality can help even the smartest people to make bad decisions.