Two new bottoms for the GBMB
Transcept Pharmaceuticals (TSPT) - market cap 87M, share price 6.45. Cash 79M, debt 1M, quarterly burn 2-4M. Transcept is the reincarnation of a failed biotech called Novacea who whiffed on prostate cancer drug Asentar. They wisely used accumulated cash to reverse merge with Transcept and their zolpidem reformulation Intermezzo, which they then submitted to the FDA as a treatment for the middle-of-the-night awakening variety of insomnia. In mid-2009 the share price steadily climbed from 5 to 15 on the strength of a licensing deal with Purdue and the impending PDUFA of Intermezzo, then collapsed in 10/09 with an FDA Complete Response letter. The FDA safety concerns were related to driving impairment the morning after Intermezzo usage. The company announced today that they completed the highway driving study with positive results and would submit the Intermezzo NDA in Q1 2011. This announcement has done nothing to reverse recent downward momentum in the stock. Close inspection of the driving study data does raise some concerns. While the primary analysis of the driving study (symmetry analysis) showed no significant effect four hours after Intermezzo use, there was a significant effect three hours after use. The secondary analysis (standard deviation of lateral position) used at both three and four hours showed statistically significant effects, although the magnitude was substantially lower than that seen with a 0.05% blood alcohol level. Therefore there is potential for an extremely safety-conscious FDA to deliver another CRL based on these results. However, once the Intermezzo NDA is resubmitted in Q1 2011, I expect these potential safety concerns to be submerged in the pro-approval hype. A resurgence back to the low teens is not unlikely. Continuing downward momentum in the share price leads me to set a threshold of 6 for a GBMB buy.
Alnylam Pharmaceuticals (ALNY) - market cap 572M, share price 13.59. Cash 397M, debt 0, quarterly burn 8-15M. Alnylam is occupying a much more lowly position in the biotech food chain than they did in 2007 and 2008, when the share price was in the 30's and market cap was well over a billion based on giddy optimism for shiny new RNA interference technology. I dumped on Alnylam at those levels but more recently I put in a green thumb. I kind of feel like the nerdy guy who started dating the cheerleader after she got fat. A combination of broad market pressures and growing analyst skepticism took the share price down substantially in 2009, and the beating continued in 2010 with the scheduled ending of a five year collaboration with Novartis. The market seemed to take this as a bad break-up, but I'm more willing to accept both parties' version that this was simply destiny. So my cheerleader may have lost her quarterback boyfriend, but she's still got a hefty chunk of Daddy's cash and I suspect before long she'll be back on the squad. I may go all the way with Alnylam below 12.