Ventrus Biosciences (NASDAQ:ASMB)

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Player Avatar zzlangerhans (99.69) Submitted: 3/22/2011 6:23:41 PM : Underperform Start Price: $9.75 ASMB Score: +4.51

When I call Ventrus a niche pharma, I'm not kidding. All their products relate to anorectal health. I recently looked over their pipeline, and the word which came to my mind is "why?". The company makes a lot of hay about the lack of FDA approved medications for hemorrhoids and anal fissures, but that doesn't mean there's any shortage of medications. Last I checked there weren't FDA approved medications for runny noses and earaches. The concept is called over-the-counter, or OTC for short. What's the market going to be for a prescription 5HT-2 antagonist for hemorrhoids that can usually be treated with hydrocortisone suppositories, stool softeners, or minor surgery. Their diltiazem cream for anal fissures is a nifty idea, except that this is already easily available from specialty pharmacies that mix it for proctologists. Is there a market for the same cream at ten times the price once the FDA approves it?

The company was only able to raise 20M from their IPO in December, one of the weakest of the recent weak biotech IPO's. I'm not sure how much cash they had left before the IPO, but I'm guessing not much. Meanwhile, the share price has nearly doubled from the IPO on anticipation of an SPA for the phase III trial of iferanserin, the hemorrhoid pill. I'm anticipating more capital raises will be necessary before phase III data becomes available.

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Member Avatar jramson (< 20) Submitted: 3/28/2011 7:06:54 AM
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Is there any way to contact you directly? please feel free to email me at jramson@proactivecrg.com
thank you

Jeff Ramson

Member Avatar AlonKutai1 (< 20) Submitted: 3/30/2011 2:21:34 PM
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Hi zzlangerhans -

We at ProActive Capital Resources represent Ventrus in an investor relations capacity. I would like to take this opportunity to respectfully address each of your concerns mentioned in your 3/22/2011 post. For clarity purposes, I first iterate your concern and then follow on with a response.

1. When I call Ventrus a niche pharma, I'm not kidding. All their products relate to anorectal health. I recently looked over their pipeline, and the word which came to my mind is "why?". The company makes a lot of hay about the lack of FDA approved medications for hemorrhoids and anal fissures, but that doesn't mean there's any shortage of medications.

RESPONSE: There are no prescription drugs approved by FDA for this indication in the US. Doctors write 4 million prescriptions a year for high dose intra rectal and intra anal steroids but there are no data whatsoever to support their use in hemorrhoids. In fact these [products were never approved for this by FDA and have not been designated “safe and effective” because of this lack of data. Rx drugs simply don’t compete directly with OTC products unless the indication is completely cure or resolved by the OTC brands - and that’s certainly not the case with hemorrhoids as the great majority of hemorrhoid sufferers and physicians will tell you, if you but ask. In fact 4 million doctor office visits/year does indicate that OTC drugs aren’t getting it done for many people.

2. Last I checked there weren't FDA approved medications for runny noses and earaches.

RESPONSE: In fact this category illustrates precisely why there could be a significant market for a prescription hemorrhoid product. There are a vast array of OTC products for cough and cold. Many of these have solid clinical trials demonstrating their effectiveness. In spite of this Claritin (Schering) Allegra (Aventis now sanofi-Aventis) and Zyrtec (Pfizer) when they were prescription drugs for ‘runny nose’ had peak sales in the billions in the US even though they were for the same indications as these OTC products some of which were non sedating and more effective (e.g. Sudafed) Another example is Prilosec, for heartburn and ulcers, which, when it was an Rx, Zantac and Pepsid were available OTC for the same indication and had solid clinical data behind them and were more rapid acting…and now there’s Rx Nexium, a product very similar to Prilosec selling over 1 billion when Prilosec is OTC !

3. The concept is called over-the-counter, or OTC for short. What's the market going to be for a prescription 5HT-2 antagonist for hemorrhoids that can usually be treated with hydrocortisone suppositories, stool softeners, or minor surgery ?

RESPONSE: In the case of hemorrhoids the original OTC monographs for all of the OTC product ingredients were mostly in the 60’s/70’s and were based on case collection data (not dble blind trials) that were for very different combo preparations…the original even contained mercury! There are no published or otherwise publically available data demonstrating efficacy with these products, unlike many of the OTC products for cough/cold. Basically the OTC products for hemorrhoids are ointments, and as such only provide a ‘protective effect’ by coating the hemorrhoid so some of the symptoms are reduced until they resolve on their own. One ingredient found in some of the OTC preparations, phenylephrine, causes tightening of the anal sphincter when applied topically, exactly the effect you don’t want when you have hemorrhoids. If iferanserin were to be approved, the trials reflected in the label would describe cessation of the symptoms (bleeding itching and pain) which is very different than what current OTC drugs provide. Ironically the ointment used as the placebo arm in these trials is much like the base protective ointment used OTC, and an existing PH IIB study with iferanserin shows considerable differences between the drug and the ointment in the cessation and reduction of these symptoms. Hydrocortisone primarily relieves the itch somewhat as well as providing a coating if it’s in an ointment. There’s some debate as to whether in makes bleeding worse, but as for all of the products there are no data at all All in all what you’d have if iferanserin was an approved Rx drug would be a product prescribed by a physician, reimbursed by payors, with solid clinical data,FDA approval, and results that would be meaningful to patiients who have bleeding itching and pain– cessation of symptoms in a market where all there is are OTC products with no data, zero doctor support and only a mild coating effect and an Rx product with no approval and no data. What a great ‘niche’ to be in!

4. Their diltiazem cream for anal fissures is a nifty idea, except that this is already easily available from specialty pharmacies that mix it for proctologists. Is there a market for the same cream at ten times the price once the FDA approves it?

RESPONSE: 1. The dispensing by pharmacies of compounded drugs falls by over 95% once an approved product is available – i.e. is replaced by the Rx manufactured product. (only exception is Avastin/Lucentis where there’s an enormous economic incentive and maybe the KV progesterone, depending how that works out). 2. Currently patients are paying $40-$80 per 1 month of this and the treatment course is 2 months so that’s $80- $160 that the patient pays as it’s not reimbursed. Irrespective of the actual WAC (wholesale acquisition cost) what matters is the patient copay, which even at $100/month is in the range of what’s it’s already costing the patient and gives a $400-$500 WAC.

5. The company was only able to raise 20M from their IPO in December, one of the weakest of the recent weak biotech IPO's.

RESPONSE: Thecompany only sought to raise less than $20 million. In fact the deal priced in the range , was upsized, the over-allocation (green shoe) was exercised and the stock is now trading 75% higher than the IPO price. Hard to find a development stage biotech IPO performance like that since the 90’s…so in fact it was one of the strongest IPO’s of 2010 and so far into 2011.

6. I'm not sure how much cash they had left before the IPO, but I'm guessing not much. Meanwhile, the share price has nearly doubled from the IPO on anticipation of an SPA for the phase III trial of iferanserin, the hemorrhoid pill. I'm anticipating more capital raises will be necessary before phase III data becomes available.

RESPONSE: The company has consistently guided that the net proceeds are sufficient for the completion of the hemorrhoid PH III double blind trial (data to report out in Q1 2012) and the diltiazem anal fissure PH III trial (data to report out in Q2 2012) and for runway to Aug 2012 after that

Member Avatar zzlangerhans (99.69) Submitted: 4/1/2011 6:07:44 PM
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Geez, I'm half-convinced. I hope I'm just batting practice for you guys, since I can't imagine Ventrus is paying you big bucks to refute duffers like me on obscure stock websites. No one with any sense listens to me, at least they didn't until they noticed the company was listening. My feelings about Ventrus aren't very strong anyway - the pitch is an initial impression that I can refer back to in the future to remember my mindset at a particular time point. If the share price gets spanked on a dilutive financing or some negative analyst remarks, my next pitch might very well be positive. At least you aren't Prana or Star Scientific.

Now a little batting practice for me. A 75% jump over the IPO price (closer to 100% today) isn't exactly a victory for the company. It suggests they mispriced or mistimed the IPO and left money on the table. It's more of a success for whoever bought the stock at the IPO. I've never known a company to want to raise LESS money in their IPO, but I guess wonders will never cease. Now of course, if that share price keeps rising it will help the company to the extent that they can raise more money when they dilute (which of course they have no plans to do, which makes me wonder why they're paying you to promote their stock).

Member Avatar cecamadocv (99.98) Submitted: 5/3/2011 1:13:55 PM
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Why take their time to answer your questions. If their product is so great, and their pipeline is a good one, then their gonna get approved.
Langer doesnt work for the FDA...

I'm downthumbing and i have a good feeling about it too

Member Avatar jcarnoldsf (22.72) Submitted: 5/3/2011 3:24:04 PM
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I'm kind of happy I bought this stock at $7 per share, personally.

Member Avatar RRobertsmith (< 20) Submitted: 8/17/2011 12:02:46 PM
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this is a dog with fleas to quote M. Douglas

Member Avatar aracer (99.68) Submitted: 9/30/2011 1:18:28 PM
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I'm sorry. I just laughed loudly when I read you had looked over their anorectal pipeline...

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