Biotech milestones preview (2): PDLI

After the market close, Genentech reported extremely strong Jan 07 results. Good news for DNA means good news for PDLI which gets royalty revenue stream on most of all DNA blockbuster cancer drugs that includes Avastin and Herceptin.

PDLI

Description.
Marketed products: (1) Cardene I.V. is the only intravenous calcium channel blocker (calcium ion influx inhibitor) for the short-term treatment of hypertension when oral therapy is not feasible or desirable, (2) Retavase, a recombinant plasminogen activator, works by generating plasmin, an enzyme produced naturally by the body's blood plasma for management of acute myocardial infarction (AMI) or heart attack in adults for the improvement of ventricular function following AMI, the reduction of the incidence of congestive heart failure and the reduction of mortality associated with AMI and (3) IV Busulfex is an intravenous form of oral busulfan, a chemotherapeutic agent commonly used as part of a conditioning regimen in the transplant setting combination with cyclophosphamide, prior to allogeneic hematopoietic stem cell transplantation (also referred as blood or marrow transplantation or BMT) in patients with chronic myelogenous leukemia (CML).

Humanized mononoclonal antibodies (huMAbs) - receives royalties on sales of multiple products on the market, including DNA's Avastin, Herceptin, Lucentis, Raptiva, Xolair and MEDI's Synagis. Internal pipeline includes Nuvion (visilizumab, anti-CD3) - initiating first of two pivotal trials in 1Q06 for Nuvion - phase II/III study in IV steroid resistant moderate to severe ulcerative colitis (UC). Zenapax (daclizumab, anti-IL-2R) entering phase IIb dose-ranging study for moderate to severe persistent asthma. Zenapax is also in phase II for multiple sclerosis (add-on to Avonex) with BIIB. PDLI discontinued development of Zenapax for UC in May 2004. M200 (volociximab), an anti-alpha-5/beta-1 integrin chimeric Ab, is in phase II for solid tumors and phase I/II for AMD with BIIB. Huzaf (fontolizumab, anti-interferon-gamma) is in phase II for autoimmune diseases with BIIB. Ularitide, a recombinant form of the natriuretic peptide urodilantin is in phase II for acute decompensated congestive heart failure. Terlipressin is an intravenous peptide in a phase III trial for hepato-renal syndrome (HRS).

Milestone Events.
1Q07: Interim DSMB analysis from Nuvion phase II/III UC trial; begin phase III UC trial. 1Q07: M200 Initiate PII open label studies.
1H07: Initiate Ularitide phase III trial for ADHF in Europe.
1H07: M200 PIIb cancer go no/go Mid-2007: Initiate Ularitide phase III trial in 300 ADHF patients.

My Take.
Steady royalty relationship with large biotech companies such as DNA and BIIB puts the company into cash flow positive mode while developing its own in-house drug. One of the most promising franchise for mid-cap biotech names. Patiently waiting for the company to hit a homerun with either bowel inflammatory drug Nuvion or congestive heart failure drug Ulartide. Speculative buy with $30 TP.


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