(Ack.  Wrote this on Friday, and completely forget to post)

Here we go – I can’t compete with all the goodies the came out from the JPM Healthcare Conference, but here’s Part II of my six-month update from June. No, I wasn’t there, but if you were on Twitter and followed #JPM12, you could have followed some some interesting updates and commentary from the likes of @adamfeuerstein, @BiotechStockRsr, @LifeSciVC, @3NT and many, many more. For a first hand account, some of the presentations were webcast as well, though I did not get a chance to watch any of them live – maybe I can catch a replay over the weekend?

Next up are two companies that may not be the most interesting at present. On this post, I wanted to take a look at two different gout companies that seem to be on opposite paths. In one corner, we have Savient ($SVNT), a former billion dollar company with a marketed product Krystexxa (pegloticase), which has hit some bumps. And in the other, we have Ardea ($RDEA), which is just getting their Phase III trials started, and appears, to my eye at least, an opportunity.

When we last visited $SVNT, they had a $490 MM market cap (71 MM shares x $6.96/share, 6-10-11). By the end of 2011, they had dropped another 68% to $159 MM market cap at $2.23/share (12-30-11) with no significant change in share structure (11/5/11).  Wow.  Truly amazing, how the market gives and takes away – the never ending battle between bulls and bears.

From the chart below, some of the loss was certainly correlated to weakness in the broader market in August, but for $SVNT, the losses continued into the new year.

Source: Yahoo! Finance

What happened? Slow sales for one. Recall that the full US launch for Krystexxa was near the end of February (2/25/11). If we give them a pass on March, and take a look at the subsequent six-months, during the second and third quarters, we see that uptake is slow: $1.091 MM in Kystexxa revenues 2Q11 Krystexxa, and $1.850 MM during 3Q11. I have no clue what analysts are projecting for 4Q11, but $SVNT will need to do much better.

One would assume fairly robust revenue projections prior to approval, but there are some disappointed investors out there and some analysts that need to re-visit their market models. If I put myself in their shoes and use 100 K as the number of treatment refractory gout patients (conservative?), I come up with a big number, $6 B, in fact, at peak sales. Just a 10% penetration rate would be $600 MM. Given, their slow launch, something is missing from a market adoption perspective.

Maybe the $60,000 annual price tag ($2,300/8 mg dose x 26 weeks) is too much, or the need to visit their doctors office every two weeks for a two hour infusion or the lack of a specific reimbursement code, or J-code, had something to do with lackluster sales…maybe it is just not a major improvement (see Benlysta, from $HGSI)

We know that going forward this year, reimbursement coding won’t be an issue. The company received approval for a specific J-Code for Krystexxa in November. Strange how struggling or marginal products generally cite the lack of a specific reimbursement codes as a hurdle for sales.

Of course, this was followed in December with the dreaded “Dear Healthcare Provider” Letter, which contained new guidance for use, suggesting the potential for some sort of adverse event profile when used in current patient management:

“In this letter, the Registrant recommends that oral urate-lowering medications be discontinued before a patient begins treatment with KRYSTEXXA, and that therapy with oral urate-lowering agents should not be instituted while the patient is taking KRYSTEXXA. It is important to note that during KYSTEXXA’s clinical studies, patients discontinued oral urate-lowering therapy before commencing treatment with KRSYTEXXA. While it is difficult to draw finite conclusions from post-marketing adverse events reporting rates, to date, the Registrant has not seen any unexpected rates of infusion reactions and/or anaphylaxis, which to date remain consistent with the labeling for KRYSTEXXA, and the Registrant continues to closely monitor these events. “

They closed at $2.48/share today, giving them a market cap of $176 MM. Assuming they burn another $40M during 4Q, cash is c. $160 MM at the end of 2011 ($240 MM cash 2Q11, $203 MM cash 3Q11). $2M 3Q sales annualized, yields $8M sales, suggests a 2x sales multiple for simplistic valuation ($160 MM cash + ($8 MM sales x 2 sales multiple) = $176 MM). Crude and doesn’t account for debt, growth, burn, etc.

Is there an opportunity here? It certainly doesn’t look like it at present.  Wonder what IMS data looks like, what docs think, and what the Street is modelling for the target population and penetration rates. While this looks cheap, I don’t think the little guy has an edge here. Leave it to the pros.

Alright, next. How did I spend so much text on $SVNT?

When we last looked at $RDEA, they were valued at  $636 MM (26.7 MM shares, 4/29/11 x $23.81/share, 6/10/11). While the company also took a hit in August, losing 30% of its value,  they were relatively stable through year end ($452 MM market cap = 26.9 MM shares (10/28/11) x $16.81/share on 12/30/11).

Progress. They initiated the first of four Phase III trials for lesinurad (12-19-11). According to clinicaltrials.com, we can expect primary efficacy data in January  2013 (looking for sUA < 6.0 mg/dL). Lucky for me, I still have time to review the Phase III clinical design and compare it to the Phase IIs and look for discordance. Still, has anyone find any data flaws so far?

With $123 MM cash at the end of September last year, they look in pretty good shape, though they did file a $150 MM shelf in Dec. Just out of curiosity, does anyone know what the cost per patient was during the Uloric (febuxostat) Phase III?

Could $RDEA hit the $1 B mark, like $SVNT?  If the Phase IIIs perform as well as the Phase IIs without safety issues, then there is a very good chance. Wish the share price is lower – doesn’t hit my arbitrary criteria of <$10/share for consideration.

Last, but not least, I forgot all about BioCryst’s ($BCRX) gout program, BCX-4208, as add-on therapy to xanthine oxidase inhibitors (e.g., allopurinol, febuxostat), on the original post. [Unfortunately, I still have memories of their influenza program and issue with needle length in “larger” patients.]  All in all, I think Adam Feuerstein has a good data review here. Follow-up data was released earlier this week, but it doesn’t change my view.

I do like the idea of “multiple shots on goal” for some types of companies, but I’m not so sure $BCRX should have their hands is so many different therapeutic areas: rheumatology (BCX-4208 in gout), infectious disease (peramivir in influenza), and oncology (forodesine in CTCL).

Thanks for stopping by, and see you next week for new goodies and Part III of the June updates. Will try to keep this shorter going forward!