May 10, 2018 UPDATES: ACAD, CELG, ESPR, FPRX, IONS, MDGL, MDCO, NKTR, PCRX,SGMO

BIOTECH SECTOR ANALYSIS

SENTIMENT — Holding The Line

In the last Issue we mentioned thattraders/technicians would be watching the 100level on the IBB. Despite a handful of neutral tonegative clinical, regulatory and financial eventssince then (e.g., GILD, ESPR), the index held thatlevel and has since made another reversal to theplus side. Over the past few months technicalpattern of the biotech indices has been negative,with repeated dead cat bounces and lower highs.One step forward and two back is not good, butholding the line is. However as we went to press,the IBB rose about 6% off the 100 mark to closeover 106. Friday’s ~3% jump in the sector wasbased on the less than draconian drug priceproposals from President Trump.. While we makeno claim as technicians and are true long-terminvestors, the charts no doubt predict very short-

Portola Approval Shows More FDAUnpredictability

Portola has finally overcome FDA concerns towin approval of its coagulation factor Xa, ableeding antidote for some of the newgeneration blood thinners like Xarelto andEliquis. Portola will launch Andexxa next month,although initial supplies will be limited by amanufacturing changeover required by the FDA.PRTA has a marketing partnership with bothPfizer and Bristol-Myers (makers of theaforementioned blood thinners) for Adrexxa. Butthe approval marks another recent regulatoryreversal as Portola was given a completeresponse letter (CRL) in August 2016 overmanufacturing questions.

This year alone, there has been several partialapprovals and/or reversals in decisions thatmake predicting the outcome of final approvalstricky. The FDA does not always follow theAdCom votes, or the votes are so close that the

MTSL Issue 877

IN THIS ISSUE: FDA AdCom Recommends Approval For IONS’ Waylivra

Since Last Issue: BTK: 1.3%; NBI: -1.4%; Model Portfolio: -6.1%; Trader’s Portfolio: -10.9%

term moves – especially in the inherently volatilebiotech sector. Speaking with top technicians thatplay biotech, an IBB move above 106 would triggera level higher than a recent high and at above 107-108 would signal a true reversal to the upside. Afterthe long-awaited POTUS plans, we are almostthere, but holding the 100 level for the second timeis a very helpful in creating a solid base. (TheMTSL usually has a Thursday deadline, but basedupon the Trump announcement, it has been editedto include Friday’s stock activity.)

After half of the Big Bios (AMGN, BIIB, ALXN)reported better than expected quarterly calls(albeit from lowered expectations),unfortunately Q1 reports from CELG, REGN andnotably GILD were disappointing and kept theindex below the moving averages. ESPR’smixed Phase III BA report, in our view, is not asbad as the Street has perceived it to be (seeESPR below). However, the data was releasedon the same day as Gilead’s earnings miss.Hence, biotech sentiment touched recent lowsonce more.

What probably keeps the IBB bid intact is thenotion that further consolidation through M&Aactivity remains likely. On most Big Bio/Pharmaquarterly calls, managements alluded to makingstrategic acquisitions and pipeline filling, ratherthan mega-mergers. A perfect example of that

companies can work around panel issues. Examples include MTSL’s PCRX (partial nerveblock approval) and ALKS (CRL reversal tomove forward with ‘5461).

Just last week, the FDA delayed the PDUFAdate for AKCA/IONS’s hereditary TTRamyloidosis drug inotersen, allowing to Alnylamto gain the lead by about two months. Adding toits unpredictability, officials at the FDA acceptedinotersen for Priority Review at the start of theyear, setting the agency on the path to a July 6decision. Three-month delays with no new trialsneeded are common responses from theAgency.

DEALS – LLY’s ARMO Purchase KeepsM&A Alive

Armo’s lead product candidate, pegilodecakin,will add to LLY’s immuno-oncology programs.Pegilodecakin, a PEGylated IL-10 (Interleukin-10), is in a Phase III clinical trial in pancreaticcancer, as well as in earlier trials for lung andrenal cell cancer, melanoma and other solidtumor types. The Phase III trial is testingpegilodecakin combined with the chemotreatment Folfox against Folfox alone.Pegilodecakin is designed to activate tumor-reactive cytotoxic CD8+ T cells in patients.CD8+ T cells mediate the tumor clearing effectof this immuno-oncology agent. The relativelysmall deal size but strong acquisition premium(~$1.5 billion) is an encouraging sign of the bolt-on/pipeline filling strategic deals that areprobably in the works now and will beannounced from time to time going forward.

GILD will pay up to $90 million over three yearsto Verily Life Sciences, an arm of computinggiant Alphabet, to research immune cells in thehopes of finding new treatments for rheumatoidarthritis, inflammatory bowel disease, and lupus-related disease. The goal is to identify which

occurred today when Eli Lilly announced it wouldacquire ARMO Biosciences (ARMO) for $1.5billion, at a 67% premium to the previous day’sclose. Fears of an aggressive drug pricing proposalfrom POTUS has kept stocks under pressure, butsuch concerns appear to be waning as we remainin a wide trading range with a negative bias. TheIBB closed on Friday in a neutral but improvingtechnical position (RSI=56). As the IBB continuesto hold the line at 100, let’s go back to 1978 withTOTO’s hit song with the same title that peaked at#5 on the Billboard charts(https://www.youtube.com/watch?v=htgr3pvBr-I).

POLITICAL – Trump’s Drug Price Plan NotToo Bad

As usual, the proposals arrived a bit later thanexpected and, thanks to the POTUS’ oftenaggressive tweets regarding drug companies andhigh prices (e.g., “they are getting away withmurder”), fears of a bitter plan was creating a majoroverhang on drug and biotech stocks. The planaimed at the “middle men” like insurers and PBMs,and suggests discounts in the form of rebates. Inaddition, it would aggressively push generic andbio-similar approvals. Most important was what theplan did not include – the ability for Medicare tonegotiate prices. That was the biggest fear ofhealth care investors. Hence, the major rally in thegroup on Friday. The removal of the overhang has,in our view, cleared the way for further upwardsmoves in drug/biotech stocks – where multiples areextremely low and dividend yields quite high. Whilethe economy is still in overdrive, defensive stocksoverall are unlikely to lead. Nonetheless, a reliefrally heading into the upcoming mini-conferenceseason (see DATA section below) could lead to thetechnical breakout mentioned above, a bit ofrotation back to group and maybe some shortcovering. Stock picking remains key, but the sectorno doubt ended the weak on a high note.

patients respond to existing drugs and to try todiscover biological clues that could lead to newmedicines. It will be the first large-scale use ofVerily’s Immunoscape platform, which seeks todetermine data and insights on theimmunological nature of certain diseases.

Spark Therapeutics has sold a priority reviewvoucher to Jazz Pharmaceuticals for $110million, a fraction of the price these documentsonce commanded. The price indicates themarket for vouchers is in decline. The highestprice paid for such a voucher was $350 millionin August 2015, when United Therapeutics soldits voucher to AbbVie. And in May 2015Retrophin sold a voucher to Sanofi for $245million. But since then the prices have fallen withSarepta having sold a voucher to GILD for $125million in early 2017.

FINANCE – IPOs Still Making Their WayOut

Testing the overall cash abundance in biotechinvestors’ accounts, several companies havefiled to go public. Autolus has filed to raise $100million in a Nasdaq IPO. The British biotechfocuses on next-generation CAR-Ts designed tobroaden the use of cell therapies whileimproving their safety and efficacy. London-based Autolus has already raised more than$170 million in venture funding and establisheditself in the pack of next-generation CAR-Tplayers on the strength of its technology plus thesuccess of the KITE and JUNO acquisitions,many of which aim to address the shortcomingsand limitations of existing cell therapies. Provention Bio has filed to raise up to $50million in its Nasdaq IPO, which will bankrollseveral clinical programs, including a pair ofinflammatory bowel disease compounds itacquired from Janssen last fall.

DATA – There’s Always A ConferenceSomewhere – ASGCT, Hemophilia &Oncology Meetings Coming Up

A slew of scientific symposia are gearing up to takeplace over the next few weeks, including ASCO.

May 16-19 – ASGCT – The American Society ofGene and Cell Therapy (ASGCT) Annual Meetingprovides an international forum where the latestgene and cell therapy developments are presentedand critically discussed. MTSL names includeSGMO, ZIOP

May 20-24 – WHF – World HemophiliaConference – Largest international meeting forglobal disorders community – MTSL namesinclude BMRN, SGMO

June 1-5 – ASCO – Largest clinical oncologymeeting – MTSL names include CELG, FPRX,INCY, NKTR, SGMO, XON, ZIOP

REGULATORY – AdCom Panel Votes ToApprove IONS’ Waylivra

The Advisory Committee reviewed data from twoPhase III clinical trials, APPROACH andCOMPASS, as well as the ongoing APPROACHOpen Label study for WAYLIVRA. Results from thePhase III APPROACH trial, the largest study everconducted in patients with FCS, show that patientswith FCS treated with WAYLIVRA achieved astatistically significant mean reduction intriglycerides of 77% from baseline and decreasedrisk of pancreatitis. The most common adverseevents in the APPROACH study were injection sitereactions and platelet declines. There were Streetconcerns about the outcome of the panel when theBriefing Documents were made available onlineearlier in the week. The PDUFA date is August30 . Hence, the positive vote is a big victory forboth companies and antisense technology overall.

New CRSPR companies are popping up all overthe place, despite the uncertain patentenvironment. Beam Therapeutics, a newCambridge, Massachusetts-based startup co-founded by gene editing innovator Feng Zhang,has raised nearly $100 million in series Afunding and early commitments. Beam justraised an initial $13 million from Arch VenturePartners and F-Prime Capital Partners, andanother ~$85 million has been committed beforeany formal announcements.

The news followed last week’s announcement ofa new CRISPR company, MammothBiosciences, which will utilize gene-editingtechnology from the lab of co-founder JenniferDoudna, who will also serve as chair ofMammoth’s science advisory board. So manymore collaborations/financings are taking placedaily and too many to mention. But the overallmessage is that the biotech sector is quitehealthy financially, and MTSL’s SGMO is wellahead of all of the gene editing wannabes.

This Issue includes updates from the majority ofthe MTSL Universe first quarter reports andconference calls.

th

Clinical Trials Watch

Relevant New Studies or Changes Posted on ClinicalTrials.gov for our MTSL Portfolio and/or Related Comp

ABBV – Expanded Access to Rovalpituzumab Tesirine

AMGN – Evolocumab in Acute Coronary Syndrome (EVACS)

AMGN – A Study of Carfilzomib Plus Dexamethasone in Subjects With Relapsed or Refractory MultipleOncology Centers

CELG – IDH2 Inhibition Using Enasidenib as Maintenance Therapy for IDH2-mutant Myeloid NeoplasmTransplantation

FPRX – FPA150 in Patients With Advanced Solid Tumors (FPA150-001)

IONS/AKCA – Study of AKCEA-ANGPTL3-LRX (ISIS 703802) in Patients With With Familial Partial Lip

IONS – Study of ISIS 681257 in Patients With Renal Impairment Compared to Healthy Patients

INCY – Epacadostat (INCB024360) and Pembrolizumab Added to Preoperative Chemoradiation in PatiCancer

INCY – A Study to Evaluate Effectiveness and Safety of Ponatinib in Patients With BCR-ABL Positive AEurope – “POSEIDON”

INCY – A Study of INCB059872 and INCB057643 in Relapsed or Refractory Ewing Sarcoma

INCY – Ruxolitinib With Radiation and Temozolomide for Grade III Gliomas and Glioblastoma

PCRX – A Prospective Study to Compare Bupivacaine and Exparel Versus Bupivacaine or Exparel Alon

REGN – PCSK9 Inhibition in Patients With Symptomatic Intracranial Atherosclerosis

SNY/REGN – An Efficacy and Safety Study of Alirocumab in Children and Adolescents With Homozygo

ACAD – Reports Strong NuplazidSales Despite Negative Media

ACAD recently reported strong Q1:18 Nuplazid netsales in PDP of $48.9 million, above the consensusestimate of $47.1 million (and guidance of $45-$48million). Nuplazid net sales grew 12% Q/Q basedon a gross to net adjustment of 24% (vs. 13% inQ417). Management guided to Q2:18 sales of$57-$61 million and reiterated Nuplazid FY18 netsales guidance of $255-$270 million. In our view,Nuplazid sales in Q1 are positive and reflect thedrug’s utility in PDP, not something one might seein a drug that leads to fatalities. We will monitorprescription trends closely to see if the recentmisinformation in the media affects sales.

The recent call focused on the erroneous media onNuplazid safety, and management remainsconfident in its pharmacovigilance activities and theNuplazid risk/benefit profile. The following pointssupport the Company’s risk/benefit claims aroundNuplazid:

(1) the two placebo controlled studies completedpost Nuplazid approval in ~300 patients resulted inno difference in the number of reported deathsbetween the drug and placebo arms;

(2) post-marketing safety reviews and signaldetection analysis of serious and fatal adverseevents have not identified the presence of anycommon etilogy or underlying mechanism thatwould lead to the conclusion of a causalrelationship to Nuplazid and death;

(3) the reported deaths remain consistent withpatient age, medical conditions and comorbidities,and whenput into context of comparable naturalhistory literature and large insurance datasets ofother PD psychosis patients, the rates observedappear to be in line. ACAD noted that the FDA hasstated that “based on information to date they havenot identified a specific safety issue that is notalready adequately described in the product label.”

While the FDA has said they are performing anevaluation of the emerging safety information, atthis point there is nothing to suggest there is a newrisk and that providers will stop prescribing thedrug while the evaluation is ongoing. In our view,the FDA was backed into a corner and had toconduct the safety review after all the publicity. Our confidence in the drug is based on it being theonly drug ever approved for PDP, previously anunmet medical condition, and the fact that Nuplazidis as safe, or safer, than other antipsychotics onthe market.

RECOMMENDATION

ACAD is a BUY under 32 with a TARGETPRICE of 45

Company Updates

UPDATES: ACAD, CELG, ESPR, FPRX, IONS, MDGL, MDCO, NKTR, PCRX, SGMO

CELG — Reports Q1 and Will Re-File Ozanimod in Early 2019

CELG reported Q1:18 revenues of $3.54 billion,ahead of consensus $3.46 billion.Non-GAAP EPSof $2.05 also came in ahead of consensus $1.94on higher revenues and lower share count. CELGupdated 2018 guidance for revenue to grow at thetop end of the prior range and lowered EPSguidance due to incorporation of expenses for theJuno acquisition. In addition managementreiterated its 2020 guidance.

In light of recent negative speculation, CELGannounced that following a meeting with FDA andEMA they plan to file the Ozanimod (Omod) NDAand MAA for relapsing MS in Q1:19. The FDAresubmission plan includes bridging non-clinicalstudies and utilizes existing PK/PD data but mostimportantly additional human clinical efficacy andsafety studies are not needed. In our view, whilethis delays the entry of Omod for the MS indication,at this point it does not appear that it will curtail theulcerative colitis (UC) indication (the larger valuedriver of the two). However, enrollment in thePhase III UC trial is now expected to complete inmid-2019 vs. prior guidance of YE18, hence a 2020UC launch could be delayed.

The sentiment on CELG, in our view, cannot beworse. The Omod timeline is better than The Streetbelieves, but the Company has had a number ofclinical setbacks over the past six months. Thepipeline is still pretty deep but getting earlier withthe late-stage/regulatory disappointments. On thecall, management was unable to instill a lot of near-term optimism and CELG still needs to deliver on anumber of upcoming readouts includingLuspatercept (Phase III data for MDS and beta-thalin mid-2018), JCAR17 (DLBCL pivotal data in2018), and Omod (Phase III UC data in 2019/2020depending on enrollment) – to improve perceptionthat they can replace Revlimid. The MMcollaboration with BLUE and bb121 should help.We have not been visible on CELG in a long time,and are adjusting our targets. However, withexpectations this low and pipeline options plentiful,it may be the right time to begin building positions.

RECOMMENDATION

CELG is a BUY under 90 (down from 100)with a TARGET PRICE of 120 (from 130)

ESPR – BA First Phase IIISuccessful, But Stock Down onSafety Confusion & Some EfficacyConcerns, NASH Phase II Programto Start By Yearend With SustainedRelease BA

Last week, ESPR delivered positive Phase IIIsafety data for bempedoic acid (BA). Despitedelivering a highly significant 20% LDL reductionfor those on treatment – expectations were for 20-30% LDL reduction based on several previous BAstudies. The low-end for efficacy combined withsafety concerns unrelated to treatment with thedrug development candidate have driven the stockdown by more than a third, and excessively in ourview.

Highly Significant Reduction in LDL and CRPAlthough Less Than Previous Trials

Esperion announced positive top-line results fromthe second pivotal, Phase III study (Study 1 or1002-040), the long-term safety study ofbempedoic acid 180 mg, in this case evaluating thesafety, tolerability and efficacy of bempedoic acidversus placebo in high-risk patients withatherosclerotic cardiovascular disease (ASCVD)who are inadequately controlled with current lipid-modifying therapies, including maximally toleratedstatin therapy. The study included 2,230 patientsand met the primary endpoint of safety andtolerability and the key efficacy endpoint with on-treatment LDL-C lowering of an additional 18% at

In our view, this is a gross over-reaction with theshorts taking advantage of a bad tape and investorconfusion. The safety remains strong and in ourview, so does the efficacy. The 20% placeboadjusted LDL reduction is a no doubt slightlydisappointment, but BA in the mid-20’s LDL, oreven a 30% LDL reduction was never the mostattractive drug candidate. The synergistic BAcombo with Zetia (EZ) has shown the ability toreduce LDL 40+% on top of statins, which in ourview makes it an attractive drug candidate. Beinga once a day pill that will be also be priced around$3K per year also adds to its competitive potential. It will not be long until investors see the additionaltop-line data from the other three pivotal studies:

Upcoming Milestones

May 2018:Top-line results expected from thepivotal Phase 3 Study 3 (1002-046) ofbempedoic acid in ASCVD patients onbackground therapy of less than approveddaily starting doses of statins (high CVrisk patients considered statin intolerant).

August 2018:Top-line results expected from thepivotal Phase 3 Study (1002FDC-053) ofthe bempedoic acid / ezetimibecombination pill in ASCVD patients onmaximally tolerated statin backgroundtherapy.

September 2018:Top-line results expected from thepivotal Phase 3 Study 2 (1002-047) ofbempedoic acid in ASCVD patients onmaximally tolerated statin backgroundtherapy.

Before Year-End 2018:

twelve weeks (p<0.001) in the intent-to-treatanalysis. Patients treated with bempedoic acid alsoachieved a significant reduction of 22% in high-sensitivity C-reactive protein (hsCRP), an importantmarker of the underlying inflammation associatedwith cardiovascular disease.

Safety Issues Overblown

BA’s safety has been confirmed in multiple Phase IIand the first Phase III trial. The incidence of anyadverse events (AEs) and/or serious AEs wereidentical in both arms – 78.5% BA vs. 78.7%placebo AE; 14.5% BA vs. 14.0% placebo. In thismost recent study, the key safety subgroupanalysis that caused the problem was FatalAdverse Events-Unrelated To Drug Treatment inthe table below. The trial was randomized 2:1BA:placebo and absolute deaths were 13 (0.9%) vs2 (0.3%). For bempedoic acid there were 6cardiovascular (CV) deaths (5 originally noted asCV and 1 ultimately as CV-related) vs 1adjudicated as a CV death on placebo. In contrastto the CV death rate, the rate of CV events overallactually favored BA in the study (80-90 CV eventsin this study including fatal and non-fatal). Therewere also 5 cancer deaths on the BA arm, some ofwhich occurred very early on (and highly unlikely tobe drug related), and 0 in the control arm. The rateof smoking was roughly balanced across groups. The bottom line in our view is that therandomization with regards BA safety was fine, butjust unlucky as with more deaths unrelated to BAoccurred. Despite the aggressive tweets andmarket’s strong negative reaction, we believe BA’sclean safety profile remains intact.

ESPR will start a Phase II NASH programby the end of the year with a sustained-release version of BA that could providelower dosing. Phase II NASH data wouldprovide an important catalyst for ESPRafter they file their IND for FDA approvalin Q1:19. A sustained-release BA couldalso provide significant IP extension forthe BA franchise.

In our view, it will take just one (if not all three)studies to come in the range earlier trials to clearup today’s painful stock reaction. With the potentialto lower LDL 40+% on top of statins, in our view,the BA/EZ combo remains a formidable LDLlowering drug candidate with its novel mechanismof action. ESPR remains on track to deliver morepositive Phase III data and file for FDA and EUapprovals in early 2019. We recommend takingadvantage of the current weakness.

RECOMMENDATION

ESPR is a BUY under 75 with a TARGETPRICE of 100

In addition to their clinical pipeline which will be ondisplay at ASCO, FPRX continues to create newI/O drug development candidates from itsproprietary antibody discovery platform. FPT155(CD80-Fc) is next up for clinical development asthe Company will start Phase I clinical

FPRX – Five Prime’s ‘144 &Cabria/Nivo Combo at ASCO,Pipeline Continues to Grow WithFPT155

FPRX will present two posters during the 2018American Society of Clinical Oncology (ASCO)Annual Meeting, being held June 1-5, 2018, inChicago featuring their two lead I/O drugdevelopment candidates.

Abstract Number and Title: #TPS4135, “FIGHT: APhase 3 Randomized, Double-Blind, PlaceboControlled Study Evaluating (Bemarituzumab)FPA144 and Modified FOLFOX6 (mFOLFOX6) inPatients with Previously Untreated AdvancedGastric and Gastroesophageal Cancer with a DoseFinding Phase 1 Lead-In” Poster Session: Gastrointestinal (Noncolorectal)Cancer Session Date and Time: Sunday, June 3, 2018;8:00 – 11:30 a.m. CT Location: Hall A, Poster Board Number: #322a

Abstract Number and Title: #3020,“Pharmacodynamics (PD) and Genomic Profiling ofPts Treated with cabiralizumab (cabira) +nivolumab (NIVO) Provide Evidence of On-TargetTumor Immune Modulations and Support FutureClinical Applications” Poster Session: Developmental Therapeutics –Immunotherapy Session Date and Time: Monday, June 4, 2018;8:00 – 11:30 a.m. CT

development in H2:18. FPT155 is a CD80 fusionprotein that uses the binding interactions of solubleCD80 to block CTLA-4 from competing forendogenous CD80, allowing CD28 signaling toprevail in T-cell activation in the tumormicroenvironment and directly engage CD28 tofurther enhance its co-stimulatory T-cell activationactivity without inducing super agonism. Studies inpreclinical models suggest FPT155 has thepotential to be a potent T-cell co-stimulator withstrong monotherapy antitumor activity and mayhave a synergistic effect when combined with anti-PD1 therapy. This is an intriguing drugdevelopment candidate going after a proven I/Otarget, CTLA-4 (Yervoy). To date, Yervoy has beenvery toxic when used in PD1 combo therapy,leaving a substantial opportunity for ‘155 if it issafer.

FPRX continues to expand its pipeline withinteresting I/O drug development candidates. It isalso important to remember that FPRX has alreadydelivered an outstanding partnership for Cabriawith BMS which is a strong validation for FPRX’santibody discovery platform.

RECOMMENDATION

FPRX is a BUY under 30 with a TARGETPRICE of 45

Location: Hall A, Poster Board Number: #234 Discussion Session Date and Time: Monday,June 4, 2018; 11:30 a.m. – 12:45 p.m. CT Discussion Session Location: Hall B1

IONS/AKCA’s Volanesorsen(WAYLIVRA) Gains FDA PanelVote

In late breaking news, AKCA, an affiliate of IONStoday announced that the FDA Division ofMetabolism and Endocrinology Products AdvisoryCommittee narrowly voted 12-8 to support approvalof WAYLIVRA (volanesorsen) for the treatmentof people with familial chylomicronemia syndrome(FCS). The PDUFA date of WAYLIVRA is August30, 2018. Seemly against the odds – the briefingdocuments were released earlier in the week andperceived quite negatively by the Street – yet IONScontinues to plow forward.

In our view, WAYLIVRA will be approved by theFDA now that it has passed their advisory panel. The panel win for WAYLIVRA is a positive readthrough for their entire systemic antisense pipelineand the technology overall. To date most of WallStreet has refused to value IONS’ systemic drugcandidates due to their fear of excessive toxicity. An FDA approval for WAYLIVRA will certainly putsome of this fear to rest. It will be the third IONSFDA approved drug, with the fourth inotersen(TTR) right behind.

RECOMMENDATION

IONS is a BUY under 55 with a TARGETPRICE of 70

MDGL – All Eyes On UpcomingMDGL-3196 Phase II Biopsy Data

In our view, the data will be positive but given thesmall sample size (n=116) we do not expectstatistical significance across the board with NASHresolution and fibrosis improvement both expectedto trend in the right direction. We will be monitoringthe lipid improvements as the reduction ininflammation has the potential to treat the diseaseat its source, not just the symptoms. Strong datawill position MGDL to start a pivotal Phase IIIprogram in the third quarter. Lastly, strong Phase IIdata could easily lead to a major bidding war to

TM

By the end of May we expect to have 36-weekbiopsy data in the NASH subjects who completedthe 12-week MRI scan (n=116). MDGLmanagement expects MGL-3196 to exhibitconsistent and durable improvements in NASHpatients. They have guided for a statisticallysignificant 2-point reduction in NAS score (focus oncomponents, particularly ballooning) and a strong,favorable trend in NASH resolution. We believe‘3196 will show a trend in fibrosis improvement(given measurement variance) and importantly,maintenance of the cardio, lipid and liver enzymebenefits. In regards to the NAS score,management views an improvement in ballooning(i.e., damaged hepatocytes driving inflammationand fibrosis) as the most important component,and notes that if ‘3196 can show such a reduction“that would be a win.” Measures of inflammationtend to be more variable as clearing immune cells(e.g. macrophages) could confound the benefits.When determining fibrosis scoring based onbiopsy, we expectthehttp://www.bioinvest.com/portfolio-overview/madrigal/re to be some variation (up to30%) between the initial and end-of-study biopsy(and vs. placebo) given the likelihood of extractionfrom different sections of the liver making it adifficult component to measure. Therefore,management will look to additional imaging (MRI-PDFF and multiparametric MRI) and biomarkerdata to provide a more clear and consistent pictureof the improvements.

acquire MGDL as a potential best-in-class once-a-day pill in one of the most sought after assets inthe pharmaceutical world.

RECOMMENDATION

MDGL is a BUY under 160 with a TARGETPRICE of 190

This week at the 86th European AtherosclerosisSociety Congress (EAS 2018, Lisbon, May 7), theresults of a pre-specified analysis of secondaryendpoints from the ORION-1 Phase II studyshowed that inclisiran also reduces atherogeniclipoproteins in a profound and sustained manner.Atherogenic lipoproteins – non-HDL-C, ApoB,VLDL-C and Lp(a) – have each been associatedwith an increased risk of heart attacks and strokes,particularly in high-risk patients. The reductions

MDCO – Inclisiran Continues ToDifferentiate Itself

The Medicines Company has presented favorabledata at two separate scientific conferences thatfurther support and even expand the therapeuticindex of inclisiran, its novel PCSK-9 cholesterol-lowering compound. First, new data and analysesfrom the ORION development program forinclisiran was displayed at the National LipidAssociation (NLA) 2018 Scientific Sessions held inLas Vegas, NV (April 30). Several studies from theORION development program demonstrate that theproposed dosing regimen is likely to be the samefor a wide range of dyslipidemia patientpopulations, including those hard-to-treat patientswith homozygous familial hypercholesterolemia(HoFH) and other sub-groups. At a Late Breakersession titled “The Efficacy and Safety of Inclisiran,An RNAi Therapeutic Targeting PCSK9, in DifferentPatient Populations”, MDCO scientistsdemonstrated that the inclisiran dosing regimen(300 mg injection administered on Day-1, Day-90and then every six months thereafter) achievedsubstantial PCSK9 and low-density lipoproteinscholesterol (LDL-C) lowering in patients with HoFHand primary dyslipidemia, as well as in varioussub-groups, such as patients with renal impairmentand diabetes. The data showed that inclisiranlowered LDL-C by more than 50% across a widerange of dyslipidemia patient populations and sub-groups, and by up to 44% in HoFH patients. KOLswere quoted saying, “The simplicity andconvenience of a one-size-fits-all dosing regimen,without the necessity of dose adjustment, is ahighly-attractive therapeutic option for health careprofessionals, and could make a significantdifference in busy clinical practice.”

were achieved most clearly with a 300 mg dose ofinclisiran given on Day-1 and Day-90, and weresustained to the pre-specified time of assessment(180 days) and beyond (at least 210 days). This isthe same starting dose of inclisiran being utilized inthe Phase III trials (the Phase III dose of inclisiranis 300 mg given on Day-1 and Day-90 and thenevery six months thereafter). The Phase III trials,which are assessing a range of markers of diseaserisk, including LDL-C as the primary endpoint andother atherogenic proteins as secondary endpoints,are expected to report results in the H2:19. TheEAS data have also been accepted for publicationin Circulation, the journal of the American HeartAssociation.

While not directly comparable, the lower-than-expected efficacy for Esperion’s most recent PhaseIII BA study, in our view, also bodes well forinclisiran’s solid ORION results to date.Furthermore, REGN/SNY’s recent price reductionfor Praluent and exclusive agreement with ExpressScrips, in our view, also supports the best-in-classvalue proposition of the MDCO drug. Takentogether, all four events above continue to suggestthat inclisiran, when approved, will become themarket leader. In our view, at current levels MDCOshares represent a highly attractive risk/reward.

RECOMMENDATION

MDCO is a BUY under 40 with a TARGETPRICE of 65

Abstract #3085:“Efficacy and immunemodulation by BXCL701 a dipeptidylpeptidase inhibitor, NKTR-214 a CD122-

NKTR – Q1 Update – To File NDAFor ‘181 This Month & Have A StrongPresence At ASCO For ‘214/Opdivo

NKTR recently confirmed on their Q1 conferencecall that they will file the NDA for ‘181 for FDAapproval this month. This is a very importantannouncement as the NDA filing was expected tohappen by the end of April and the stock has beenweak since. The NDA will incorporate clearguidance from the FDA which resulted frommultiple pre-NDA meetings with the agency. Thecompany will retain ‘181 rights to maximizeshareholder value with a separate subsidiary orpain franchise possible. With over $2 billion incash after the incredible ‘214 BMS deal, NKTRclearly has the resources to explore all commercialoptions to maximize ‘181’s value in what could be amulti-billion dollar opportunity to treat pain whilereducing the risk of addiction.

ASCO will be a key meeting for NKTR and theabstracts are due next week (May 16 ), as theconference then takes place in Chicago from June1-5. At the meeting, we expect NKTR to present‘214 PIVOT expansion data comprising anadditional 130-150 patients as well as longerfollow-up from the dose exploration patientsoriginally presented last year at SITC. Based onmanagement guidance, we expect an additional30-40 patients each from the first line melanomaand first line RCC (kidney) cohorts, as well asroughly 10-20 patients each from second lineNSCLC, TNBC and bladder cancer and expect that

biased immune agonist with PD1 blockadein murine pancreatic tumors”, Rastelli, L., etal.

Session: Developmental Therapeutics –ImmunotherapyDate:Monday, June 4, 2018, 8:00 a.m. –11:30 a.m. Central Daylight Time

Abstract #5582: “Efficacy and immunemodulation of the tumor microenvironmentin murine ovarian tumor with the PARPinhibitor rucaparib and CD122-biasedimmune agonist NKTR-214“, Simmons, A.,et al.

Session: Gynecologic CancerDate:Monday, June 4, 2018, 1:15 p.m. –4:45 p.m. Central Daylight Time

Abstract #TPS3115: “PROPEL: A phase1/2 trial of NKTR-214 (CD122-biasedagonist) combined with anti-PD-1(pembrolizumab) or anti-PD-L1(atezolizumab) in patients (pts) withadvanced solid tumors“, Vaena, D., et al.

Session: Developmental Therapeutics –ImmunotherapyDate:Monday, June 4, 2018, 8:00 a.m. –11:30 a.m. Central Daylight Time

Abstract #TPS1111: “ATTAIN: Phase 3study of etirinotecan pegol (EP) vs.treatment of physician’s choice (TPC) inpatients (pts) with metastatic breast cancer(MBC) who have stable brain metastases(BM) previously treated with ananthracycline, a taxane, and capecitabine(ATC)“, Tripathy, D., et al.

Session: Breast Cancer – MetastaticDate:Saturday, June 2, 2018, 8:00 a.m. –11:30 a.m. Central Daylight Time

College on Problems of Drug Dependence 80thAnnual Scientific Meeting (2018), San Diego,CA:

Oral Presentation: “Assessment of DrugAbuse-Related Events with MADDERS in

th

all the patients will be I/O naïve. We expect mostNSCLC patients will be PD-L1 negative because ifthey were PD-L1 positive they would have alreadytaken Keytruda or Opdivo. We will monitor the ‘214combo data with Opdivo in NSCLC as the Streethas viewed the Keytruda/Chemo combo as betterthan the potential for ‘214/Opdivo combo. In ourview, it is early days for the ‘214 combination dataand that it has significantly more potential that thechemo combo as ‘214’s ability to make cold tumorshot is game changing. In our view, the ‘214/Opdivocombo has the potential to be a best in classtherapy for a plethora of solid tumors, not justNSCLC. The fact that BMS has committed to 22registrational trials in 15,000 patients in nine tumortypes for the combo is testament to our sharedbelief that ‘214/Opdivo has significant Best-in-Class potential.

The company also announced upcomingpresentations at the following scientific congressesduring the second quarter of 2018:

TReg Directed Therapy for AutoimmuneDisorders Meeting, Boston, MA:

Preclinical Data Presentation: “NKTR-358:An IL-2 Pathway Agonist that SelectivelyExpands and Activates Regulatory T cellsfor the Treatment of Allergy andAutoimmune Disease”

Presenter: Jonathan Zalevsky, Ph.D.,Nektar Therapeutics Session: Enhanced Treg-based therapywith the use of IL-2Date: Wednesday, May 23, 2018, 3:40p.m. Eastern Daylight Time

3rd Annual Advances in Immuno-OncologyCongress, London, U.K.:

Presentation: “Accessing The Potential OfAn Immunotherapeutic Agent”

SUMMIT-07: A Phase-3 Study of NKTR-181in Patients with Moderate to Severe ChronicLow-Back Pain”

Abstract #76Presenter: Ryan Lanier, Ph.D., AnalgesicSolutionsSession: The Pain and the Strain ComesMainly from the BrainDate:Wednesday, June 13, 2018, 1:30p.m. – 1:45 p.m. Pacific Daylight Time

OralPresentation:“NeuropharmacodynamicProfile of NKTR-181: Correlation to LowAbuse Potential”

Abstract #335Presenter: Laurie Vanderveen, Ph.D.,Nektar TherapeuticsSession: Basically OpioidsDate:Tuesday, June 12, 2018, 10:15 a.m.– 10:30 a.m. Pacific Daylight Time

Abstract #168: “NKTR-181 demonstrateslow abuse potential in recreational opioidusers in two double-blind, randomizedcrossover human abuse potential studies”,Henningfield, J., et al.

Session: Abuse LiabilityDate:Thursday, June 14, 2018, 12:00 p.m.– 2:00 p.m. Pacific Daylight Time

Powerful Momentum

The NDA filing for ‘181, ASCO abstracts and thenthe actual meeting, and the Drug Dependenceconference line up for a significant flow of catalystsfor NKTR over the next month. Phase III trials forfront line RCC and melanoma will start in Q3 forthe ‘214/Opdivo combo and both of the pivotal trialdesigns will be revealed at ASCO. BMS hascommitted to 22 registrational trials in 15,000patients in nine tumor types for the potential best inclass combo. Given all the hype around theKeytruda/Chemo data in front line lung cancer, welook forward to the BMS announcement about theirplans to develop ‘214/Opdivo in lung cancer. Our

Presenter: Jonathan Zalevsky, Ph.D.,Nektar TherapeuticsSession: Translational Immuno-OncologyDate: Thursday, May 24, 2018, 5:40p.m. British Summer Time

American Society for Clinical Oncology (ASCO)2018 Annual Meeting, Chicago, IL:

Oral Presentation: “NKTR-214 (CD122-biased agonist) plus nivolumab in patientswith advanced solid tumors: Preliminaryphase 1/2 results of PIVOT”.

Abstract #3006Presenter: Dr. Adi Diab, AssistantProfessor, Department of MelanomaMedical Oncology, Division of CancerMedicine, The University of Texas MDAnderson CancerCenter, Houston, TexasSession: Developmental Therapeutics– ImmunotherapyDate:Saturday, June 2, 2018, 3:00p.m. – 6:00 p.m. Central Daylight Time

Abstract #2567: “TAK-659 inCombination with NKTR-214 and anti-PD-1 Therapy Leads to Complete andSustained Tumor Regression and ImmuneMemory In Pre-Clinical SyngeneicModels“, Huck, J., et al.

Session: DevelopmentalTherapeutics – ClinicalPharmacology and ExperimentalTherapeuticsDate:Monday, June 4, 2018, 8:00a.m. – 11:30 a.m. Central DaylightTime

guess is they may also announce the pivotal lungcancer plan at ASCO along with RCC andmelanoma pivotal trial designs. NKTR has pulledback significantly after the Merck lung cancer data,the INCY IDO failure, and the one month delay inthe ‘181 NDA filing. In our view, the selloff isoverdone as we expect ‘214/Opdivo to be a majorsolid tumor treatment including lung. The IDOfailure is actually good for ‘214, meaning lesscompetition, and ‘214 has looked much better thanIDO as soon as the first data emerged. Lastly, ‘181is poised for its NDA filing with the FDA setting theclock for a possible approval by year end.

RECOMMENDATION

NKTR is a BUY under 95 with a TARGETPRICE of 120

Other Indications Moving Forward

PCRX continues to work on additional clinicalapplications and regulatory filings to expandEXPAREL’s availability. Recent advances include

PCRX – Q1 Exparel Sales Steady

Sales were $74 million for Q1:18, up 9% over thesame quarter last year, as previous guidancesuggested such in recent investor meetings.Management reiterated Exparel guidance for 2018in the $300-310 range (+10%), without anycontribution from nerve block.

Nerve Block Label

With the recent FDA granted label expansion,EXPAREL is now the first, long-acting, single-shot,nerve block available for patients undergoing highlypainful procedures such as rotator cuff repair. Webelieve that their existing physician relationships aswell as already expanded sales and medicalteams, provide PCRX with the opportunity to workwith the anesthesia community to afford all patientsof improved access to EXPAREL for this and forfuture indications. Despite getting a relativelynarrow label compared with the broad nerve blockextension, there are still roughly 1 million shoulderprocedures performed annually in the UnitedStates, and brachial plexus blocks are emerging asthe mainstay of post-surgical pain control. Upperextremity procedures are expected to make upmore than 60% of the total EXPAREL nerve blockswithin the next two years. In just a few weeks sincebeing granted the nerve block extension, PCRXhas seen a 38% increase in sales of the 10 mL vial,compared to a 13-week historical benchmark.

programs in other key surgical settings in womenundergoing C-sections, hip fracture and spine (thelatter two in collaboration with the JNJ/DuPuypartnership). There are approximately 100,000 C-sections performed each month in the UnitedStates and top-line results in that setting are ontrack for later this year.

Opioid Education

Pacira remains a fervent component of positioningEXPAREL as part of the solution of the opioidepidemic. Most if not all surgeries that useEXPAREL report significant declines in opioid useduring and post-procedure, in addition to theeconomic benefits/cost savings. Management isalso working closely with CMS to update the Jcode for EXPAREL and try to unbundle it fromspecific total surgeryreimbursements.http://www.bioinvest.com/portfolio-overview/pacira/

Pacira momentum is resuming once again with thenerve block indication, additional procedures,further education/reimbursement and global brandmanagement. We are aware of upcomingcompetition from HRX, but believe PCRX’s leadtime, and overall label without restrictions maymake HRX less competitive than currentconsensus believes.

RECOMMENDATION

PCRX is a BUY under 35 with a TARGETPRICE of 50

Inherited Metabolic Diseases

SGMO– Q1 Update: Progress In AllAreas – Stock Weak Due ToSecondary Offering/TechnicalBreakdown – Reiterate BUY

Sangamo released first quarter results and held aquarterly call. With the broadest geneediting/therapy clinical program around, SGMO isexpected to deliver proof-of-concept clinical dataacross 7 gene therapy and gene editingprograms over the next 18 months, with near terminitial proof-of-concept (POC) results in MPS11 andHemophilia A (both due late Summer) up first.SGMO ended the quarter with $235 million in cash,not including the $150 million from the KITE/GILDdeal or the $215 million from a recent follow onoffering – together totaling over $600 million. YE18cash guidance of $485 million is sufficient to fundoperations for an impressive 5 years, as theCompany is building new HQs and manufacturingcapacity. More important, SGMO intends to holdonto and internally develop some longer-term butpotentially much larger programs (metabolicdiseases, CNS and immunology).

POC Data Due Late Summer

The lead compounds are the in vivo gene editingproduct SB913 for MPSII (SGMO owned) and genetherapy product SB525 for hemophilia A (partneredwith PFE), both programs have now treated 4patients to date (up from 3 in the last quarterlycall). With initial safety and efficacy data from thefirst two dose cohorts expected in late summer.

Liver-Based Expression of the Human Alpha-Galactosidase A Gene in a Murine FabryModel Results in Continuous TherapeuticLevels of Enzyme Activity and EffectiveSubstrate Reduction – Abstract #545 Session: Metabolic, Storage, Endocrine, Liverand Gastrointestinal Diseases II Poster Presentation – Thursday, May 17;5:15PM

ZFN-Mediated In Vivo Genome Editing Resultsin Therapeutic Levels of α-Galactosidase A andEffective Substrate Reduction in FabryKnockout Mice – Abstract #234 Session: Metabolic, Storage, Endocrine, Liverand Gastrointestinal Diseases I Poster Presentation – Wednesday, May 16;5:30PM

T Cell Immunology

Highly Efficient and Specific Multiplexed GeneEditing in T Cells using Enhanced Zinc-FingerNucleases (ZFNs) Enables StrategicEngineering of Allogeneic T CellImmunotherapies – Abstract #968 Session: 412. Advancements in T Cell-BasedTherapies Oral Presentation – Saturday, May 19;11:15AM

Technology and Delivery Enhancements

Enhancing ZFN Expression Construct andNuclease Activity Leads to Improvements of InVivo Genome Editing Platform – Abstract #809 Session: Gene Targeting & Gene Correction III Poster Presentation – Friday, May 18; 5:45PM

Global and Tunable Suppression of Zinc FingerNuclease and ZFP-Transcription Factor Off-Target Activity via Discrete FrameworkSubstitutions – Abstract #183 Session: Gene Targeting & Gene Correction I

Based on safety for SB913 in dose Cohort 1 in theCHAMPIONS Phase 1/2 study, SGMO amendedthe protocol for SB318 in vivo gene editing forMPS1 to enroll directly into intermediate dosecohort 2 (this is another positive). Efficacyassessment in MPSII has not been undertaken andwill be done with more mature follow up.

More Trials To Start

The broader pipeline continues to progress with athird trial from their in vivo gene editing program,this one for SB-FIX expanding to the UK followingclinical trial authorization (CTA – also newinformation). Additional programs highlightedincluded ST400 ex-vivo gene editing for transfusiondependent beta thalassemia with first patientdosing by partner Bioverativ/Sanofi expected inH1:18, progress with next-generation CAR-TTherapeutics with partner KITE/Gilead, andadditional progress with in tauopathy andHuntington’s.

ASGCT Meeting Upcoming (5/16-19,Chicago)

Data from the Company’s technology andpreclinical research programs will be presented atthe 21st Annual Meeting of the American Society ofGene & Cell Therapy (ASGCT) being held May 16-19, 2018 in Chicago. Sangamo scientists orcollaborators will present abstracts highlightingrecent enhancements to Sangamo’s zinc finger-based genome editing and gene regulationplatforms; data from the company’s preclinicaldevelopment programs in Fabry disease, CNSdisorders, and T cell immunotherapy; as well asresearch into novel delivery modalities.

The following presentations are scheduled at theASGCT Meeting sessions:

Central Nervous System Disorders

Poster Presentation – Wednesday, May 16;5:30PM

Non-Viral Delivery of ZFN mRNA EnablesHighly Efficient In Vivo Genome Editing ofMultiple Therapeutic Gene Targets – Abstract#952 Session: 410. Gene Targeting and GeneCorrection Oral Presentation – Saturday, May 19;11:15AM

Invited Presentations at Scientific Symposia

Therapeutic Gene Editing Using Designed ZincFinger Proteins – Michael C. Holmes, Ph.D.,Sangamo Therapeutics Corporate Review Session Invited Talk – Tuesday, May 15; 4:00PM

Education Session Chair: Thomas Wechsler,Ph.D., Sangamo Therapeutics Session: 135. The Basics of Genome Editing Presentation Series – Wednesday, May 16;1:30PM

Take Advantage Of Stock Weakness Due toTechnicals Not Fundamentals

There is a slew of steady progress at SGMO,creating the leader in the gene therapy, geneediting with by far the most-advanced clinicalprograms in the field. In our view, the recent stockweakness is not at all due to the solid andimproving fundamentals, but due to the secondaryoffering that broke deal price ($16.25) and thestock also fell below its 200-day moving average –both reasons for traders to sell. We recommendsubscribers take advantage of this wide divergenceof excellent fundamentals and an oversold stock.

RECOMMENDATION

Designed Zinc Finger Protein TranscriptionFactors for Single-Gene RegulationThroughout the Central Nervous System –Abstract #949 Session: 410. Gene Targeting and GeneCorrection Oral Presentation – Saturday, May 19;10:30AM

SGMO is a BUY under 30 with a TARGETPRICE of 40

CONFERENCE

BioInvest’s John McCamant will be speakingat The MoneyShow Las Vegas, May 14-16,at Bally’s/Paris Resort. Please join him andover 100 other financial experts andeconomists as they come together to

discuss new and exciting investing and trading opportunities for 2018. If you are unable to attend thisconference, you can still watch select presentations streamed live from the event! Register free for TheMoneyShow Las Vegas Live Stream and enjoy real-time market analysis and instruction from myselfand dozens of elite experts who will assess every corner of the markets, reveal timely buyrecommendations, and teach proven portfolio strategies designed to help every investor achieve theirown unique goals. Click the button below for more conference details, the speaker schedule and toregister for the live stream.

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The Back Page

Symbol Company Orig.Rec. Current Target Recommendation

ACAD Acadia 33.79 18.26 45 BUY under $32

ALKS Alkermes 10.13 45.79 75 BUY under $55

BMRN BioMarin 12.68 89.40 130 BUY under $100

CELG* Celgene* 24.97 82.38 120* BUY under $90*