Worried about a Broader Biotech Bubble? Check out the Orphan Drug Space


Since July 2010, the iShares Nasdaq Biotechnology ETF (IBB) has gained more than 370%, rising from $77 on July 12, 2010 to June 2015 highs of $377 a share. A number of leading news media outlets are starting to report that we are in the midst of a biotech bubble, and that this bubble looks set to burst before the end of the year. This is not to say, however, that there are not opportunities in the space going forward.

Biotech is a strange sector in the sense that, while its constituent companies are not immune to a downturn in equities markets, we will often see a muted impact on event-driven stocks in particular, for two reasons. First, because biotechs undergoing imminent milestones are exceptional cases that are less impacted by beta conditions, and second, because biotech in general is becoming more and more of a public sector good with government involvement in the healthcare system. Much like defense stocks are insulated somewhat from the broader market and respond more strongly to defense spending developments, biotech as a whole will tend to move with healthcare spending developments as government becomes more and more involved.

On the chance that biotech is at an intermediate top at least, investors can look for further protection in the orphan drug space, which has a rhythm all its own. There are a number of companies that look promising in this arena, despite the looming fear that the biotech bull-run may have come to an end. Here we will look at a selection of these companies, what they bring to the table, and what we can expect from each going forward.

Lion Biotechnologies

Lion Biotechnologies (NADAQ:LBIO) is new to the orphan drug world, having just received orphan status from the FDA on June 11 for its novel metastatic melanoma treatment. The theory behind Lion’s lead candidate is what’s known as TIL’s, or tumor infiltrating lymphocytes. TIL’s are the body’s initial response to attacking cancer, and are present in solid tumors as a natural immune response. However, since cancer cells suppress the immune system in various ways, the TIL’s are ineffective after a short period of time.

Lion takes the TIL’s from a resected tumor and grows them in vitro. It then tests the cells response to the tumor antigen of the patient and selects the samples that have the best response to the antigen. Once the best candidates are selected, they are rapidly grown and then reinfused into the patient after the patient has undergone lymphodepleting treatment. A lymphodepleting treatment basically erases the patient’s current immune cells, making the cells reintroduced the dominant ones in the immune system and in effect more powerful.

In phase 2 trials, patients were given their own TIL’s after lymphodepletion and various levels of total body radiation. Researchers found that the more radiation given, the higher the response rate to the TIL’s proved to be. 20 patients out of 93 showed a complete response to therapy, and the proportion of complete responders in the cohort that was administered the highest radiation dose before therapy was a very high 40%.

Lion will be initiating a phase 3 trial for its orphan candidate this year, and results so far look very promising.


Protalex (PRTX) announced on June 16 that the FDA granted orphan drug designation to one of its candidates called PRTX-100 – targeted at the treatment of immune thrombocytopenia (“ITP”). PRTX-100 is the company’s lead product, and has already demonstrated safety, tolerability, and acceptable pharmacokinetics across five different clinical studies at a range of dose levels.

So how does it work? First, it’s important to understand what ITP is. In patients that suffer from ITP, blood clotting does not work as it should. This derives from a reduced number of a type of blood cell fragment called platelets, and can lead to severe blood loss through minor injury, as well as heavy bruising. It is similar to hemophilia in symptoms, but the cause is different .Hemophiliacs lack clotting factors, while thrombocytopeniacs lack platelets.

One of the reasons for the lack of platelets is auto-antibodies, or the patient’s own immune system binding to the platelets and signaling them as targets. Rhis means that the immune system disposes of platelets. PRTX-100 inhibits immune system action against platelets, and in doing so, can raise or at least stabilize the number platelets in a patient’s system. A stabilized platelet count translates to better clotting and a reduction in severity of ITP.

How have trials looked so far? Phase 1 trials have already supported safety and tolerability, and Protalex is now looking to initiate enrolment for a range of Phase I/II clinical trials in the coming quarter. Topline data from the trial is expected during the second half of 2016. It is worth mentioning that the current standard of care treatments for ITP increase production of platelets, but reportedly do not affect the platelet destruction process. PRTX-100 has shown so far that it can reduce platelet destruction, and this could set it aside from the competition on approval.


Retrophin (NASDAQ:RTRX) is yet another biotech specializing in Orphan drugs. Retrophin is one of the best performing stocks in 2015, and continues to climb, having just passed $1B in market cap, rising 185% year to date. Retrophin already has 3 orphan drugs on the market, one more in the clinical phase, and 2 others preclinical. It only began seeing revenues last year, but has a long way to go before being consistently profitable. This growth comes despite the company getting some negative press due to firing its CEO last year. If anything Retrophin shows the full potential of the orphan drug space.

Lipocine Inc.

Lipocine (NASDAQ:LPCN) is also new to the orphan space, having received orphan status from the FDA for its preterm birth candidate on June 2. While most do not think of preterm birth as a significant unmet medical need, it is responsible for 75% of infant mortality cases in the US, occurring in 12% of all US births. Lipocine’s product is an oral formation of a type of progesterone that is injected intramuscularly that is already approved for this indication. Progesterone is otherwise known as the pregnancy hormone, and low levels of it can lead to preterm birth. Raising the level of progesterone, then, decreases the chances of premature birth.

The injectable progesterone formulation for preterm birth requires weekly injections at a doctor’s office, which disrupts daily life, not to mention that the injections are painful. Lipocine’s formulation is a twice daily pill, and has shown in phase 1 trials that the drug has high bioavailability and absorption and is expected to match the efficacy of the injectable formulation in upcoming efficacy trials, with no serious side effects.

It’s a simple concept for an indication that is often overlooked, but it could be a big deal if it shows superiority to injectable progesterone. With market exclusivity for 7 years upon approval, Lipocine’s product could be quite a hit, significantly lowering the cost of neonatal intensive care across the country.


Matinas BioPharma

Lastly is Matinas BioPharma Holdings, Inc. (OTCMKTS:MTNB). And this might be the most exiting one with serious potential given its lead candidate. In January this year, we learned that Matinas had acquired all the outstanding stock of Aquarius BioTechnologies Inc., and along with it, a number of promising candidates with a range of NIH grants already in place. The most advanced of this pipeline is CAmB, now referred to as MAT2203. MAT2203 is an orally administered variation on a current broad-spectrum fungicidal, Amphotericin B, which is currently administered intravenously. The current IV variation has significant negative side effects associated with it that make the drug only usable as a last resort. One of the more severe being nephrotoxicity (kidney poisoning). In a clinical Phase 1a single-dose trial conducted last year, the CAmB demonstrated a positive tolerability profile, with no adverse events reported across 48 healthy volunteers when orally administrated. This is because the Amphotericin B is housed in a lipid envelope, shielding the body from side effects.

Matinas’ other lead candidate was recently in the news for passing a Phase 1 comparison study with flying colors. MAT9001 was compared with current best-in-class Vascepa for dyslipidemia, or very high triglycerides. Since this candidate has an overlap with cholesterol-lowering statins, it has the potential to compete with all time best selling drug Lipitor in a best case scenario.

Matinas intends to carry MAT2203 forward into a Phase 2a trial, funded by the NIH, before the end of this year. Once again, this is a small company, and as such, a risky allocation. However, much of this risk is mitigated by the fact that all of Matinas’ acquired pipeline have pre-arranged funding through NIH grants, meaning (and as Matinas has publicly stated) there should be no material increase in the company’s cash burn short-term as a result of the transaction. Funding is often a huge risk factor in development stage biotech’s, but in this instance, it need not be perhaps quite as serious a consideration as it might be with other potential portfolio allocations.


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