Top Hepatitis C Virus Biotech Picks By The World's Largest Fund Managers

Recently posted on the Seeking Alpha.com financial website on who fund managers like in the HCV drug development space. In general, fund managers are bullish like Idenix, Dynavax and Peregrine but the currently bears run wild for Vertex, Achillion and Merck. Good quick rundown of what each company specializes in and where they're HCV compounds are in terms of development and partnerships. 

The announcement by Bristol-Myers Squibb (BMY), just over two weeks ago, on January 7th, of an agreement to buy Inhibitex (INHX) for $2.5 billion at a massive buyout premium of over 160%, has ignited a rally among biotech companies that are currently active in developing products targeting hepatitis C virus (HCV). In this article, we examine based on our research of their latest available Q3 institutional 13-F filings, the investment activities of the world's largest funds or mega funds among a dozen pharmaceutical and biotech companies that are active in the HCV space.

These mega fund managers hold between $100 billion and over a trillion dollars in assets, such as Fidelity Investments, Goldman Sachs, and Vanguard Group, and together they control almost a third of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Individually, and collectively, they pack enough firepower to move stocks based on their trading activities.

Taken together, these mega managers were bullish on the group, adding a net $427 million in Q3 to their prior $178.84 billion prior quarter holdings in the group. However, taking out the big pharmaceutical companies, mega funds still added a net $530 million in Q3 to their $47.46 billion prior quarter position among the biotech companies that are active in the HCV field. (for more general information on these mega funds, please look at the end of the article).

The following are the HCV group companies that mega fund managers are bullish about (see Table):

Idenix Pharmaceuticals (IDIX): IDIX engages in the discovery and development of drugs for the treatment of human viral and other infectious diseases, including a focus on hepatitis C virus, hepatitis B virus (HBV), human immunodeficiency virus (HIV) type-1, and acquired immune deficiency syndrome (AIDS). Mega funds added a net $45 million in Q3 to their $380 million prior quarter position, and together they hold 29.7% of the outstanding shares, higher than their 26.3% weighting in the group. The top mega fund buyers in Q3 was by Fidelity Investments ($50 million), and the top holders were Fidelity Investments ($131 million), T Rowe Price ($114 million) and Vanguard Group ($50 million).

IDIX shares have mounted a strong rally recently, up more than 100% in the past twelve trading days, benefiting from both the January 9th announcement of the acquisition of rival INHX by BMY that has ignited a rally in the group, as well as positive interim phase 2b clinical trial data on its HCV Nucleotide Inhibitor, IDIX 184, that was released the same day by the company.

Dynavax Technologies (DVAX): DVAX is a clinical-stage biotech company that is engaged in the discovery and development of novel products to prevent and treat infectious and inflammatory diseases. Its lead clinical stage product candidate is HEPLISAV™, a phase 3 investigational adult hepatitis B vaccine designed to provide protection with fewer doses than current licensed vaccines. In addition it has early stage product candidates, including a universal flu vaccine in phase 1, TLR inhibitor for lupus in phase 1, and then hepatitis B and hepatitis C therapies, also in phase 1 development.

Mega funds added a net $7 million in Q3 to their $102 million prior quarter position, and taken together they hold 25.8% of outstanding shares. The top mega fund buyers were Fidelity Investments ($3.3 million) and Bank of America Corp. ($1.6 million), and the top holder by far was also Fidelity Investments ($64 million). DVAX is currently engaged in preparing to submit its first Biologics License Application (BLA) for HEPLISAV™ Hepatitis B Vaccine to the FDA in the first quarter of 2012, followed soon by a submission of Marketing Authorization Application (MAA) for European approval.

Peregrine Pharmaceuticals (PPHM): PPHM is a clinical-stage biotech company developing and manufacturing innovative monoclonal antibody therapeutics to treat cancers and viral infections such as hepatitis C virus. In the hepatitis C space, the company is evaluating bavituximab combined with ribavirin in a randomized phase 2 trials in treatment native patients with genotype-1 HCV infection. Earlier, the company released preliminary phase 2 trial results from this study on December 29th last year that showed antiviral activity and a positive safety profile, with patients reporting fewer side effects than in the interferon-containing arm. Mega funds added a net $1 million in Q3 to their $8 million prior quarter position, and taken together mega funds hold 11.4% of the outstanding shares, with the top holders at the end of Q3 being Barclays Global Investors ($2.7 million) and Blackrock ($1.7 million).

The following are the HCV group companies that mega fund manager are most bearish about (see Table):

Vertex Pharmaceuticals (VRTX): VRTX engages in the discovery, development, and commercialization of small molecule drugs for the treatment of hepatitis C, cystic fibrosis, epilepsy and other life-threatening diseases. It has two FDA-approved drugs, INCIVEKTM for treat chronic hepatitis C genotype-1 infection in adults with stable liver problems, who have not been treated before or who have failed previous treatments, and Lexiva for HIV that it co-discovered with GlaxoSmithKline (GSK).

It has five other drugs in clinical development, including VX-222 in phase 2 development for hepatitis C, VX-765 in phase 2 development for epilepsy, VX-509 in phase 2 development for immune-mediated inflammatory disease, and VX-770 and VX-809 in phase 3 and phase 2 development respectively for Cystic Fibrosis. Mega funds cut a net $110 million in Q3 form their $3.89 billion prior quarter position. The top sellers were Fidelity Investments ($91 million) and T Rowe Price ($34 million), and the top holders were Fidelity Investments ($966 million) and Capital World Investors ($653 million).

Achillion Pharmaceutical (ACHN): ACHN is a clinical-stage biotech focused on developing new treatments to patients with infectious diseases, including HCV and resistant bacterial infections. It currently has five compounds in various stages of clinical development targeting HCV, including one in phase 2, two in phase 1 and two others in pre-clinical development. Mega funds cut a net $6 million from their $280 million prior quarter position, with the top seller being Bank of New York Mellon Corp. ($18 million), and the top holder being Fidelity Investments ($111 million). ACHN shares rallied strongly after the announcement of the INHX acquisition by BMY, up over 50% in the five trading days after the January 7th announcement; while they have given back part of their gains, they are still up over 35% on the news.

Inhibitex Inc. and Bristol-Myers Squibb Co.: INHX, a developer of differentiated anti-infective products to prevent and treat serious viral and bacterial infections, including primarily shingles and chronic infections caused by hepatitis C virus, is under agreement to be acquired by BMY, a developer of branded pharmaceuticals for the treatment of cardiovascular, virological and other infectious diseases. Mega funds cut $28 million in Q3 from a $512 million prior quarter position in INHX, and they added a net $711 million to their $20.51 billion prior quarter position in BMY.

Other pharmaceutical and biotech companies that are players in the HCV space that mega funds are bearish on (see Table) include Gilead Sciences Inc. (GILD), that has multiple product candidates in phase 1 and phase 2 trials targeting hepatitis C, in which mega funds cut a net $306 million in Q3 from their $17.68 billion prior quarter position, and Abbott Laboratories (ABT), that has a product candidate in phase 2 clinical trials for HCV in collaboration with Enanta Pharmaceuticals, in which mega funds cut a net $16 million in Q3 from their $26.63 billion prior quarter position.

Also, additional HCV players that mega funds are bullish about include Merck & Co. (MRK), that has an FDA-approved product Victrelis for HCV in the market, and several in phase 2 and 3 development for hepatitis B and C, in which mega funds added a net $530 million to their $47.46 billion prior quarter position; and Pfizer Inc. (PFE), that has a compound in phase 2 development for HCV, in which mega funds added a net $60 million to their $54.03 billion prior quarter position. Furthermore, mega funds have a $1 million position, unchanged in Q3, in Inovio Pharmaceuticals (INO), that has compounds in phase 2 and preclinical development targeting HCV.

General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Peregrine Initiates Randomized Phase II Trial of Bavituximab in Chronic Hepatitis C Open-Label Trial Evaluating 12 Weeks of Therapy With Novel Targeted Antibody Bavituximab in Combination With Ribavirin Versus Standard of Care

TUSTIN, CA -- (MARKET WIRE) -- 01/10/11 -- Peregrine Pharmaceuticals, Inc. (NASDAQ: PPHM), a clinical-stage biopharmaceutical company developing first-in-class monoclonal antibodies for the treatment of cancer and viral infections, today announced that it has initiated a randomized Phase II clinical trial in patients with previously untreated genotype-1 hepatitis C virus (HCV) infection. This open-label trial will determine the early virologic response (EVR) rate of patients after 12 weeks of therapy with Peregrine's bavituximab, a phosphatidylserine (PS)-targeting monoclonal antibody with immune-modulating potential, in combination with the antiviral drug ribavirin versus standard of care, pegylated interferon alpha 2a and ribavirin. Peregrine expects to complete enrollment shortly in an ongoing Phase Ib HCV trial and report data by mid-year.

"Our fourth randomized Phase II trial evaluating bavituximab for oncology and viral infections is designed to build on our three prior Phase I HCV trials, which have demonstrated our antibody's acceptable safety and promising signs of antiviral activity," said Steven W. King, president and chief executive officer of Peregrine. "Although there are several targeted antiviral drug candidates in development against HCV, immune stimulation with interferon remains a cornerstone of the standard HCV regimen, but unfortunately causes serious side effects and unacceptable toxicity for many patients. With bavituximab's immune reactivation mechanisms and safety profile to date, we are eager to assess this new combination as a potential alternative to interferon-based regimens for patients infected with HCV."

Bavituximab may address a fundamental "immune evasion" mechanism exploited by many infectious pathogens. A growing body of published data from researchers worldwide shows that bavituximab's PS target, exposed on the surface of cells infected by viruses and protozoan parasites, suppresses the immune system's ability to fight disease. PS-targeting antibodies such as bavituximab bind to PS and block the immunosuppressive signals created by the target, thereby allowing the immune system to mount a robust immune response against the pathogen. In prior HCV clinical trials, bavituximab administered as monotherapy in single and multiple doses demonstrated a positive safety profile with no dose-limiting toxicities or serious adverse events. Bavituximab as a monotherapy also showed promising on therapy antiviral activity of up to 1.5 log viral load reduction.

About the Phase II HCV Trial
In this multicenter Phase II randomized, open-label trial, up to 66 patients with previously untreated genotype-1 chronic HCV infection will be randomly assigned to one of three treatment arms. Patients will receive daily oral ribavirin (1000 mg) with either weekly bavituximab (0.3 mg/kg or 3 mg/kg) or PEG-IFN alpha-2a (180 µg) for up to 12 weeks and will be tested for safety parameters and antiviral activity.

The primary endpoint of the study is the proportion of patients achieving early virologic response (EVR), an early predictor of which patients are likely to clear virus with continued treatment. EVR is defined as a greater than or equal to 2 log reduction in HCV RNA after 12 weeks of treatment. Secondary endpoints include safety, tolerability and HCV viral kinetics. For further information about this trial, please visit www.peregrinetrials.com or http://www.clinicaltrials.gov/ct2/results?term=bavituximab.

About HCV
According to the U.S. Centers for Disease Control and Prevention, an estimated 3.2 million individuals in the United States have chronic hepatitis C virus (HCV) infection. Chronic HCV infection is a serious disease that can result in long-term health problems, including liver damage, liver failure, liver cancer, or death. It is the leading cause of cirrhosis and liver cancer and the most common reason for liver transplant in the United States. Approximately 8,000 to 10,000 people die every year from HCV-related liver disease.

About Bavituximab's Antiviral Approach
Bavituximab is the first in a new class of patented antibody therapeutics that target and bind to phosphatidylserine (PS), a specific phospholipid component of cell membranes. Bavituximab helps reactivate and direct the body's immune system to destroy infected cells and virus particles that exhibit this specific phospholipid on their surface. Since their target is host-derived rather than pathogen-derived, PS-targeting antibodies have the potential for broad-spectrum antiviral activity and are also expected to be much less susceptible to the viral mutations that often lead to drug resistance.

Researchers have found that PS is exposed on the outer membrane of cells infected with HCV, HIV, influenza, herpes viruses, hemorrhagic fever viruses, respiratory syncytial virus, measles as well as other viruses. A growing body of scientific publications, including Nature Medicine and The Journal of Experimental Medicine, has highlighted data on the role of PS and Peregrine's PS-targeting therapies in infectious diseases.

About Peregrine Pharmaceuticals
Peregrine Pharmaceuticals, Inc. is a biopharmaceutical company with a portfolio of innovative monoclonal antibodies in clinical trials for the treatment of cancer and serious viral infections. The company is pursuing multiple clinical programs in cancer and hepatitis C virus infection with its lead product candidate bavituximab and novel brain cancer agent Cotara®. Peregrine also has in-house cGMP manufacturing capabilities through its wholly-owned subsidiary Avid Bioservices, Inc. (www.avidbio.com), which provides development and biomanufacturing services for both Peregrine and outside customers. Additional information about Peregrine can be found at www.peregrineinc.com.

Safe Harbor Statement: Statements in this press release which are not purely historical, including statements regarding Peregrine Pharmaceuticals' intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, the risk that results from the Phase II HCV trial will not be consistent with results experienced in earlier HCV clinical trials and preclinical studies, the risk that investigators may experience delays in patient enrollment, risk that results may not support registration filings with the U.S. Food and Drug Administration, and the risk that Peregrine may not have or raise adequate financial resources to complete the planned clinical programs. Factors that could cause actual results to differ materially or otherwise adversely impact the company's ability to obtain regulatory approval for its product candidates include, but are not limited to, uncertainties associated with completing preclinical and clinical trials for our technologies; the early stage of product development; the significant costs to develop our products as all of our products are currently in development, preclinical studies or clinical trials; obtaining additional financing to support our operations and the development of our products; obtaining regulatory approval for our technologies; anticipated timing of regulatory filings and the potential success in gaining regulatory approval and complying with governmental regulations applicable to our business. Our business could be affected by a number of other factors, including the risk factors listed from time to time in the company's SEC reports including, but not limited to, the annual report on Form 10-K for the year ended April 30, 2010 and the quarterly report on Form 10-Q for the quarter ended October 31, 2010. The company cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Peregrine Pharmaceuticals, Inc. disclaims any obligation, and does not undertake to update or revise any forward-looking statements in this press release.

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Contact:

Amy Figueroa

Peregrine Pharmaceuticals

(800) 987-8256

info@peregrineinc.com



Source: Peregrine Pharmaceuticals