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Synageva Shares Tumble Amid Positive Phase 3 Data, A Director's 75% Gain & Analyst Concerns

Erika Janowicz

Shares of Synageva BioPharma Corp. (NASDAQ: GEVA) tumbled 14.6 percent Tuesday morning following the results of the Phase 3 Arise trial of sebelipase alfa and analyst comments on commercial opportunity.

Results from Phase 3 Sebelipase Alfa Study

In an 8-K filing on Monday, Synageva announced that the "global, randomized, double-blind, placebo-controlled Phase 3 ARISE trial of sebelipase alfain 66 children and adults with lysosomal acid lipase deficiency (LAL Deficiency) met the primary endpoint of normalization of alanine aminotransferase (ALT), a marker of liver injury (p=0.027). In addition, sebelipase alfa significantly improved multiple other disease-related abnormalities as measured by a number of secondary endpoints."

The ARISE (Acid Lipase Replacement Investigating Safety and Efficacy) placebo-controlled study evaluated 66 children and adults over a 20 week period. The study reported that adverse affects in the treated and placebo arms were relatively equivalent. The majority of adverse affects were generally seen one to five percent more in patients taking sebelipase alfa.

Despite the company's optimism of sebelipase alfa is treating Lysomal Acid Lipase (LAL) Deficiency as part of the genetic Lysomal Storage Disorders (LSDs) family, one side-effect sticks out in the release. Oropharyngeal pain was experienced by 17 percent of patients treated with ebelipase alfa versus the 3 percent from the placebo group.

Citigroup Initiates Coverage on the Biotech Company

On Monday, Citigroup analyst Christopher Mortko, Ph.D., initiated coverage on Synageva BioPharma with a Neutral rating and $113.00 price target. Dr. Mortko remarked that the current valuation is fair given the phase 3 ARISE success, its predicted $700 million in peak sales, and the risk associated with commercial execution.

Citigroup pointed towards three concerns surrounding sebelipase alfa's commercial opportunity. The analyst commented that the "key" questions include, "1) Prevalence estimates of LAL deficiency are
variable, 2) Identification of patients could be challenging as many of the signs and symptoms of LAL deficiency overlap with other conditions, 3) LAL deficiency patients have a range of disease severity and its unclear which patients would require treatment."

Mortko concluded that these concerns could "result in a slower than expected launch compared to other orphan drug peers."

Leerink Remains Cautious on Treatment for the "Silent Disease"

According to the Synageva website, sebelipase alfa acts as a replacement therapy for LAL Deficiency.

"LAL Deficiency is a rare autosomal recessive lysosomal storage disease (LSD) caused by a marked decrease in LAL enzyme activity that results in the buildup of fatty material in the liver, blood vessel walls, and other tissues and organs. This buildup of fatty material often results in significant morbidity and early mortality in infants, children, and adults."

Leerink analyst Joseph Schwartz emphasized that many patients may have this "silent disease" and often won't notice symptoms for a long time. Schwartz is cautious on shares due to the difficulty in finding patients, similar to Citigroup's concerns.

The firm sees the introduction of the drug for the treatment of LAL deficiency slower than other orphan drugs.

Leerink reiterated a Market Perform rating and $89.00 price target on Synageva.

Synageva Director Barry Quart Sees Sweet Spot in $100.00 Price

Following a run-up in shares to $119.42 on February 28, the stock trended between $70.00 and $90.00 in the following months. Synageva flirted in the $90.00 range on June 17 and hit $102.13 on June 20.

In a Form 4 filing with the Securities and Exchange Commission, Director Barry Quart exercised his options to purchase 1,375 shares for $25.00 per share on June 20. He then proceeded to dispose the securities acquired for $100.00 per share.

The stock continued to see a run-up over the next week to hit as high as $108.24. Synageva soared to $114.56 in after-hours trading on Monday before a steep descent to $89.50.

Shares are currently down 14.32 percent at $89.79.

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