Last Updated on June 23, 2019 by Sultan Beardsley
Two weeks into June the markets are continuing to recover from the painful volatility we experienced in April and May. Unfortunately, though, there are still days where biotech gets hammered without probable cause. Trade tensions took a turn for the worst last month when President Trump followed through on his threat to impose a 25% tariff on $200 billion in Chinese goods, and banned Chinese tech giant Huawei from doing business in the U.S. It may feel like a distant memory but obviously the market has not forgotten. As we continue through 2019 I suspect volatility related to trade will continue, as well as, political discussions on healthcare policy. Objectively speaking, the sector as a whole is outperforming the greater markets. Balance sheets are strong, dividends from pharma companies are healthy, and demand for healthcare services and products is rising.
Turning our attention now to the picture above of our biotech performance tracker, we see that last week was mixed, but favored the bears overall. The only index that gained any ground was the DOW. Both tech and biotech got hit pretty hard as represented by the NASDAQ and XBI, respectfully. The XBI actually got hit twice as badly (-.73% vs. -.34%). However, the IBB and the XLV (healthcare sector ETF) performed much better only shedding -.08% and -.03%, respectfully.
There is a lot of static obscuring our ability to discern emerging market trends. The price movement for tech companies for instance could unfold multiple ways. If president Trump and Chinese president Xi Jiang make progress in reconciling trade disagreements, then we are likely to see a major rally. This would percolate into biotech as well. On the other hand, if the stalemate continues and the trade war escalates, then we can expect more red days ahead. I believe the latter is more likely. Both sides are deeply entrenched in their positions and expectations. As investors in healthcare we must stay mindful of price movements and be ready to capitalize on overreactions. In the long run, all this noise will dissipate. The more we can build positions strategically looking past headlines, the more we can can grow our portfolios. The U.S economic landscape is always going to be changing. The trick is staying in tune with it and investing accordingly with conviction.
On that note, it appears hedge funds and institutional investors are allocating their funds more defensively. Looking back to the performance tracker we see cash flowing out of speculative clinical stage bios and into revenue generating big pharma companies. Novartis (NVS), Merck (MRK) Johnson & Johnson (JNJ), and Bristol-Myers Squibb (BMY) all closed green for the week while small bios like ADMA and GALT stagnated.
In my June 10th-14th Biopharma Stock Watch article I presented 14 companies with upcoming catalysts. Five of these companies saw growth in their share price last week, four of which posted impressive gains. However, two other companies on the list fell considerably.
ArQule (ARQL $8.20) spiked over +30% on Friday after it presented very exciting phase 1 data at the European Hematology Association (EHA) conference. Investigators saw an objective response rate (ORR) of 66% in (4/6 patients) in heavily pretreated relapsed or refractory chronic lymphocytic leukemia (CLL) patients.
Intra-Cellular Therapies (ITCI $12.51) climbed +10% throughout the week. The company has top-line phase 3 data for its compound ITI-007 as a monotherapy in treating Bipolar Depression due this month. In conjunction with anticipation for the data, a FDA advisory committee (ADCOM) meeting was announced on Thursday facilitating sustained gains for the week. The ADCOM meeting is scheduled for July 31st followed by a PDUFA on September 27th.
Sunesis Pharmaceuticals (SNSS $.90) had a stellar week charging up +25%. Preliminary phase 2 data was announced today (June 15th) for a trial studying a non-covalent BTK inhibitor vecabrutinib in patients with relapsed/refractory chronic lymphocytic leukemia (CLL), as well as, other B-cell cancers. We’ll see how the market likes it on Monday. Looking at it briefly I was not impressed. They only mentioned stable disease responses (less than 29% tumor shrinkage) and there were serious adverse events. The data set is being presented Saturday June 15th at EHA; the presentation should provide more clarity.
Verrica Pharmaceuticals (VRAY $9.35) gained +15 last week. Other than some options being awarded internally, and the addition of a new board member, it was a quiet week for VRAY. Phase 2 data is expected in 2Q19.
Dova Pharmaceuticals (DOVA $9.25) closed up +2%. The company has a PDUFA for an sNDA it filed approach on June 30th. No new developments came up last week.
Savara (SVRA $2.46) fell -77% on Wednesday after announcing disappointing phase 3 data. The company’s drug candidate Molgradex under development to treat autoimmune pulmonary alveolar proteinosis (aPAP) missed its primary endpoint. It did, however, hit its secondary endpoint and had a safety profile similar to the placebo. SVRA still plans to seek commercial approval. The full data set will be submitted to a peer reviewed medical journal for consideration. The following statement from the CEO suggest there was some treatment benefits:
Disappointingly, with the placebo effect stronger than anticipated, the study did not meet its primary endpoint,” said Rob Neville, Chief Executive Officer, Savara. “However, we remain encouraged about the results of IMPALA, most notably the significant improvement in SGRQ, the consistency of trends and improvements seen across the endpoints and the favorable safety profile. We are preparing to meet with the FDA and EMA to discuss the results from this study and to determine our options to seek approval based on the current data, and potentially conduct an additional study incorporating the learnings from IMPALA. It is with much gratitude that we acknowledge the patients participating in the study. It is on their behalf that we will continue to pursue our goal of bringing this important therapy to market.SVRA Press Release
CymaBay Therapeutics (CBAY $6.28) dropped -45% Tuesday June 11th after reporting 12-week top-line phase 2b data from a 52-week study. CBAY’s lead compound seladelpar is being developed as a treatment for nonalcoholic steatohepatitis (NASH). Unfortunately, reduction in liver fat content relative to the placebo was minimal, which was the primary endpoint. This study is blinded and will continue for the remaining 40-weeks. On the bright side, seladelpar was safe, well tolerated, and elicited clinically meaningful reductions in markers for liver injury. CMO at CBAY Dr. Pol Boudes, MD stated:
While the reductions in liver fat were minimal, we remain encouraged by the significant improvements in biochemical markers of liver injury that we observed at week 12. The 52-week liver biopsy data will allow us to understand whether the improvement in liver injury markers will translate into histological improvement. The observed improvement in markers of liver injury are consistent with the observed effects of seladelpar in PBC and further support the potential for seladelpar to improve liver healthCBAY Press Release
Clinical-Stage With A Catalyst
- Acer Therapeutics (ACER) $16.48
- Aclaris Therapeutics (ACRS) $4.67
- Affimed NV (AFMD) $3.19
- AMAG Pharmaceuticals (AMAG) $8.99
- Dova Pharmaceuticals (DOVA) $9.25
- Intra-Cellular Therapies (ITCI) $12.51
- Top-line phase 3 data due 2Q19 (There are two data sets expected, one for study 404 and another for study 401).
- Krystal Biotech (KRYS) $31.52
- Top-line phase 2 data expected 2Q19.
- Very low float (7.5 M) making it highly susceptible to volatile swings up, and down
- Minerva Neurosciences (NERV) $4.40
- Verrica Pharmaceuticals (VRCA) $9.35
Provention Bio (PRVB $11.72) skyrocketed +169% last week. A press release on June 9th announced that PRV-031 (teplizumab), an anti-CD3 monoclonal antibody, delayed the onset of Type-1 diabetes by at least 2-years in high risk individuals. Later in the week PRVB proposed a public offering of 5.5 million shares. Then on Thursday, the company terminated the offering citing that market conditions were not conducive to favorable terms for shareholders. PRVB is definitely one to watch next week. The fact that the +169% gains held throughout the week is a bullish indicator, but does not rule out the possibility of a sell-off back to baseline.
Synlogic (SYBX $7.72) jumped 25% on Wednesday after announcing a collaboration agreement with Ginkgo Biowork and their cell-programming platform. Ginkgo Biowork agreed to buy 6.3 million shares of SYBX common stock and pre-funded warrants for 2.5 million shares. Both were price at $9 per share (i.e. $1.30 dollars higher than SYBX’s closing price on Friday).
I am long ADMA.