Taking a break…

Hi everybody,

My current day job is becoming more and more oriented towards the public markets, which has the potential to create conflicts and significantly limits my ability to discuss publicly traded companies. Given this situation I decided to take a break from publishing on this site. As you may guess, this wasn’t an easy decision… this blog and its readers have been a significant part of my life for over a decade but it is the inevitable one given the circumstances. I am very grateful and feel fortunate to have had the opportunity to interact with all of you. I am going to miss it.

Take care,

Ohad

Portfolio updates – Biotech M&A valuations and ADCs

It was nice to see M&A picking up in the 2nd half of 2019, with multiple high profile acquisitions. Two sectors of interest were kinase inhibitors for oncology (Array Biopharma, Loxo, ArQule) and Gene therapy for rare diseases (Spark, Audentes). siRNA came back to the limelight with Novartis’ $9.7B bid for MDCO for its twice-yearly PCSK9 treatment, marking a radical change in sentiment towards siRNA.

This uptick is great news for investors in small/mid-cap biotechs for which acquisitions are the primary exit route. Looking at some of the deals, I am having a hard time justifying valuations or seeing the acquirers making a decent ROI in the long run. What bothers me is not the fact that many acquired assets eventually fail but the amount some biopharmas are willing to spend for high risk assets, sometimes even preclinical ones. Continue reading

Q1 update – GTx, ADC and NASH

Gene therapy – M&A picking up, imminent crucial update from Biomarin

In Q1, the gene therapy space saw one big acquisition (Roche/ Spark (ONCE)) and several smaller deals including Biogen/Nightstar (NITE), Pfizer/Vivet and J&J/MeiraGTx (MGTX). These deals demonstrate the industry’s appetite for gene therapies with an emphasis on liver and ophthalmology as validated domains. CNS (primarily AAV9) and muscle (primarily AAVrh74) are the two other popular domains

What I find interesting in these deals is the fact they weren’t done from a position of strength (as opposed to the Novartis/Avexis deal, for example). Spark was struggling with its HemA program and did not have near term catalysts with other programs. Nightstar was trading around its IPO price with initial XLRP data that were hard to interpret at higher doses. MeiraGTx’s stock also hasn’t performed well and the company was facing an imminent fundraising. Continue reading

Biotech portfolio updates – Endocyte and AVROBIO

Endocyte – Surprise acquisition driven by scarcity value

Last week’s acquisition of Endocyte (ECYT) by Novartis (NVS) came as a surprise as Lu-PSMA-617 just started P3 and results are not expected until 2020. This is Novartis’ second radiopharmaceutical acquisition within a year, following the AAA acquisition, making Novartis the undisputed leader in targeted radiotherapy.

The decision to buy Endocyte was likely driven by the commercial performance of Lutahtera (originally developed by AAA), which generated Q3 sales of $56M compared to $24M in Q2. This trajectory in the first year of launch (approved January 2018) proves that radiopharmaceuticals can become meaningful products despite the logistic hurdles. Continue reading

Endocyte – And now for something completely different

Last week’s approval of Alnylam’s (ALNY) Onpattro, the first FDA-approved siRNA drug, serves as a reminder for the bumpy road new technologies go through on their way to the market. From an investor perspective, siRNA has gone in and out of fashion over the years with dramatic shifts in market sentiment. It started with unrealistically high expectations, deteriorated to deep pessimism due to clinical setbacks, followed by gradual sentiment improvement in recent years (with some hiccups along the way). Continue reading

Xenon – P1 data provide more de-risking

To me, the main challenge in today’s biotech market is finding good quality assets with attractive valuations. There are definitely a lot of promising programs out there but valuations are often hard to justify as they reflect limited development risk and unrealistic commercial potential. From a risk/reward standpoint, it is hard to get excited about valuations of >$0.5B for companies before clinical proof of concept and $2-5B for clinically validated programs.

From that perspective, Xenon (XENE) is a market anomaly, with two promising clinical stage programs, a robust discovery platform and a market cap of just under $100M. Its two epilepsy programs, XEN1101 (Kv7 opener) and XEN901 (Nav1.6 inhibitor), are still in P1 but at the current levels the upside potential is too significant to ignore. Continue reading

Gene therapy updates – One big acquisition, two IPOs and a mixed bag of data

It is hard to overestimate the impact of the Novartis (NVS) /Avexis (AVXS) deal. So far, big biopharmas have had limited exposure to gene therapy and those that did get into the field focused on early-stage collaborations: Pfizer/Bamboo, Biogen/AGTC, Roche/ 4DMT, Abbvie/Voyager etc. This is understandable given the unique product profile gene therapies represent: One time irreversible treatment, lack of long term follow up and creative reimbursement models.

The $8.7B acquisition of Avexis, just three months after the deal with Spark (ONCE), makes Novartis the first pharma to embrace gene therapy as a commercial opportunity. The deals also make Novartis the undisputed gene therapy leader with (hopefully) two products on the market next year. Continue reading

After a long stagnation, is CNS starting to crack?

After being the industry’s graveyard for over 20 years, there is finally room for optimism in CNS (central nervous system) disorders. The void created in the field is now being filled by small companies which are using novel therapeutic (gene therapy, antisense, antibodies) and development (genetic validation in humans, biomarkers for patient selection) approaches. While clinical results are early and sparse they may represent the beginning of a new innovation cycle in CNS. Continue reading

Biotech portfolio updates – ESMO 2016, Exelixis, Abeona, Esperion and Seattle Genetics

After a two-month break here is a recap of key highlights from the September/October time frame. On the menu today: PD-1 controversies at ESMO 2016, Exelixis’ (EXEL) launch in renal cancer,  gene therapy data from Abeona (ABEO), long awaited update from Esperion (ESPR) and a positive surprise from Seattle Genetics (SGEN).

ESMO 2016 – Merck wins by a landslide (for now…)

While ESMO is typically secondary in importance to ASCO, this year’s meeting overshadowed its US counterpart (which was relatively quiet to begin with…), generating big headlines in the PD-1 arena. Continue reading