Despite the recent surge in general and biotech indices I still believe we are in the beginning of a significant correction after a 10-year bull market. If a major correction occurs in 2019, I intend to use it and increase exposure to small cap biotechs as I still believe in their long term value proposition.
With respect to stock picking, the thriving biotech IPO market created a dichotomy. On the one hand, investors have a lot to choose from as the IPO class of 2017-18 includes so many high quality biotech companies. On the other, valuations for many companies (especially the ones without clinical validation) appear to be overblown, driven by hype rather than data. Continue reading →
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 →
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 →
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 →
A new lucrative indication for Sage (and potentially Marinus)
Last week, Sage (SAGE) surprised the market by announcing preliminary but impressive results for SAGE-547 in patients with postpartum depression (PPD, also known as postnatal depression). Four patients with severe PPD experienced a dramatic improvement in their depression score from an average of 26.5 to 1.8. In other words, these patients entered the study with a severe debilitating depression and became symptom-free within 2-3 days. Despite the preliminary nature of the results, they generated a clear efficacy signal that merits evaluating SAGE-547 in a randomized trial, to be started later this year. Continue reading →
The recent pullback in the biotech sector hit the vast majority of small/mid cap biotechs. As a group, it is hard to argue biotech stocks are cheap right now but some stocks are becoming attractive after losing 30-50% in several months. Below are 6 companies that are approaching or already are at attractive valuations. A key theme for all 6 is that they have been sold off alongside the general market rather than for fundamental reasons. Market fluctuations in 2014 may present investors with attractive entry points. Continue reading →
One of the questions I am frequently asked is whether there are any good oncology drugs out there which are still available for partnering. The past years saw a surge in licensing and M&A deals, however, there are still several high quality assets out there being developed independently by small or mid cap biotechs. Below are ten companies with promising wholly-owned development stage programs, in alphabetical order.
In its earnings release last week, Seattle Genetics (SGEN) did not surprise anyone with the financial guidance and expected timelines for approval of its lead agent, SGN-35. However, on the business development front, the release did include an intriguing announcement that did not receive the attention it deserved. The company announced that Genentech recently advanced 3 new antibody drug conjugates (ADC) based on Seattle Genetics’ technology to phase I, this is inaddition to the CD22 ADC already in clinical testing.
The announcement has several important implications for Seattle Genetics. First, the number of clinical programs in its partnered pipeline instantly jumped 50% from 6 to 9. By definition, this provides Seattle Genetics with more shots on goal and increases chances of substantial milestones and royalties down the road. More importantly, it establishes Seattle Genetics’ technology as Genentech’s preferred ADC platform, an attractive position given Genentech’sdominance in oncology and ADCs in particular.Continue reading →
Last week, Sanofi-Aventis (SNY) announced disappointing results from a phase III trial evaluating iniparib in breast cancer. The drug failed to improve survival and progression-free survival (PFS) in breast cancer patients and although actual data were not published, approval is unlikely even for a subset of patients. Failed phase III trials are quite common in oncology, a field with one of the highest attrition rates in the pharmaceutical industry. Nevertheless, iniparib’s failure is particularly disturbing, as the phase III was supported by compelling results from a randomized controlled phase II trial as well as strong scientific rationale. Importantly, this trial could have broader implications as it raises questions regarding the role of randomized phase II trials as a go/no go decision point for pivotal trials.