With the SPDR S&P Biotech Index up 43% over the trailing-12-month period, it's evident that investment dollars are willingly flowing into the biotech sector. Keeping that in mind, let's have a look at some of the rulings, studies, and companies that made waves in the sector last week.
If you thought last week was busy, this week brought a whole new sense to the term breaking news. Earnings results stole the show for a number of stocks, including Quesctor Pharmaceuticals and Dynavax Technologies which both easily topped Wall Street's EPS projections. But there was a considerable amount of clinical data and buyout news earlier on in the week that biotech enthusiasts would scold me for not including in this week's wrap-up.
Will you be my valentine?
No one ever said three's company with Cubist Pharmaceuticals (NASDAQ: CBST.DL ) proposing to both Trius Therapeutics (NASDAQ: TSRX ) and Optimer Pharmaceuticals for a combined sum of approximately $1.6 billion.
The deal values Trius at $13.50 per share and gives shareholders the option of receiving $2 per share more if certain sales targets are met for Trius' late-stage acute bacterial skin and skin structure infection drug, tedizolid. Considering that tedizolid packed a better punch and required less dosing than Pfizer's Zyvox in trials, I'd say Cubist is getting quite the bargain.
With Optimer, I'm left scratching my head. Optimer brings Dificid, its Clostridium difficile-associate diarrhea drug, to Cubist's portfolio, which I suspect has peak sales potential of perhaps no more than $225 million. Even at $10.75 per share with $5 per share in sales milestone incentives, Cubist's purchase of Optimer fails to excite me and values the company somewhere around four or more times peak sales estimates.
In contrast, ultra-rare drugmaker Alexion Pharmaceuticals (NASDAQ: ALXN ) decided to retain the services of Goldman Sachs in the wake of growing rumors that Roche plans to make a move to acquire Alexion. The impetus behind retaining Goldman Sachs is in an effort to ensure it gets top dollar for its pipeline, or to be able to withstand a hostile takeover bid should one occur. Goldman and Alexion have worked together before when Alexion was on the acquisition hunt, so the two parties are well acquainted with one another. I already think Alexion is priced for perfection and can't see what Roche is going to squeeze out of its lone FDA-approved drug, Soliris, moving forward.
Vanda shares rocketed higher by 50% in just a three-day span following word from the Food and Drug Administration that it would give tasimelteon, the company's sleep-disorder drug aimed at treating non-24-hour disorder, a priority review. That's good news because it speeds up the review process and could signal to shareholders a good potential for approval. Since there isn't currently an approved treatment for non-24-hour disorder, tasimelteon could effectively take all market share and may be able to generate peak sales in excess of $200 million. Obviously, investors should take this one step at a time, but this is exciting news for Vanda's shareholders.
For Synta Pharmaceuticals, it skyrocketed this week following results from a mid-stage study of experimental breast cancer drug ganetespib, which demonstrated that four patients achieved an objective tumor response (the primary endpoint which would have initiated an expansion of the trial was just one objective tumor response as outlined by the trial design). Because of its apparent success in shrinking tumors, Synta is expanding its trial and combining its experimental drug with Paclitaxel. Ganetespib is also being tested as an experimental lung cancer treatment which is currently in late-stage trials. It's probably a bit too early to start counting your chickens as late-stage trials can sometimes go completely in the opposite direction from mid-stage results, but ganetespib definitely merits a close eye.
It's no secret that biotech stocks have been soaring recently, but the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.