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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Biotechs are known for their volatile ways. Sometimes they take flight for no reason at all, or break down based on mere rumors. In either case, it's important to understand the underlying cause of the movement.
That said, here is my take on three biotechs that were moving this week.
Clovis Oncology (NASDAQ: CLVS ) exploded Wednesday with shares finishing up more than 16% after acquiring privately held Italian biopharmaceutical company Ethical Oncology Science SpA. Clovis paid $200 million upfront to gain the U.S. marketing rights to Ethical Oncology's mid-stage cancer drug lucitanib.
Lucitanib is being evaluated in a broad mid-stage clinical program designed to assess the drug's effectiveness in treating multiple types of cancer, including treatment-refractory FGF-aberrant breast cancer and metastatic squamous non-small-cell lung cancer. If the FDA approves lucitanib for its breast cancer indication, Clovis will owe Ethical Oncology an additional $65 million, per the terms of the agreement.
What's my take on the deal? Clovis was clearly in need of an additional clinical candidate after its lead candidate CO-101 failed a mid-stage trial for pancreatic cancer. That said, the company already has a market cap of $1.6 billion, which is high for a development-stage company -- especially one without a late-stage candidate. So, my take is that Foolish investors might want to sit on the sidelines for now.
QLT (NASDAQ: QLTI ) shares soared Wednesday ending the day up more than 11% after providing a clinical and regulatory update on its synthetic oral retinoid program. Specifically, the company stated that meetings with both the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, have brought their oral retinoid program one step closer to finalizing a pivotal trial protocol. QLT is thus expecting to be able to announce further details of the pivotal clinical trial by the end of the first quarter in 2014.
In the same breath, QLT announced that the company started recruiting patients for a mid-stage trial for impaired dark adaptation, a condition that results in decreased ability to recover visual sensitivity in the dark after exposure to bright lights. And finally, QLT announced the launch of a compassionate use program for their oral retinoid platform for individuals suffering from leber congenital amaurosis and retinitis pigmentosa.
Suffice to say, that's a lot of good news coming out at one time, and the market apparently didn't know what to make of it all. Although shares shot up upon the announcement, they gave up most of their gains in after-hours trading, as the market digested the news.
My take is that these are obviously positive developments, but they don't add immediate value to the company. QLT is still a development stage company operating at a significant loss and should remain that way for the foreseeable future. With that said, QLT does have a reasonable market cap of $264 million for its developmental stage. Foolish investors thus might want to keep an eye on this biotech as its clinical program advances.
Galena BioPharma (NASDAQ: GALE ) shares shot up another 7% Wednesday, and the stock is now up more than 50% since acquiring Abstral from Orexo last March. And if you are new to this story, Abstral is a breakthrough cancer pain treatment approved by the FDA in 2011. Galena launched the drug last October and peak sales are expected to hover around $50 million. Abstral is expected to provide a much needed revenue source to help cover the development of NeuVax, Galena's flagship breast cancer treatment currently in late-stage trials.
My take is that the acquisition of Abstral was crucial for Galena investors, and this increase in share price is warranted. Prior to acquiring Abstral, Galena was a biotech burning through cash at breakneck pace. Abstral turns Galena into a commercial operation, and gives the company something to fall back on in case NeuVax turns out to be a dud. Moreover, Abstral sales should help buoy the share price while investors wait out the next two years for the initial NeuVax trial results.
Galena is certainly a speculative biotech stock, and I picked up shares of the stock in my real portfolio as an intriguing speculative play. I also recently added it to my Motley Fool CAPS portfolio to help me keep tabs on it. Foolish investors may also want to add it to their watchlist.
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