With the SPDR S&P Biotech Index up 61% 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.
To say that the start of 2014 has gone to the biotech sector might be a drastic understatement with biotech stocks soaring and flopping at will over the first two weeks. Today we're going to look at 12 (yes, twelve!) important biotech stories that made news this week and decipher why they're important for investors.
In Part 1, we're going to tackle all of the clinical data that moved companies this week, as well as examine a new collaborative pact as well as a fresh purchase. Part 2 of "This Week in Biotech" will focus on FDA, EU, and Department of Justice rulings and actions which dominated the headlines for the week. So let's get started.
Setting the record straight ... up!
I'm not sure how any discussion can begin without mentioning the historic run in Intercept Pharmaceuticals (NASDAQ:ICPT) this week. Intercept, a company that develops therapies to treat chronic liver disease, advanced 545% for the week (that's really not a misprint), or $376.66 per share, after reporting that its mid-stage study of obeticholic acid for nonalcoholic steathohepatitis, or NASH, had been stopped early because of statistically significant efficacy. The data safety monitoring board made its recommendation after reviewing about half of all trial patients and determining that the primary endpoint of the trial -- a decrease in NAFLD Activity Score of at least 2 points with no worsening liver fibrosis -- was met. In response, Intercept has seen price target upgrades galore, including a fresh $872 price target from Bank of America/Merrill Lynch. To put this in context, Intercept began the week below $70 a share. Although Bank of America/Merrill Lynch is forecasting $4 billion in peak sales and there's clearly a huge market to treat serious cases of NASH (perhaps 6 million people), I'm concerned that this run-up has come way too far, too fast.
This company "only" doubled
Normally, a company that doubles in one week will get a lot of attention. For clinical-stage drug developer Epizyme (NASDAQ:EPZM), which advanced 99.4% this week, its gains tracked largely under the radar because of Intercept -- but its results were no less encouraging. Epizyme on Monday reported that its DOT1L inhibitor to treat acute leukemias, EPZ-5676, reached its proof-of-concept milestone in early stage trials. This achievement, which was triggered by objective responses with regard to translocations of the MLL gene in study patients, necessitates a $25 million payment from development partner Celgene. To make matters better, Epizyme also alerted investors to a separate $4 million milestone achievement from a collaboration with GlaxoSmithKline, which cumulatively allowed it to boost its year-end cash projection to $145 million from previous estimates of $115 million. As for me, I'd much prefer to wait for later-stage data before drooling over EPZ-5676's potential.
A "Resonating" success
In a week of early trial stoppages, Pharmacyclics (NASDAQ: PCYC) and Johnson & Johnson's phase 3 Resonate trial involving Imbruvica for the treatment of relapsed/refractory chronic lymphocytic leukemia, or CLL, and small lymphocytic lymphoma was also stopped early because of statistically significant efficacy. The stoppage, based on the recommendation of the independent data-monitoring committee, wasn't a big surprise given how impressively Imbruvica outperformed the placebo in previous trials. This is, however, the most crucial of all trials for Imbruvica, since CLL is the most common of all adult blood cancers. As of now, Imbruvica appears to be on track to claim its blockbuster status by 2015.
Oh, yeah, this company nearly doubled, too ...
No joke -- we had three companies pretty much vault higher by triple digits on the week, with Neurocrine Biosciences (NASDAQ:NBIX) being the third. With a gain of 98% for the week, Neurocrine advanced after announcing positive mid-stage results for its VMAT2 inhibitor known as NBI-98854 for the treatment of tardive dyskinesia, a disorder characterized by abnormal and involuntary muscle movements. The trial data revealed a 2.6-point reduction in the Abnormal Involuntary Movement Scale, compared with just a 0.2-point reduction in the control arm. There was also a 49% responder rate in the NBI-98854 intent-to-treat group, and 67% of patients were deemed "much improved" or "very much improved" at the six-week mark. An initial peek at its 12-week results, released yesterday, showed that the responder rate improved to 54%. If you recall, Neurocrine tanked just months ago on weak results from NBI-98854, but dose escalation studies were still ongoing. This is why it's always important for biotech-savvy investors to wait for dose escalation studies to be complete before placing their bets.
In addition to clinical data, we also saw a collaborative partnership struck between Sangamo Biosciences (NASDAQ:SGMO) and Biogen Idec on Thursday. The deal, which sent Sangamo shares higher by 41% on the week, allows Biogen Idec access to Sangamo's proprietary gene-altering technology platform in return for a $20 million upfront cash payment and the potential to earn up to $300 million in additional milestone and development payments. The two companies will focus their research on sickle-cell disease and beta-thalassemia, with Biogen Idec also covering all external and internal trial costs. While shareholders are clearly excited that Sangamo landed a mammoth partner, I'm more excited for Biogen, which landed a unique technology platform for a very inexpensive price.
Patent cliff no more!
Finally, Forest Laboratories (NYSE: FRX) addressed the question to investors of how it would solve its patent cliff issue when Alzheimer's disease drug Namenda goes off patent in 2015. The answer: Buy its way out! On Wednesday, Forest Labs announced the $2.9 billion all-cash purchase of Aptalis, a maker of cystic fibrosis and gastrointestinal drugs, from TPG Capital. The deal, which Forest will fund with $1 billion in cash on hand and $1.9 billion raised through debt offerings, will add $700 million in revenue by 2015, could reduce costs through synergies by $125 million in 2016, and should add an adjusted $0.78 in EPS by 2015, the same year Forest will lose its exclusivity on Namenda. While shares soared this week and its pipeline is no longer among the most perilous, its valuation is a bit high to warrant a look here based on what's remaining in its pipeline.
Stay tuned for "This Week in Biotech Part 2," which covers all of the FDA, EU, and Department of Justice actions which rocked the biotech sector this week.