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.
Four stocks -- Five Prime Therapeutics (NASDAQ:FPRX), Bristol-Myers Squibb (NYSE:BMY), Intercept Pharmaceuticals (NASDAQ:ICPT), and Gilead Sciences (NASDAQ:GILD) -- could all loom large in health care headlines this morning. Let's take a closer look at these top biotech stories.
Five Prime and Bristol-Myers Squibb announce a new collaboration
Five Prime Therapeutics is up 15% as of this writing after announcing a new collaboration with Bristol-Myers Squibb for the discovery, development, and commercialization of immuno-oncology therapies toward targets in two undisclosed immune checkpoint pathways.
Five Prime specializes in a proprietary target discovery platform and novel protein therapeutics to treat cancer and inflammatory diseases. In addition to Bristol-Myers Squibb, Five Prime is also developing an experimental treatment for multiple solid tumors with GlaxoSmithKline.
Five Prime's new agreement with Bristol-Myers Squibb states that Bristol-Myers Squibb will obtain exclusive worldwide rights to develop and commercialize products directed at the protein targets identified by Five Prime. Bristol-Myers will make an upfront payment of $20 million to Five Prime, as well as $9.5 million in additional research funding.
Bristol-Myers will also acquire 4.9% of Five Prime's outstanding common stock for approximately $21 million at a 30% premium to the stock's previous closing price. Five Prime will be eligible to receive up to $300 million in future milestone payments and tiered royalty payments on each product commercialized by Bristol-Myers Squibb.
In other words, I think this is a great deal for Five Prime, which has no marketed products and finished last quarter with $86.7 million in cash and equivalents. The combined backing of GSK and Bristol-Myers Squibb are firm votes of confidence for its pipeline.
Intercept reports positive phase 3 data for its lead drug candidate OCA
Meanwhile, Intercept Pharmaceuticals just reported that its phase 3 trial of obeticholic acid (OCA) for the treatment of primary biliary cirrhosis (PBC) had met its primary endpoint in reducing serum alkaline phosphatase (ALP) from the baseline and maintaining a normal bilirubin level after 12 months of therapy.
PBC, which primarily occurs in women, is characterized by the destruction of bile ducts in the liver, which leads to liver scarring and the buildup of bile. Based on the positive phase 3 data, Intercept intends to apply for a market approval in the U.S. and Europe.
Wall Street is enamored with OCA's growth prospects. Bank of America Merrill Lynch analyst Rachel McMinn, who has a price target of $872 on the stock, believes OCA could generate peak sales of $4 billion if approved. Analysts at Wedbush are even more bullish, with peak sales estimates of OCA at $9 billion.
Both forecasts would represent a huge boost for Intercept, which only reported $1.6 million in licensing revenue for fiscal 2013. Intercept does not have any marketed products, but it is researching OCA for four indications -- PBC, portal hypertension, NASH, and Bile Acid Diarrhea. The PBC indication is in phase 3 trials, while the other indications are in phase 2. It is also conducting preclinical studies on two treatments for type 2 diabetes and fibrosis.
Gilead's battle with Idenix continues to weigh on its stock
Last but not least, investors should keep an eye on the escalating legal battle between Gilead Sciences and Idenix Pharmaceuticals (NASDAQ: IDIX). Idenix claims that Gilead infringed on its patent when Gilead marketed Sovaldi, its new hepatitis C treatment, in England, France, and Germany.
Sovaldi is widely expected to be a blockbuster drug, with peak sales estimates between $6 billion to $7 billion. Sovaldi could offset future sales declines in Gilead's blockbuster HIV pipeline, which is heavily dependent on Viread, an antiviral drug that loses U.S. patent protection in 2017.
Idenix and Gilead have been battling each other in courts over the past three months, with Idenix claiming it has exclusive intellectual property rights for sofosbuvir, which forms the basis for Sovaldi. Idenix also went after Gilead in California last December.
Although the outcome of the litigation probably won't be known for some time, the announcement was enough to cause shares of Gilead, which are up 66% over the past 12 months, to slide nearly 4% last Friday.