Big News Day, Market Update

Trial Design Impacts Stocks?

Biotech stocks have partially recovered from the recent sell-off but still remain below ““Double top” levels (XBI) of 2015. The major ETFs- FBT,IBB and XBI- remain below the March 19 peak but above the April 30 recent low. A lot of selling took place after recent highs and we are currently in a May uptrend (See excellent Yahoo charts).

• YTD the XBI leads up 24%, compared to 18.7% for the IBB and FBT. See chart below.
• April 30 low is higher than Feb 4 lows so technicals look good.
• XBI outperforms during “bull runs”.
• Five star Fidelity Select Biotech Fund (FBIOX) tracks FBT and IBB a tad lower.

Rayno Large Caps are underperforming ETFs up about 10% YTD. Regeneron Pharmaceuticals (REGN) is the leader up 22% YTD followed by Gilead Sciences (GILD) up 17.3% and Biogen, Inc.(BIIB) up 16.4%.

Outside of the larger caps, small cap biotech stocks  are volatile with big moves on seemingly minor news. Mid-caps lead the market driven by clinical news and M&A after the mega-deals from Abbvie (ABBV) and Alexion (ALXN). See our recent post on Valuations of mid-caps driven by M&A. There is a high M&A premium for biopharma pipelines without consideration of clinical development risk.

Rayno Mid Caps remained strong with Alkermes (ALKS) up 3.77% and Seattle Genetics (SGEN) up 1.8%. Vertex (VRTX) is a laggard but holding up well at $128.31 up 8% YTD.

High Hopes for Gene Therapy-Novel Regulatory Pathway Cleared

Today the CAR-T Cell Therapies, and gene therapy stocks soared boosted by bluebird bio (BLUE) news on the pivotal design of a small 24 month clinical trial, reversing a downtrend over the past few weeks. T-cell genetic therapies are a transformative platform with potential for treatment of severe genetic diseases, cancer and rare diseases. No products are currently FDA approved using CAR-T.

Rare or orphan diseases are a favored  business model and strategy favored by entrepreneurs, bankers and analysts because the cost effectiveness of the drug can be rationalized, even with very high pricing in excess of $100k per year per patient. Think high prices, rare disease and fast track approval. An expedited regulatory path is also possible because of the small patient size in trial. Alexion Pharmaceuticals (ALXN) is the model for “ultra-rare disease” R&D and now the Company has a market cap of $32B with revenues approaching $2.6B.

• bluebird bio (BLUE) soared 9% to $170 a new high up 84.9% YTD, on accelerated regulatory strategy for bluebird bio strategies in the EU and US for their LentiGlobin BB 305 in BetaThalassemia Major currently in a Phase 2/3 study. Two new trials are planned with 15 patients each with a 24 month follow-up. Price targets were re-iterated or upgraded. The stock is 99% owned by institutions with Fidelity and Capital World are big blue biotech holders.
• Juno Therapeutics (JUNO) rocketed off the bottom up 11% to $45.44,but still down 13% YTD. No news except tagging along with BLUE.
• Kite Pharma (KITE) was up 10.86% to $51.43, but down 10.5% YTD and hit a low of $45.36 just yesterday! KITE is in a Phase 2 study (CD19 CAR) for B cell malignancies.
• Ziopharm Oncology (ZIOP) was also up 5.4% joining the party.
• Biomarin (BMRN) a $20B large cap rare disease company did not move. The Company has one of the BMRN-largest pipeline in “orphan diseases” and has been mentioned as an M&A play.

It was a big news day and several other biopharma stocks were movers:

Achillion (ACHN) announced after hours Achillon and JNJ in  $1.1B Licensing and Collaboration Agreement with Janssen a Johnson and Johnson (JNJ) Company for HCV. The stock was volatile after hours. ACHN has been on our focus list for over two years.

Two other stocks not on our focus list were actively traded:

Intercept Pharmaceuticals (ICPT) a high flier was down 16% to $263 on an announcement of their Phase 3 trial design for a liver fibrosis drug an FXR agonist.  The trial was larger than expected.

Sarepta Therapeutics (SRPT) was up 38% after hours on the FDA filing of their drug for Duchenne muscular dystrophy, a rare genetic disorder.

Our top picks within the Rayno Portfolio for ASCO are : Clovis Oncology (CLVS), Roche ADR (RHHBY) and Seattle Genetics (SGEN) but all are up over the past month. ASCO update to follow.