It was an exceptionally good week for the biotech sector with the market reacting positively to pharma company Allergan’s acquisition deals with biotech stocks. Expectations are that more such deals will be announced with biotech companies like ARIAD seeing their shares prices increasing in response to speculation rumors.
It was good news on the regulatory front as well with Sarepta SRPT receiving FDA approval for its orphan disease drug.
Recap of the Week’s Most Important Stories
Biotech Sector Boosted by Allergan Acquisition Announcements: Pharma-biotech M&A deals picked up pace with Allergan announcing its acquisition plans for three biotech stocks in a short span of one week. Last week, Allergan announced that it will be acquiring clinical-stage biotech company, Vitae, for approximately $639 million. Vitae’s shares shot up 157.4% on the news.
And yesterday, Allergan announced a couple of acquisition deals focused on liver diseases, specifically non-alcoholic steatohepatitis (NASH). The major announcement that proved to be a shot in the arm for biotech stocks was Allergan’s acquisition deal with clinical-stage biopharma company, Tobira Therapeutics TBRA. Allergan has agreed to pay up to $1.695 billion to Tobira (upfront payment of $28.35 per share, in cash, and up to $49.84 per share in contingent value rights (CVRs) depending on the successful achievement of certain development, regulatory and commercial milestones) sending the biopharma company’s shares up 720.9% on the whopping premium (Read more: Why Did Tobira Therapeutics Stock Skyrocket 720% Today?).
Meanwhile, Allergan made an up-front payment of $50 million to acquire privately-held biopharma company Akarna Therapeutics, and will make additional payments on the achievement of certain milestones.
More Deals Signed this Week: More deals between pharma and biotech companies were announced this week. Regeneron REGN and Teva are teaming up to develop and commercialize fasinumab, Regeneron's late-stage pipeline candidate for osteoarthritis pain. Fasinumab is in mid-stage development for chronic low back pain as well. The deal terms include an upfront payment of $250 million to Regeneron and equal sharing of the global commercial value, as well as ongoing R&D costs of about $1 billion. Regeneron will also get development and regulatory milestone payments and additional payments based on net sales.
Meanwhile, Geron GERN strengthened its ties with Johnson and Johnson and entered into a license agreement with J&J’s Janssen Pharmaceuticals worth up to $80 million (including an upfront payment of $5 million) plus single digit royalties. Janssen will get exclusive global rights to Geron’s proprietary patents and related know-how for the development and commercialization of products based on specialized oligonucleotide backbone chemistry, as well as novel amidates for RNAi for the prevention, treatment and/or diagnosis of any and all human disorders, excluding blood/bone marrow cancers and products whose predominant or primary mechanism of action is telomerase inhibition. Geron already has a collaboration with J&J’s Janssen Biotech for imetelstat. Geron is a Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sarepta Soars on FDA Approval of DMD Drug: Sarepta got a huge boost with the FDA granting accelerated approval to Exondys 51, for Duchenne muscular dystrophy (DMD). FDA approval makes Exondys 51 the first DMD treatment to gain approval in the U.S. But with Exondys 51’s clinical benefit not having been established, continued approval will depend on the outcome of confirmatory trials with results expected in 2021.
That being said, Exondys 51’s approval is a major win for Sarepta not just because this will be the first approved product in the company’s portfolio but also because other companies failed to gain approval for their DMD drugs. So, overall, this is a big milestone for Sarepta. Sarepta expects Exondys 51’s net annual cost to be about $300,000 taking into account the weight-based dosing in the product label and the typical expected patient age and weight over time (Read more: Sarepta Stock Nearly Doubles on FDA Approval for DMD Drug). Meanwhile, in addition to gaining FDA approval, Sarepta got a rare pediatric disease priority review voucher (PRV) which can be used for its own future regulatory applications or can be monetized by transferring to another company.
Spectrum Drug Shot Down by FDA Panel: Spectrum’s shares were down on news that the FDA’s Oncologic Drugs Advisory Committee (ODAC) voted that Qapzola did not show substantial evidence of a treatment effect over placebo. Spectrum is looking to get Qapzola approved for immediate intravesical instillation post-transurethral resection of bladder tumors (post-TURBT) in patients with non-muscle invasive bladder cancer (NMIBC). However, the vote did not really come as a surprise considering Qapzola failed to meet the primary endpoint in two phase III studies. A final decision from the FDA is expected on Dec 11, 2016 (Read more: Spectrum Down, Qapzola Fails to Impress FDA Panel).
Novavax and Vical Vaccines Disappoint in Studies, Shares Fall: Novavax’s shares plummeted on disappointing data from a late-stage study on its RSV F Vaccine in older adults. Top-line results from the late-stage study showed that the vaccine failed to meet the primary and secondary endpoints and did not show efficacy. Shares were down 84.5% on the data (Read more: Novavax Tanks, RSV F Vaccine Disappoints in Two Studies).
Another company that came out with disappointing news on its vaccine candidate is Vical. Vical and partner Astellas said that top-line results from a mid-stage study on their cytomegalovirus (CMV) vaccine, ASP0113, showed that the vaccine failed to achieve the primary endpoint. The study was conducted in kidney transplant patients receiving an organ from a CMV-seropositive donor (Read more: Vical Slumps, Cytomegalovirus Vaccine Fails in Phase II Study).
MEDICAL-BIOMED/GENETICS Industry Price Index
The NASDAQ Biotechnology Index gained 4.6% over the last five trading days. Among major biotech stocks, Gilead was up 4.8% while Vertex VRTX declined 3.8%. Over the last six months, Biogen BIIB was up 22.4% while Gilead lost 9.4% (See the last biotech stock roundup here: Horizon-Raptor Acquisition Deal, Geron Down on Pipeline News).
What's Next in the Biotech World?
Watch out for the usual pipeline and regulatory updates from biotech companies including a response from the FDA regarding Amgen’s regulatory application for ABP 501, the company’s biosimilar version of AbbVie’s Humira. Meanwhile, Alkermes ALKS will provide an overview of medical, commercial, policy and market perspectives for Vivitrol at an Analyst and Investor Event next week.
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research