It's no secret that the biotech sector on the whole has resoundingly beaten the broader indices this year, and next year is shaping up to be another good one. Yet, some companies failed to join the sector-wide party this year and instead visited the factory of sadness.
Because today's losers can be tomorrow's winners in biotech, I think it's a good idea to take a look at the prospects for the biggest losers going forward. So without further ado, here is my take on the top three losers.
Ariad Pharmaceuticals (NASDAQ:ARIA) announced on October 9th that an updated clinical review of its flagship cancer drug Iclusig showed that the drug's risks now outweighed its potential rewards, and the drug was pulled from the U.S. market as a result. Specifically, patients taking the drug were found to be at a greater risk of serious occlusive vascular events, and the U.S. Food and Drug Administration, or FDA, placed a partial clinical hold on all new patient enrollments in Iclusig clinical trials. Patients with no other treatment options can request to continue using the drug under an individual IND application, as well as patients who are currently responding to treatment with the drug.
The effect on Ariad shares has been dramatic. Shares have now plummeted 78% since this announcement and that's after they've rebounded to some degree in recent sessions.
Ariad's rebound was triggered by a positive opinion from the Committee for Human Medicinal Products, or CHMP, of the European Medicines Agency, or EMA, stating that Iclusig could continue to be prescribed for its authorized indications. The EMA also made a series of recommendations to minimize the risk of serious occlusive vascular events. Since then, however, the EMA has indicated that it will undertake an "in-depth" review of Iclusig, which may warrant further action.
At present, Ariad is in talks with the FDA about a possible risk mitigation strategy, or RMS, that would enable the clinical hold to be lifted. My bet is that Iclusig will be allowed back on the market in 2014, but as a treatment of last resort. As far as the EMA in-depth review is concerned, I don't see that as anything but more bad news. The best Ariad shareholders can hope for, in my opinion, is that the EMA re-affirms their current position, which is certainly possible.
Fortunately, the company did raise over $300 million upon the commercial launch of Iclusig earlier this year. As such, Ariad isn't strapped for cash at the current time. That said Iclusig does represent 88% of the company's clinical pipeline, so a highly restrictive RMS could weigh down Ariad for years to come. In short, I don't see much hope for Ariad as a turnaround story next year.
Achillion Pharmaceuticals (NASDAQ:ACHN) is down 56% this year after the FDA placed a clinical hold on its lead hepatitis C drug candidate sovaprevir. On June 29th, the FDA issued a letter to Achillion stating that a review of the company's early stage trial revealed that exposure to sovaprevir and atazanivir leads to elevated liver enzymes levels in healthy subjects. The FDA thus requested drug-drug interaction studies to clarify this issue. Last September, however, the FDA re-affirmed their clinical hold after reviewing the requested information, and the stock dove over 60% in a single day.
Personally, I don't think this issue ever mattered that much. Achillion was already well behind Gilead (NASDAQ:GILD) in the hepatitis C race. And with Gilead's sofosubuvir receiving approval from FDA last week and a whole host of competing drugs expected to be approved soon, sovaprevir looked like it was dead in the water a long time ago. Even though Achillion still has over $170 million in cash, I don't see much value in their remaining clinical candidates. The company would be wise to concede defeat on the hepatitis C front, and try to acquire the rights to another mid-stage drug.
Infinity Pharmaceuticals (NASDAQ:INFI) is down 57% year to date. And unlike its peers at the bottom of the biotech barrel, Infinity's decline has been more of a steady march south. Infinity shares began to slide back in April after announcing a large public offering of 10 million shares and the slide has continued ever since despite a number of positive clinical and regulatory developments for the company's lymphoma drug candidate IPI-145.
The problem appears to be that investors sniffed out the pending failure of Infinity's non-small cell lung cancer drug candidate retaspimycin hydrochloride early on. Last September, Infinity reported that retaspimycin did not meet its primary endpoints for overall survival in patients with squamous cell carcinoma. And a combo of drugs also failed to show any clinical benefit at the mid-stage level. The company thus plans to terminate the development of retaspimycin in the near future.
The biggest problem facing Infinity going forward is their ever-increasing operating expenses, which are already topping $10 million a month. Although Infinity does have access to roughly $250 million in liquid assets, the company is planning on expanding its clinical development of IPI-145. So it's very possible the company will resort to even more dilutive funding next year. With a market cap exceeding $700 million and no late-stage clinical candidates, Infinity looks like it will continue to slide next year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.