Lively M&A Scene Keeps Biotech Shares Buoyant In Q3

| About: iShares Nasdaq (IBB)

The protracted takeover battle for Medivation (NASDAQ:MDVN) and a healthy M&A scene elsewhere helped keep shares in small and mid cap drug developers buoyant in the third quarter. The likes of Actelion (OTCPK:ALIOY), Seattle Genetics (NASDAQ:SGEN) and Exelixis (NASDAQ:EXEL) have added billions in value so far this year.

There have also been some substantial fallers, of course. The decline of Endo (OTCPK:ENDO) continues, crushed by its debt pile, while clinical setbacks mean Ionis (NASDAQ:IONS), Alkermes (NASDAQ:ALKS) and Infinity (NASDAQ:INFI) rank as some of the sectors biggest share price disappointments.

Mid-caps

Pfizer’s $14bn acquisition of Medivation had a knock-on effect on Seattle Genetics and Actelion, raising hopes that the similarly sized biotechs might also be bought out. A spending spree by Allergan (NYSE:AGN), which has been enthusiastically consolidating some early-stage bets since its merger with Pfizer (NYSE:PFE) fell through, has also helped drive M&A hopes throughout the sector.

Meanwhile, Celltrion benefited from the rise in biosimilars, with Inflectra, its version of Johnson & Johnson’s (NYSE:JNJ) antirheumatic antibody Remicade, reaching the US in April, making it the second biosimilar approved there.

Mid cap ($25-5bn): top risers and fallers in 9 months

Market capitalization ($bn)

Top 5 risers

SP change

Q3 2016

9-mth change

EP Vantage comment

Medivation ($)

68%

13.52

5.60

Pfizer pays up

Celltrion (KRW)

26%

10.86

2.78

US biosimilar space reaches its Inflectra point

Genmab (DKr)

23%

10.12

2.15

Daily Market Movers: Global Majors & Industry (26 Jul 2016)

Actelion (SFr)

20%

18.44

2.44

Actelion re-awakens research on sleep medicine

Seattle Genetics ($)

20%

7.59

1.33

Who’s next after Medivation?

Top 5 fallers

Endo International ($)

(67%)

4.49

(9.36)

Daily Market Movers: Global Majors & Industry (6 May 2016)

Ionis Pharmaceuticals ($)

(41%)

4.43

(3.01)

Ionis safety blow boosts Alnylam

Alkermes ($)

(41%)

7.13

(4.78)

Forward goes backward for Alkermes

Perrigo Company ($)

(36%)

13.23

(7.96)

What Papa might preach to Valeant

Juno Therapeutics ($)

(32%)

3.17

(1.49)

Is Juno’s hold a CAR crash or just a speed bump?

Neurotoxicity only short-term toxic to Juno stock

Click to enlarge
Click to enlarge

The biggest mid-cap fallers have all been the victims of either clinical setbacks or strategic disruptions.

Endo International saw its valuation tumble as its Valeant (NYSE:VRX)-like strategy of debt fueled acquisition fell out of favor with investors. Perrigo (NASDAQ:PRGO), meanwhile, has seen its chief executive defect to rival Valeant.

On the clinical side, Ionis has suffered from a safety concern over amyloidosis project IONS –TTRRx, as has Juno with its CAR-T project JCAR015. Alkermes saw its big pipeline hope, depression drug ALKS 5461, stumble in a phase III trial.

Small-caps

Exelixis takes the top spot among the smaller players partly thanks to positive data on its renal cell carcinoma treatment Cometriq.

Indivior’s (OTCPK:INVVY) shares have climbed after the group won a crucial legal battle in the US over its Suboxone film. A pivotal trial hit for its follow-on asset RBP-6000 also helped the company.

Meanwhile GW Pharma (NASDAQ:GWPH) is still gaining ground with its cannabis-based product Epidiolex. Since June 30 the anti-epilepsy drug has performed well in two trials for the rare disorder Lennox-Gestaut syndrome, fanning the flames of acquisition rumors.

Among the small-cap fallers, clinical setbacks were mostly responsible for share price collapses, with the demise of Infinity’s duvelisib, and failure for Novavax’s (NASDAQ:NVAX) RSV F vaccine.

Small cap ($250m-5bn): top risers and fallers in 9 months

Market capitalization ($m)

Top 5 risers

SP change

Q3 2016

9-mth change

EP Vantage comment

Exelixis ($)

127%

2,946

1,664

Therapy focus – New kidney cancer data emerge in time for Asco

Theravance Biopharma ($)

121%

1,734

1,114

Daily Market Movers: Global Majors & Industry (8 Sep 2016)

Ariad Pharmaceuticals ($)

119%

2,638

1,455

Weekly Market Movers: Global Majors & Industry (to 29 Jul 2016)

Indivior ($)

115%

2,900

1,551

Indivior’s addiction to the opioid market is paying dividends

GW Pharmaceuticals (£)

112%

3,326

1,766

Snippet roundup: Wins for Amgen, cuts for Novo and confusion over Cabometryx

Top 5 fallers

ProNAi Therapeutics (C$)

(84%)

55

(275)

Daily Market Movers: Global Majors & Industry (6 Jun 2016)

Northwest Biotherapeutics ($)

(83%)

63

(244)

Interview – Tocagen touts two-step cancer vaccine

ImmunoGen ($)

(80%)

234

(946)

Daily Market Movers: Global Majors & Industry (14 Jun 2016)

Infinity Pharmaceuticals ($)

(80%)

77

(309)

Dynamo puts Infinity into a tailspin

Novavax ($)

(75%)

564

(1,700)

The puzzling excuse for Novavax's pivotal failure

Click to enlarge
Click to enlarge

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.