Biotech Forum Daily Digest For March 1st
Summary
- Yesterday closed out the books on February, which was a negative month for the biotech sector and the overall market.
- Celgene flubs a NDA on a key drug with the FDA. Meanwhile, Sorrento Therapeutics garners a key FDA approval.
- All the other notable news, events and analyst ratings from across the sector as well as a Spotlight feature on Acadia Pharmaceuticals are below.
"Use only that which works, and take it from any place you can find it." - Bruce Lee
It was tough slog for the biotech sector in the month of February, which mercifully ended yesterday. After a promising start to 2018 with some ~$30 billion in deals to open the year, M&A activity dried up in February as market volatility spiked.
Biotech was hardly alone in seeing negative sentiment. The overall market broke its 10 month winning streak as all the major indices declined on the month as the 10 Year Treasury yield got closer to the 3% milestone. Interest rates stand at their highest levels in over four years as the credit markets adjust to an accelerating economy and the prospect of three or four quarter point hikes by the Federal Reserve in 2018.
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Biotech giant Celgene (CELG) was thumped almost 10% in trading yesterday and also contributed to the negative sentiment on the sector in trading Wednesday. The company received a refusal to file letter around its NDA for its compound ozanimod for the treatment of patients with relapsing forms of multiple sclerosis. This is one of several stumbles of late for the company.This appears to be a bureaucratic snafu that certainly does not put Celgene's leadership in a good light. However, this will probably delay the NDA submission not kill it.
The FDA approved Sorrento Therapeutics' (SRNE) ZTlido (lidocaine topical system) 1.8% patch for the relief of pain associated with post-herpetic neuralgia on Wednesday. The shares rallied over 15% despite the down day in the markets as a result.
The stock of Novavax (NVAX) should rally nicely in trading today. The company disclosed top-line results from its Phase 1/2 clinical trial in older adults of its NanoFlu influenza vaccine compared to another, high-dose influenza vaccine for older adults. The partial data showed improved responses in adults taking NanoFlu. A Phase 2 trial is scheduled to begin in the third quarter of this year.
Conflicting views on Novavax this morning after disclosed trial data (see above). Piper Jaffray maintains its Hold rating and $3 price target. B Riley FBR is much more optimistic. It reissues its Buy rating and $10 price targets. Its analyst had this to say about the company's prospects
Yesterday, after markets closed, Novavax, Inc. announced positive top-line results from a Phase I/II trial of NanoFlu, an adjuvanted seasonal influenza nanoparticle vaccine candidate for elderly adults aged 60 years or older. The trial's primary endpoints were met in indicating that NanoFlu is safe and stimulates a robust immune response against multiple strains of the influenza virus that is superior to a high-dose version of the market-leading egg-based vaccine, FluZone HD, which is currently recommended for use in elderly adults. In addition to inducing a more robust immune response against the same virus strains targeted by FluZone HD, NanoFlu also induced stronger neutralizing antibody responses against two other strains, suggesting that it could protect against infection by drifted strains. Novavax guided to commencing a confirmatory Phase II trial in 3Q18 with a quadrivalent version of NanoFlu.
Oppenheimer is banging the drum on "Busted IPO" Syndax Pharmaceuticals (SNDX). It assigned a Buy rating and $29 price target (roughly three times the current trading level on the stock) yesterday. Oppenheimer's analyst explains his positive view on this Tier 4 biotech concern as follows
Syndax has surprisingly underperformed its peer group in the last year (down 21% vs. NBI Index up 10%). We view SNDX as a high-quality biotech company, as defined by (1) good science and (2) an execution-focused management team. In both these areas, SNDX screens exceedingly well. From client interactions we believe (1) expectations are low for the Phase 3 E2112 study PFS readout in mid-2018 and (2) little credit is given to the entinostat I/O combination portfolio under development. We think this is a good set-up for risk-tolerant investors heading into the E2112 and I/O updates later this year. We stay bullish.
Lots of analyst commentary around Acceleron Pharma (XLRN) yesterday. Piper Jaffray ($53 price target from $40 previously), H.C. Wainwright ($62 price target) and Barclays ($54 price target) reiterated Buy ratings on the stock Wednesday. Oppenheimer takes the other side of that bet, and assigns a Hold to XLRN.
Note: New analyst ratings are a great place to begin your due diligence, but nothing substitutes for deeper individual research in this very volatile sector of the market. Many of the small-cap names highlighted in "Analyst Insight" will eventually appear in the "Spotlight" section, where we do deeper dives on this type of promising but speculative small-cap concerns.
Acadia Pharmaceuticals (ACAD) posted fourth quarter earnings just after the bell Tuesday. The stock was down 20% Wednesday as a result. I think this is an overreaction by investors and this is why we are revisiting this name in our Spotlight feature today. Let's take a look at earning results as well as tidbits from the company's conference call that followed.
Earnings Results:
- Revenue came in at just over $43.5 million for the quarter. This was an over 250% year-over-year increase but missed expectations by just less than a million dollars.
- Acadia posted a loss of 55 cents a share, three cents better than the consensus.
- The company ended the fiscal 2017 year with just over $340 million in cash and marketable securities on the books.
Notable Conference Call Highlights:
The company stated it expected to end 2018 with more than $200 million of cash, cash equivalents and investment securities on its balance sheet. While Acadia could at some point in 2018 raise additional funding, it is in the position to pick a more opportune time to do so when the stock is trading higher. This would lower dilution and it is possible the company may not raise funds at all in 2018. At its current trajectory, Acadia could sustain itself into 2020 if not beyond depending on sales growth of Nuplazid.
The company expects Nuplazid net sales to roughly double to between $255 million and $270 million in FY2018 and expects $45 million to $48 million in Nuplazid revenues in the first quarter.
The company initiated a Phase III HARMONY study in dementia-related psychosis using Nuplazid in the fourth quarter. Nuplazid also received Breakthrough Therapy Designation from the FDA for this indication in the quarter. Readouts from this study should hit in the second half of this year. Results from two schizophrenia studies using Nuplazid are expected next year.
Outlook:
Sales are ramping up nicely for Nuplazid and I expect the compound to do $300 million to $400 million in revenues in FY2019. Nuplazid has $1 billion peak sales potential just for its currently approved indication. Depending on 'off-label' use as well as upcoming trial results, that potential could expand significantly. Given the stock has an approximate ~$3.2 billion market cap after Wednesday's downtown, there does not seem to be much downside from here as this appears to be a knee-jerk reaction to a slight revenue "miss."
"It is easier to fight for one's principles than to live up to them." - Alfred Adler
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
Bret Jensen has over 13 years as a market analyst, helping investors find big winners in the biotech sector. Bret specializes in high beta sectors with potentially large investor returns.
Bret leads the investing group Learn more.Analyst’s Disclosure: I am/we are long ACAD, CELG, SNDX, SRNE, XLRN. 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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Comments (63)
These guys are in huge trouble.
You'll see why soon.....
Nice SGYP AER from more confident CEO
AGEN has been absolutely smoking, but I have no idea why. Do you know what's going with AGEN?
Patch, it will be a winner in the non opioid mkt!!!
I don't think ACAD is expecting a read this year on Harmony.
They haven't even recruited the entire number of people required.
The read will more likely be 3 years out from here.
Plenty of time to keep shorting the EC's or any announcement.
The 2 others studies may have reads toward the end of 2019.
With sales drastically slowing we could see the shares hit $17 or so.
We originally thought $23.50 but that was before we saw the sales begin to plateau last Q.
You may want to check the accuracy of the various read out dates however Harmony I believe is 2 1/2 - 3 years out.
Company is in big trouble.
It worked last Q but won't this one.
There 2 price increases are masking a really poor drug uptake.
Early in the year, you chose ACAD to be a possible BO in the Fall. Do you still hold that view now and, if so, could you venture a guess as to the BO price range and the possible suitors?
