Biotech Weekend Recap: Important Developments And Big Releases

by: Bio Insights

Here is a recap of some of the major events that moved the biotech stocks mentioned below in the trading week of November 5-9th 2012. This should brief you on the most important events that the market had its eye on as they occurred throughout the week. Whether you have any positions in the stocks mentioned in the article, or whether you are just trying to keep up to date, I hope this helps you:

Everyone still has their eyes on Amarin Corporation (NASDAQ: AMRN), which finished the week with a 9.27% rally after Q3 2012 results were reported after Thursday's closing bell. This reaction wiped out almost all of the losses that AMRN shareholders saw between November 5-8. In my daily newsletter, I attempted to find some extra reasoning behind Amarin's drop to $10.26/share at the end of Thursday, because this was abnormally bearish for the stock.

Tracing back AMRN's price history, you can see that a clear bearish trend started at the beginning of November when the "Patent Rally" from October 23rd (when the USPTO awarded Amarin patent #8,793,727 and #8,293,728) fizzled. Also, we saw a press release on November 5th by one of Amarin's future competitors. Privately-held Omthera Pharmaceuticals showed that its prescription omega-3 pill met primary and secondary endpoints in the phase III ESPRIT and EVOLVE studies.

The much-anticipated third quarter results provided an update on the company's financial situation, although the real "meat" of the information was found in CEO Joseph Kakrzewski's commentary about the anticipated launch of Vascpea in Q1 2013. Basically, the company is waiting until the second half of this month (November) to hire a sales force for Vascepa. This will guarantee a smooth Vascepa launch in the event that the company doesn't get acquired, or does not get a partner for the pill.

Another hugely important earnings report was put out by Vivus (NASDAQ: VVUS) on November 6th, which I wrote about extensively here. Almost everyone who is (or was) interested in the reborn prescription obesity drug market was watching to see how Qsymia sales would come in (as the first FDA-approved prescription obesity drug available in over a decade), with some updates on its operations.

In the few weeks between drug launch on September 17th and the most recent data collection on October 26th, Qsymia sold 5,560 prescriptions. This was lower than expected, and brought the company a lowly sum of $41,000, which created some very upsetting headlines indeed. We should be giving Qsymia more than six weeks on the market to properly gauge its (and hence Vivus') valuation, but the 24% drop throughout the week made it obviously that many saw this as a sign to abandon ship.

After its mixed Q3 2012 results on November 2, 2012 Dendreon (NASDAQ: DNDN) immediately rallied over 16% due to some progress that the company is making on its profit margins. COGS for its flagship product PROVENGE were as high as 77% in Q2 2012, which made it nearly impossible for Dendreon to show a profit (something that DNDN shareholders have been desperately wanting for over a year). Although total sales revenue for PROVENGE didn't show any growth, COGS dropped to about 66% which improved Dendreon's EPS drastically. Nonetheless, the market dropped DNDN stock 10% this week - possibly due to the weakness in the broader market.

Arena Pharmaceuticals' (NASDAQ: ARNA) also saw a lot of activity after its quarterly report on November 6th. While Arena's earnings report maybe stood in the shadow of Vivus' (due to the fact that Vivus was actually reporting Qsymia sales whereas Arena isn't reporting sales), Arena did provide some confirmed updates on Belviq's situation. The company's partner Eisai is going to begin marketing Belviq in "early 2013", and we're expecting a decision on their MAA in the first half on 2013. The main annoyance to shareholders in the DEA scheduling of the drug, which will clear Belviq for launch. Unlike Vivus, Arena investors became more optimistic, sending shares up 7.3% for the week.

Shareholders weren't very pleased with Pharmacyclics (NASDAQ: PCYC), which released a lower-than-expected earnings on November 5th, which tanked shares almost 15% throughout the trading week. Earnings per share were much lower than expected due to a significant spike in R&D expenses. Pharmacyclics investors should still be focused on the company's pipeline though - specifically its lymphoma drug Ibrutinib which is now in early-stage phase III trials for the treatment of CLL (Chronic Lymphocytic Leukemia.)

Other big news came from clinical trials, like the 31% rally in BioMarin (NASDAQ: BMRN) that came on November 5th, 2012. This was a reaction to stellar news about their orphan drug, GALNS, which treats an ultra-rare condition known as Morquio A Syndrome. I elaborated a bit more in this article, but the story can be condensed.

Basically, since GALNS met its primary endpoint in a phase III trial, and since it's treating a disease that only affects about 1,500 people in the United States, it's virtually guaranteed an approval upon NDA submission (which will probably be given a priority review too). The market added over $1.4 billion to BioMarin's market cap on the news, which seemed a bit too enthusiastic. Orphan drugs can be very profitable due to large treatment costs and enormous margins (plus the 2 extra years of exclusivity in the United States as designated in the PDUFA) but the market has a tendency to get carried away with orphan drugs sometimes. (Look at what happened to Sarepta Therapeutics after phase II results from eteplirsen, for instance.)

Disclosure: I am long AMRN. 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.

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