Biopharma stocks are in focus as the 37th Annual J.P. Morgan Healthcare Conference kicks off in San Francisco today. The largest sell-side research healthcare conference of the year ends on Thursday.
The biotechnology sector, best represented by the SPDR S&P Biotech ETF (XBI), is surging 6% at a four-week high after we saw the second large acquisition in the oncology space in as many weeks and some positive preannouncements and clinical data from the sector.
Eli Lilly (LLY) made a bold move to delve further into the oncology space this morning when it announced the $8 billion acquisition of Loxo Oncology (LOXO) at a 68% premium. Loxo Oncology is developing a pipeline of targeted medicines focused on cancers that are uniquely dependent on single gene abnormalities that can be detected by genomic testing. Loxo Oncology's pipeline includes LOXO-292, an oral RET inhibitor being studied across multiple tumor types, which recently was granted Breakthrough Therapy designation by the FDA and could launch in 2020. Loxo Oncology's Vitrakvi is an oral TRK inhibitor developed and commercialized in collaboration with Bayer (BAYRY) that was recently approved by the FDA.
Loxo's peer Blueprint Medicines (BPMC) is up 16% in sympathy. Other oncology stocks trading higher: Clovis (CLVS) +8% (preannounced upside Q4 revenue), Bluebird (BLUE) +7%, Agios (AGIO) +6%, Nektar (NKTR) +6%, Aduro (ADRO) +6%, Jounce (JNCE) +5%, Seattle Genetics (SGEN) +5%, NewLink (NLNK) +5% Adamptimmune (ADAP) +4% and Puma (PBYI) +3%.
Roche's (RHHBY) Genentech also signed an immunotherpay licensing deal with privately-held Adaptive Biotechnologies, which boasts neoantigen directed T-cell therapies for the treatment of a broad range of cancers. Genentech is paying Adaptive $300 million upfront and up to $2 billion in potential milestone payments and royalties.
Recall, Bristol-Myers (BMY) surprised investors with a blockbuster deal to acquire oncology leader Celgene (CELG) in a $74 billion cash and stock deal last week.
The recent, rather unexpected pickup in biotech deals has improved sentiment in the sector, which fell to a near two-year low at the end of 2018.
Elsewhere in the sector, Sage Therapeutics (SAGE) is surging 44% after reporting positive Phase 3 data for its oral postpartum depression (PPD) drug SAGE-217. The FDA is expected to approve an intravenous version of the PPD drug by March 19 but the oral drug would open up the market with less restrictions and concerns over safety from fainting. The positive data also bodes well for the company's drug treating the major depressive disorder (MDD).
A number of other biotech companies preannounced strong fourth quarter results ahead of the J.P. Morgan Healthcare Conference:
- Insmed (INSM) is up 36% after announcing Mycobacterium avium complex (MAC) lung disease drug Arikayce had a successful launch with $9.8 million sales in the fourth quarter, well above consensus.
- Apyx Medical (APYX) is up 25% after preannouncing fourth quarter sales above consensus. The company reported 73% growth in its Renuvion Costmeic Technology unit. That represents Apyx's core business after the former Bovie Medical solid its legacy business last year.
- PARP inhibitor oncology company Clovis (CLVS) is up 17% after preannouncing fourth quarter revenue for ovarian cancer drug Rubraca up 34% sequentially, above estimates. In early December, GlaxoSmithKline (GSK) acquired PARP inhibitor peer Tesaro (TSRO) for $5 billion.
- Inviate (NVTA) is up 17% after the genetics esting company guided fiscal 2018 and fiscal 2019 revenue above consensus.
- Exact Sciences (EXAS) is up 12% after the colon cancer screen Cologuard did better than expected, preannouncing fourth quarter revenue up 64% with volume up 66%.
- Amarin (AMRN) is up 6% after preannouncing fourth quarter results above consensus due to its cardiovascular drug Vascepa.
- Hologic (HOLX) is up 5% after guiding Q1 revenue up 5%, above consensus
Some biotech companies had disappointing news for investors this morning:
- La Jolla Pharma (LJPC) is down 45% after the company's vasoconstrictor drug to increase blood pressure in adults with septic or other distributive shock Giapreza reported just $4.2 million in fourth quarter revenue, up 20% sequentially but well below consensus.
- AxoGen (AXGN) is down 20% after preannouncing fourth quarter revenue below consensus. The company also hired medical device sales veteran Christopher Crisman as VP of U.S. Sales.
- Collegium (COLL) is down 19% after the pain killer drug company guided fiscal 2019 revenue below consensus.
- Diplomat Pharmacy (DPLO) is down 7% after raising its fiscal 2018 EBITDA forecast but lowering fiscal 2018 revenue outlook and guiding 2019 revenue below estimates. The company also announced the departure of the company's President and the COO of its CastiaRx unit.
Developments out of the sector will continue to trickle out this week as companies offer guidance for investors ahead of their presentations at the J.P. Morgan Healthcare Conference.
Heading into today, the S&P 500 Biotech industry traded at 12.2x next twelve month earnings estimates, while the S&P 500 Pharmaceutical industry traded at 14.8x forward earnings, a discount to the Healthcare sector at 15.1x and the S&P 500 at 15.3x.