The iShares NASDAQ Biotech ETF (IBB) posted a major reversal from lows this Monday to close the week slightly in the green. That rally, most of which came on Friday, will catch the attention of traders as the security was meaningfully oversold on a slew of technical indicators; managed not to break its August lows; and formed a long-handled hammer for the week, which chartists will consider a likely reversal signal, if only in the short-term.
The question then is whether this strength turns into something more sustainable. We’ve already explained to PropThink readers what we’ll be looking for, and explained why it’s not a great idea to try to time a bottom in these situations. Read it, here.
What biotech executives hear, and what FDA regulators say, are often different things. For some investors, that was a tough lesson to re-learn this week. On Monday and again on Friday, executives from two small drug developers were forced to walk back commentary made less than a month ago after meetings with the FDA about their drug development plans. In both cases, it was official minutes from those meetings, received 30 days after the meeting, that forced the companies to walk back prior guidance to investors.
In August, Esperion Therapeutics (ESPR) outlined to investors in a press release and conference call that the FDA said they would NOT require cardiovascular outcomes data from ETC-1002, a cholesterol-lowering medication entering phase 3 trials later this year, prior to approving the drug for some patients with hypercholesterolemia. Those comments were made immediately after the company’s End-of-Phase 2 meeting with the regulatory body.
This Monday, six weeks later, the company altered its language, saying that the FDA could require a completed cardiovascular outcomes trial prior to approval. What happened? The company received minutes from that meeting, which made the FDA’s stance crystal clear in writing. In August, the company line was, “Based on feedback from the FDA, approval of ETC-1002 in the HeFH and ASCVD patient populations will not require the completion of a cardiovascular outcomes trial (CVOT).” This week, that changed to “…since any concern regarding the benefit/risk assessment of ETC-1002 could necessitate a completed cardiovascular outcomes trial before approval.”
The use of “could” likely comes directly from the FDA, always aware of leaving itself an out in these situations, and it’s unlikely that anything fundamentally changed in the six weeks since Esperion sat down with the regulatory body. The fault lies with Esperion’s executive team, which chose to make public commentary about their interactions with the FDA before having confirmation on paper. That’s exactly what the FDA’s meeting minutes are for: ensuring that all parties are on the same page.
ESPR fell from $35 to $25 by the end of the week. Read our interpretation here.
In a repeat of this unfortunate event, Amicus Therapeutics (FOLD) on Friday said that they won’t be able to file a New Drug Application for lead candidate migalastat by the end of the year. Immediately after a pre-NDA meeting with the FDA in September, Amicus said publicly that investors could expect a NDA by the end of the year. But with meeting minutes in hand a month later, the company now says that the FDA wants some different cuts of the existing data, as well as additional measurements from the clinical program. Amicus claims that no new studies are needed, as of yet, but that the analysis will take a few months. The company believes they’ll be able to file the NDA in the first half of next year, but investors sent FOLD lower by 50% in the Friday trading session.
For executives, the takeaway is that its best to hold commentary from these and similar FDA interactions until there’s something on paper. And for investors, this week was yet another reminder to take the company line with a grain of salt – nothing is a sure thing in investing. It’s also yet another situation that proves out how truly blind investors in the biopharma space sometimes are – FDA communications are not required to be made publicly available by law.
Also on Friday, the FDA approved Merck’s (MRK) Keytruda (pembrolizumab) for patients with non-small cell lung cancer (NSCLC) whose tumors express PD-L1, as determined by an approved companion diagnostic. Merck shares initially fell on the news as some investors had been holding out hope that Keytruda would receive the same broad label as Bristol-Myers Squibb’s (BMY) competing Opdivo (nivolumab). Opdivo was approved for NSCLC this March but is not restricted to patients with PD-L1-positive disease, meaning that Keytruda won’t be able to tackle the same market as Opdivo – at least not initially. You can compare the Keytruda and Opdivo labels here and here. Both drugs are already approved for use in melanoma. MRK and BMY both closed Friday in the green.
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