First, W.V. Democratic Senator Joe Manchin introduced a bill last week to overturn the FDA’s marketing approval of Zohydro ER, an opioid pain product developed by Zogenix Inc. (ZGNX) and approved just last Fall (ZGNX returned almost 90% for PropThink last year!).
Then just this week, Gilead Sciences’ (GILD) recently approved Hepatitis C treatment, Sovaldi, came under scrutiny for its $1000/day price tag. It sounds steep but isn’t far off from comparable, but less tolerable, treatments like the older Incivek. With the scrutiny that Sovaldi has already received from Medicaid programs and insurers across the country (including WellPoint, which has said it wants to bring down prices to “a reasonable level”), investors are unnerved about Gilead’s ability to meet sales expectations for Sovaldi and about future pricing push-back from legislators. Given the increasingly “generalist” profile of Gilead’s (plus the sectors’) investor base in the last year, and the market-cap weightings of many biotechnology ETF’s, Gilead’s news cascaded through the sector: the NASDAQ Biotechnology Index (IBB) fell over 4% in the session, the steepest single-day decline in almost two years.
(Perspective is always important. The IBB is up 310% since bottoming in 2009, 170% for the S&P 500.)
Shares of Endocyte (ECYT) rocketed higher on Friday (+93%!) with a double-dose of good news: the EU’s Committee for Medicinal Products for Human Use (CHMP) suggested a conditional approval for vintafolide and its companion imaging component etarfolatide; and a phase 2 trial of vintafolide in lung cancer was complete with positive results. We profiled these events last year, explaining why we were optimistic – the stock is up 100% since. Though the results of the lung cancer study aren’t as clean as could be, the trend suggests continued development, and the conditional approval mean partner Merck (MRK) and Endocyte should start seeing revenue and royalties, respectively, in the not-too-distant future.
Tekmira (TKMR) remains an interest at PropThink, despite rising 260% since we suggested owning the stock in January. TKMR conducted a well-timed financing last week, raising $60 million that should extend the operational ramp beyond 2016. The stock remains undervalued relative to peers, has an expanding pipeline, and trading below the $28.50 offering price means new investors can own the stock cheaper than institutional investors who participated in the offering. This week, we opined on near-term events and did some speculating on what a government biodefense contract might mean for Tekmira’s top line in just a few years. Read “More Money! Why Tekmira Is Worth Revisiing” for free.
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BioLife Solutions (BLFS) has been under severe pressure of late ahead of an uplisting to the NASDAQ. On March 20, BioLife priced a secondary offering at $4.30 per unit (one share of common stock and one warrant), to raise $15.4 million, significantly strengthening BioLife’s balance sheet. The stock is set to begin trading on the NASDAQ on Wednesday, March 26. With operating cash flow likely to be positive in 2014, this raise gives BioLife flexibility. Although the company’s secondary offering priced at a sizeable discount to the market price, the BioLife’s recent decline has occurred amidst a lack of negative news from the company or outside entities. We’re set to meet with management next week and will provide an update after the up-listing.
In connection with GILD and TKMR, PropThink has taken a long position.
