Somavaratan

Biotech has been on fire this year, with the iShare Nasdaq Biotechnology index more than doubling the gains of the S&P 500 year-to-date. September 27, 2017 By Karl Thiel for BioSpace.com Biotech has been on fire this year, with the iShare Nasdaq Biotechnology index (IBB) more than doubling the gains of the S&P 500 year-to-date. It hit a 21-month peak at the beginning of this month before starting to bounce along sideways. That’s left many investors wondering if the rally can continue, bringing benefits to both investors and companies looking for precious capital, or if the good times are drawing to a close. Biotech needs two key things to keep moving higher: A friendly political/regulatory environment, and strong clinical results. The many other things that motivate investors—like M&A, venture investment, ready capital, product approvals, and so on, all pretty much follow from these two key requirements. In September, we’ve been kept on the edges of our seats regarding both of those things. The Graham-Cassidy bill is the latest effort at an Obamacare repeal, and many GOP lawmakers are desperate to make something happen before a September 30 deadline. After that, they’d no longer be able to use the reconciliation process to pass legislation with only 50 votes, at least in this session. As I write, it looks like this attempt, too, will probably go down in defeat, with John McCain (R-Az.) joining Rand Paul (R-Ky.) and probably Susan Collins (R-Maine) in opposing it. But it’s not over ‘til its over, so stay tuned. And how about clinical results? That’s made for an exciting few weeks too. While the IBB has been roaring for more than a year, pull back a little further on the chart and you’ll see that it has yet to fully retrace the meltdown that began in mid-2015 and continued into early 2016. The enthusiasm investors were feeling back then hasn’t quite returned. But a slew of key results in September—most of them positive—could help turn sentiment positive for the remainder of this year and the next. Of course, it wasn’t all good news, and we’re still waiting on some key results. Here’s how it shakes out: Big Misses: Sage, Otonomy, Amicus, Versartis. Sage Therapeutics in particular is being closely watched as it develops brexanolone (SAGE-547) for multiple indications. It just failed pretty spectacularly in treating super-refractory status epilepticus (SRSE), a severe form of epilepsy that can require patients to be put into a medically induced coma. That doesn’t necessarily impact the chances of this drug’s success in treating post-partum depression, where it has showed some remarkable early results and is currently in phase 3. But it has certainly put investors on edge. Sage has been a very closely watched stock this year, and still boasts a valuation of over $3 billion, largely based on future hopes for brexanolone. Otonomy’s treatment for Ménière’s disease—which causes debilitating vertigo, particularly in elderly patients—failed to outperform placebo in its first phase 3 study, causing the company to discontinue development. Amicus also abandoned SD-101, its topical wound-healing agent for epidermolysis bullosa, when it performed no better (and possibly worse) than placebo in a phase 3 trial. Versartis particularly surprised markets with the failure of its long-acting human growth hormone, since this is a such a well-studied biologic. Big Wins: Alnylam, Regeneron, Insmed, Nabriva, Kura, NewLink Genetics, Voyager Therapeutics and Verastem. Of this month’s winners, nothing stands out more than Alnylam . The seemingly runaway success of its RNAi drug Patisiran in treating transthyreitin (TTR) amyloidosis in patients sent the stock up 52%. That was a one-day gain of $3.5 billion in market cap. That’s obviously a huge win for the company, its investors, and its patients. But it’s also hugely significant for the sector as a whole—not only does it mark the likely beginning of a new class of therapeutic, but it also validates the high value assigned to a company with no commercial products. It’s the kind of win that draws more investors to the sector. Insmed’s success was also significant. Clinical results for its inhaled antibiotic in treating non-tuberculosis Mycobacterium infection caused the stock to more than double and sets the company up to approval. Regeneron ‘s Dupixent is certainly poised to become a big drug, but its recent clinical success in asthma was widely expected, given phase 2b results. Moreover, the results were actually viewed with a bit of disappointment, since patients weren’t helped quite as much as in the earlier trial, and the drug appeared less effective in patients with lower eosinophil levels). Nabriva soared on phase 3 results for lefamulin, a first-line treatment for patients with community-acquired bacterial pneumonia, with a confirmatory trial expected to report top line results next spring. Then there are earlier-stage successes. Kura Oncology put itself on the map with strong mid-stage results for tipifarnib, its drug to treat squamous cell head and neck carcinomas in patients with HRAS mutations. NewLink ‘s melanoma drug indoximod looked good in a phase 2 trial, which is particularly significant after the failure of this IDO inhibitor in breast cancer earlier this summer. Even earlier is Voyager Therapeutics , which put up some intriguing but very preliminary results for its Parkinson’s disease gene therapy. Finally, tiny Verastem seemingly broke the Feuerstein-Ratain rule by producing positive phase 3 results for duvelisib in chronic lymphocytic leukemia, despite having a market cap well under $300 million before the announcement. (Indeed, it still has a market cap well under $300 million today). It will approval in the first half of next year. But the past is prologue. What will the rest of this year bring? Here’s what is likely to move the sector and determine of biotech continues to see momentum through 2017 and into 2018. Jury Still Out: Axovant, Zogenix, Revance Therapeutics, Aimmune, Tesaro, Bluebird Bio, and Ardelyx. Axovant is likely to see a lot of volatility very soon. Its Alzheimer’s treatment Intepirdine certainly looks like an even longer-than-usual longshot to me, but a win here (however unlikely) would capture enormous attention and probably impact how tens of billions of dollars in future R&D are spent. Axovant just looks like a long string of red flags to me, but there are certainly some experienced people involved with it, so there’s some chance they’ll break the curse, find success, and prove the folks at GlaxoSmithKline didn’t know what they were doing when they killed this program and sold it off for a pittance. We’ll know within days. Bluebird Bio , like Alnylam (and Axovant) also commands a multi-billion dollar valuation despite having no commercial products. But that could be set to change soon. The company’s Lenti-D gene therapy for cerebral adrenoleukodystrophy isn’t its most closely watched product, but success in the Starbeam study—expected to report out later this year—could pave the way for an approval filing. Closer at hand is Zogenix , which is expected to report on ZX008 (the controversial diet drug fenfluramine) at the end of this month. It is being developed for Dravet syndrome, a rare form of epilepsy. Versartis should be out soon with pivotal results on somavaratan, its long-acting human growth hormone. Then later in the year there’s Aimmune in peanut allergy, Revance with its Botax alternative, and Ardelyx with its pivotal T3MPO-2 trial of tenapanor in irritable bowel syndrome. Finally, there’s Tesaro , which has already had a big success with Zejula (niraparib), but is looking to expand its label in ovarian cancer (the QUADRA study) and show data on a combination with Keytruda in breast and ovarian cancer (TOPACIO). We should get a first look at TOPACIO imminently, and QUADRA later in the year. So What’s Ahead? The truth is, while individual biotech stocks are incredibly volatile and hard to predict, the biotech sector as a whole has been a pretty dependable performer. The IBB has underperformed the S&P 500 when you look at the last couple years, but it’s been an outstanding market-thumper over the past 3, 5, and 10 years—indeed going all the way back to when this ETF started trading 16 years ago. At the same time, the sector tends to make broad gains and retreats in a cyclical pattern, driven by investor sentiment. With sentiment recently on the rise, investors may be more likely to see the glass half full when regarding mixed clinical trial results. If the industry can keep delivering a nice balance of wins—particularly if it looks like an opening for new technologies like gene therapy, RNAi, CAR-T, and powerful I-O combinations—we should be able to look forward to a strong close of this year and another good year ahead. -Karl Thiel