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  • Jonathan Poyer

Biotech Activity Without Rate Cuts - M&A, Approvals, and Chapter 11

Life sciences investors took notice of Microsoft's (MSFT) legal victory over the FTC to proceed with the Activision Blizzard (ATVI) acquisition.

The FTC is now 0-4 in legal challenges under the current administration and expectations are rising that the record will be 0-5 once the Amgen (AMGN) / Horizon Pharmaceuticals (HZNP) deal litigation is concluded.

M&A headlines continued apace with Eli Lilly (LLY) announcing the plan to acquire Versanis Bio (Private) for up to $1.925 billion in cash. Versanis Bio's lead phase 2 drug candidate bimagrumab has the potential to complement LLY's dominant incretin franchise by helping preserving muscle mass and may lead to better outcomes for people living with obesity.

Roivant (ROIV) traded up on a WSJ article that said the company is in talks to sell its TL1A drug to Roche (RHHBY) for $7 billion+.

High profile data updates continue to drive large moves in individual therapeutics stocks emphasizing the opportunity for stock picking. Argenx (ARGX) rallied on phase 3 data in chronic inflammatory demyelinating polyneuropathy (CIDP) patients that exceeded expectations. Top-line data revealed competitive efficacy vs current IVIG therapy with a clear safety advantage. Analysts expectations for an ~$2 billion revenue opportunity in CIDP helped drive a ~$6 billion gain in market capitalization.

Acadia Pharmaceuticals (ACAD) added ~$1 billion in market capitalization on pre-announcing strong 2Q preliminary revenue numbers for newly launched orphan disease therapy, Daybue. ACAD estimates net sales of $21-23 million for 2Q and provided 3Q guidance of $45-55 million, outpacing 2Q consensus of ~$3 million.

Elanco Animal Health (ELAN) broke above its 200 day moving average on news the EPA confirmed continued registration and affirmed the safety profile of Seresto flea and tick collar. Previously, Amazon reviewers were alleging potential deaths linked to use of the product.

Bridgebio Pharma (BBIO) also rallied on news their Phase 3 ATTRibute-CM study of acoramidis met the primary endpoint. Investors will be watching closely for financing plans as BBIO has only ~1 year of runway despite a cash balance of $467 million.

Thesus Pharmaceuticals (THRX) has a cash runway through 2026, but the stock sank >70% to a negative ~$100 million enterprise value on announcing discontinuation of their lead kit program due to unforeseen safety findings.

High flyer Apellis Pharmaceuticals (APLS) shed nearly $4 billion in market capitalization upon the circulation of a “Dear Doctor” letter describing cases of retinal vasculitis (inflammation of the vessels of the retina) following injections of recently launched Syfovre. Investors were blindsided by the report as there were no cases observed in the clinical trials or long term safety study.

A pair of Chapter 11 bankruptcy filings from Viewray Inc (VRAY) and Novan Inc (NOVN) continued to cull the herd of cash burning small caps.

Fed funds futures are not pricing any rate cuts in until 2024 suggesting higher cost of capital will be the new normal for a while.

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