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  • Jonathan Poyer

Biotech Rallying on M&A Activity

The S&P Select Biotech Index rallied back to the 200 day moving average as M&A activity ratchets up into year end.

Abbvie (ABBV) announced the acquisition of Immunogen (IMGN) for $31.26 per share in cash for a total equity value of approximately $10.1 billion. The deal represented a 95% premium to the prior closing price and is projected to be accretive in 2027. Valuation was ~5.5x consensus 2030 revenue estimates, in line with Pfizer's (PFE) pending purchase of Seagen (SGEN).

Next, Roche Holdings (RHHBY) threw its hat into the obesity ring with the buyout of Carmot Therapeutics (private), the second such EU large pharma / private obesity asset deal in the past month. RHHBY is paying $2.7 billion upfront and the potential for $400 million in milestone payments for a pipeline of clinical stage subcutaneous and oral incretins. Lead drug candidate CT-388 is a Phase 2 ready once-a-week GLP-1/GIP receptor agonist positioned to be competitive with Eli Lilly's (LLY) Mounjaro is complimented by an once-daily oral CT-996 small molecule GLP-1 receptor agonist currently in Phase 1.

Ironically, the deal comes a few days after Pfizer (PFE) announced discontinuation of their internal twice daily oral obesity candidate Danuglipron. PFE's Phase 2b trial data showed Danuglipron met its primary endpoint with mean placebo adjusted weight reductions up to -13% at 32 weeks, but patient discontinuation rates greater than 50% rendered the overall profile uncompetitive. PFE shares hit a 52 week low on the news and now trade at less than one fifth the forward earnings multiple and dividend yield of LLY.

Clinical data updates continue to move stocks, with Eyepoint Pharmaceuticals (EYPT) trading up over 400% premarket before fading to +178% on positive topline results from the Phase 2 DAVIO 2 trial. The data showed EYP-1901, a sustained delivery maintenance treatment for wet AMD, achieved statistical non-inferiority to market leader Eylea. EYPT subsequently offered shares in a follow-on offering to help fund pivotal, phase 3 trials that are expected to start in 2H 2024 and potentially read out in 2027.

Biovie (BIVI) went the other way, falling >60% on announcing the Phase 3 NM101 trial in Alzheimer's failed to meet the primary endpoint. Investors were unconvinced by management's arguments to exclude a majority of the patients in the trial due to apparent protocol violations.

Fallen angel Acelyrin (SLRN) also reached an all-time-low on clinical trial integrity issues. The company made the shocking disclosure that some patients in the late stage trial for lead drug Izokibep incorrectly were dosed active drug or placebo due to an error in dose programming. It appears SLRN's massive $540 million IPO proceeds may be wasted given the apparent ~2 years needed to redo these trials and current burn rate of >$1 million per day.

Fellow "Brewster" biotech club member (companies that spend >$1 million per day) Arrowhead Pharmaceuticals (ARWR) also hit a 52 week low on capital concerns raised after their quarterly earnings report disclosed interest in exploring asset monetization to bolster the balance sheet.

Reductions in force continued with Abcellera Biologics (ABCL, 10% RIF), Generation Bio (GBIO, 40% RIF), and Travere Therapeutics (TVTX, 20% RIF) as the latest companies seeking to extend their cash runway.

Novartis (NVS) touted balance sheet strength at the recent capital markets day, but reset the bar for internal R&D program advancement at >$2 billion peak sales potential.

Return on investment scrutiny is not limited to market capitalization

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