Can We See the Bottom in Biotech Yet? Isn't It About Time?

The S&P Select Biotech Index continues to trade with elevated volatility as it seemingly tries to make a bottom against a backdrop of one of the worst 30-year treasury bond auctions in recent memory. 

Remarkably, the ETF (XBI) that tracks it has exhibited >2% peak to trough intraday moves over each of the last 10 consecutive sessions including a couple >2 sigma swings.  Rumors of specialist books winding down and macro funds shorting cash burning biotechs are circulating through trading desks. 

AstraZeneca (AZN) contributed to investor frustration by announcing a licensing deal in the obesity space with Eccogene (private) to develop an oral GLP-1 receptor agonist for a modest $185 million upfront.  Limited data has been released on the program, leaving investors to speculate if AZN was able to capture a potentially best-in-class candidate from China-based Eccogene at a discounted valuation compared to western equivalents. 

Quarterly earnings announcements seemingly turned into sell the news events with many biotech coming under significant pressure.  Biogen (BIIB) made a new low for the year after reporting the first full quarter of closely watched Alzheimer's drug Leqembi sales came in at $2.2 million vs $12 million consensus.  The slow launch was anticipated by many given treatment logistics and reimbursement dynamics while newly launched Skyclarys from the Reata acquisition (RETA) put up a solid $43 million and line of sight to $400+ million run rate based on ~1,200 patient start forms (>$350k gross price). 

SMID cap commercial companies were under even more pressure as incremental mixed quarters from Amylyx Pharmaceuticals (AMLX), Coherus Biosciences (CHRS), Jazz Pharmaceuticals (JAZZ) and Revance Therapeutics (RVNC) sent shares of each tumbling to new lows for the year, with some drawdowns exceeding 50%. 

Even companies that beat top and bottom line estimates like Gilead Sciences (GILD) and Amicus Therapeutics (FOLD) traded down after the prints. 

Capital markets activity has also been under pressure.  In recent weeks, both Aura Biosciences (AURA) and Abivax (ABVX) priced deals raising $99 and $236 million respectively and ended the following day ~40% lower.  A half dozen negative clinical data updates further poured salt in the wound sending shares of each company down 40-85%. 

Specifically, Ventyx Biosciences (VTYX) crashed >75% to negative $150 million enterprise value (EV) on announcing results from Phase 2 trial of TYK2 inhibitor VTX958 in patients with moderate to severe plaque psoriasis.   Although the trial achieved its primary endpoint, the magnitude of efficacy observed did not meet the internal target for advancement given a crowded competitive landscape. 

Atara Biotherapeutics (ATRA) also traded to a negative EV on announcing the phase 2 EMBOLD study of ATA188 in multiple sclerosis failed and the trial will be discontinued. 

Durect Corporation (DRRX) fell >75% after disclosing the Phase 2B AHFIRM trial of Larsucosterol in alcohol-associated hepatitis failed to meet the primary endpoint. 

Ikena Oncology (IKNA) also fell ~75% when reporting their phase 1 oncology program IK-930 failed to show any responses. 

Verve Therapeutics (VERV) fell ~40% after reporting two cardiovascular serious adverse events (SAEs) in initial data for VERVE-101 gene-editing therapy in Heterozygous Familial Hypercholesterolemia (HeFH) patients.  Investors debated whether the signal was real given only n=9 patients were dosed or simply bad luck given these patients were at high risk for such events. 

Aclaris Therapeutics (ACRS) was down even more, falling ~85% to a negative $140 million EV on announcing the Phase 2B trial of oral Zunsemetinib (ATI-450) for moderate to severe rheumatoid arthritis did not meet the primary or any secondary efficacy endpoints.  ACRS will discontinue the program. 

Not surprisingly, culling of the biotech hear continued with strategic reviews and reductions in force (RIF) from Theseus Pharmaceuticals (THRX, 72% RIF), Regenxbio (RGNX, 15% RIF) and Pyxis Oncology (PYXS, 40% RIF). 

If anyone was wondering what blood in the biotech streets looks like - this is it