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  • Jonathan Poyer

Everyone is Looking for Good News - Can Biotech Deliver?

The S&P Select Biotech Index closed in the green before the pending release of the preliminary list of 10 drugs slated for price controls under the so called inflation Reduction Act (IRA).

Many of the pharmaceutical innovators on the list are already engaged in a two front litigation war with the current administration aimed at blunting the impact of the IRA on one hand while reigning in an activist Federal Trade Commission (FTC) on the other.

Amgen (AMGN) notched an increment win in the battle to complete the acquisition of Horizon Therapeutics (HZNP) as the FTC granted a delay to the in-house administrative case, potentially providing an avenue for settlement. Last week's release of AMGN's opposing briefs to FTC's legal challenge seemingly played a role. Legal experts reviewed the documents and strongly suggested FTC was about to be handed its fifth straight court defeat. Some even went so far as to say FTC was eroding their own credibility by trying to advance spurious arguments. Specifically, FTC's argued that AMGN could theoretically offer bundled discounts across their own drugs and those that were to be acquired from HZNP. In reality, HZNP's main orphan drugs are reimbursed under medical benefits while AMGN's mainstays are reimbursed under pharmacy benefit.

Medical and pharmacy benefits are disparate with distinct economics, fees, administration and logistics and so called "cross-benefit" bundling is simply not done by anyone. Further, physicians are reimbursed for administrating medical benefit drugs based on a ~6% markup over the average selling price (ASP). Offering bundled rebates or discounts on a medical benefit drug would lower the reimbursement rate for physicians, disincentivizing them from prescribing the medication relative to a competitor who was not rebating.

Biotech short report authors took another one on the chin as Harmony Biosciences (HRMY) announced the US Patent and trademark Office (USPTO) declined the short-sellers patent re-examination request and reiterated a multi-billion-dollar peak revenue potential.

Earlier in the year a separate short report author came out against Chinook therapeutics (KDNY) just before Novartis acquired the company for >$3 billion. We do not recall reading a short report on Novocure (NVCR), yet that stock is down ~$10 billion in market cap since the January highs. NVCR shares fall an additional ~40% to start the week on news the Phase 3 INNOVATE-3 clinical trial in platinum-resistant ovarian cancer did not meet its primary endpoint.

Roche holdings (RHHBY) inadvertently gave the market some good news when they mistakenly released data from a high profile immuno-oncology combination trial. The interim data from the Phase III Skyscraper-01 study showed the TIGIT combination was showing a survival benefit, although the data needs to be confirmed in the final mature analysis.

It seems good news always finds a way to circulate early.

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