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  • Jonathan Poyer

How Healthy Is Biotech? The Alzheimer Therapy Late Stage Trials Are Very Promising

The contrast between the green shoots in the biotech / pharma sector compared to the deteriorating broader economy became more apparent as Q3 drew to a close.

September revealed 30 year fixed mortgage rates topping 7% for the first time in decades, major banks downgrading tech darling Apple Inc (AAPL) erasing $120 billion market cap on the announcement, consumer stalwart Nike's (NKE) inventory woes leading the stock to its largest single day decline since 2001 and the growing number of bulge bracket strategists slashing S&P 500 targets.

At the same time, strong gains were seen across pharma / biotech companies developing therapies to treat Alzheimer's disease as Eisai (ESALY) and Biogen (BIIB) announced positive results from a highly anticipated late stage trial.

Specifically, the Phase 3 CLARITY-AD study (n=1,795) evaluating Lecanemab, an anti-amyloid beta antibody, met the primary endpoint (CDR-SB: Clinical Dementia Rating-Sum of Boxes showing a 27% reduction in decline compared to placebo at 18 months) and all key secondary endpoints. More than $65 billion in market cap was added across EASLY, BIIB and a number of other companies with experimental Alzheimer's therapies that appreciated in sympathy (notably Lilly (LLY), Roche (RHHBY), Prothena (PRTA), Morphosys (MOR), and Acumen Pharmaceuticals (ABOS)).

Serendipitously, the regulatory outlook for neurodegenerative diseases brightened with last week's FDA approval of Amylyx Pharmaceuticals' (AMLX) RELYVRIO (sodium phenylbutyrate; AMX0035) in Amyotrophic Lateral Sclerosis (ALS).

M&A expectations also increased with news Myovant Sciences (MYOV) received a non-binding proposal from their partner Sumitomo Pharma (4506 JT) to acquire the company for ~$2.5 billion or a ~30% premium to the prior day's close. MYOV shares rallied above the offer price in expectation a higher bid would be needed to close a sale.

Fire-sale M&A also returned with Astrazeneca's (AZN) purchase of Logic Therapeutics (LOGC) for ~$70 million. The price was a whopping >600% premium to the prior day's close as LOGC had been trading at a negative enterprise value in anticipation of a potential highly dilutive financing or bankruptcy.

Upcoming Q3 earnings in a few weeks will be the next major data point to confirm the health of the sector.

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