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  • Jonathan Poyer

If You're Not First...Biotech Reckonings

The S&P select biotech index consolidated back towards the 200 day moving average as investors await earnings updates and the FOMC meeting later this week.

M&A headlines have been quiet for a couple of weeks while Gilead (GILD) announced the discontinuation of the Phase 3 ENHANCE study with magrolimab in patients with higher-risk MDS after a planned futility analysis. This is the first randomized trial readout of the CD47 inhibitor that GILD obtained in the $4.9 billion acquisition of Forty Seven back in 2020.

Johnson & Johnson (JNJ) and Novartis (NVS) set an upbeat tone for 1Q by reporting pharmaceutical revenues and outlook ahead of estimates. JNJ also threw its hat in the ring as the latest big pharma to sue the Biden administration over the drug price controls embedded in the Inflation Reduction Act (IRA). NVS has not yet overtly challenged the IRA, but is putting its balance sheet to work by through a fresh $15 billion share buyback that will retire ~7.5% of outstanding shares in the next couple of years.

Argenx (ARGX) reaped the rewards from their strong phase 3 data in chronic inflammatory demyelinating polyneuropathy (CIDP) by raising $1.1 billion in a follow-on offering and subsequently rallying to an all-time-high.

In contrast, Kodiak Sciences (KOD) and Vir Biotechnology (VIR) traded well below cash value after announcing negative clinical updates and program discontinuations. KOD fell nearly 50% to negative $125 million enterprise value (EV) as management finally discontinued lead drug tarcocimab after more disappointing data. KOD was worth >$8 billion back in the frothy days of early 2021. Likewise, VIR fell 40% to negative $225 million EV from a >$8 billion peak in early 2021.

Mirati Therapeutics (MRTX) was under pressure as the European Medicine Agency's CHMP issued a negative opinion on the conditional approval for Krazati for treatment of patients with KRASG12C -mutated advanced NSCLC. CHMP recognized the positive risk-benefit profile for Krazati, but the prior conditional approval of competitor Amgen's (AMGN) Lumakras apparently negated the need for a second agent as this time.

The importance of being first and / or best in class can hardly be understated.

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