The S&P Biotechnology Select Index smashed through the 200 day moving average as momentum from an uptick in M&A and positive clinical data read-outs seemingly overcame the Senate's passage of omnibus legislation including select drug price controls.
The sector has now rallied >50% off the June low, but it remains to be seen if the expected near term affirmation of the senate's vote in the house and signature by the president will have a material impact on sentiment. The pending legislation muddies the water on drug pricing to the point where parsing winners and losers has proven difficult for specialists and many generalist investors are hardly aware that the so called "Inflation Reduction Act" contains such provisions at all.
Anyone not accustomed to building detailed, discounted cash flow (DCF) valuation models for therapeutic assets could easily overlook the potential impact and big pharma's M&A agenda seemingly continues to progress unabated. Specifically, Pfizer (PFE) continued to deploy their profit windfall from COVID-19 vaccine and therapeutic sales in announcing the purchase of Global Blood Therapeutics (GBT) for $5.4 billion and bolster their presence in rare hematology. The $68.50 per share cash offer is a >100% premium to GBT’s closing price on 8/3 ($33.93 per share) before news articles speculating a deal was imminent were published. Similarly, Amgen (AMGN) announced the acquisition of Chemocentryx (CCXI) for >100% premium at $52 per share in cash, representing an enterprise value of approximately $4 billion.
In addition, Gilead Sciences (GILD) announced the purchase of MiroBio, a privately-held U.K.-based company focused on restoring immune balance with agonists targeting immune inhibitory receptors, for $400 million.
In parallel, two highly anticipated clinical data readouts from Alnylam Pharmaceuticals (ALNY) and Karuna Therapeutics (KRTX) exceeded expectations and contributed to the rally. ALNY's topline results from APOLLO-B Phase 3 study of Patisiran in patients with ATTR Amyloidosis with Cardiomyopathy met the primary endpoint of the study despite an earlier failure by a competitor with a similar approach. KRTX's results from phase 3 EMERGENT-2 trial of KarXT in schizophrenia also met the primary endpoint and generally surpassed analysts' data projections.
Both companies are expected to submit regulatory filings in due course affirming that biopharma innovators continue to produce potentially practice-changing medicines.