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  • Jonathan Poyer

The Good, Bad, and Ugly of Clinical Trials Leads to the Same for Stock Prices

The S&P select biotech index traded back down to retest the 100 day moving average as the big tech momentum trade took a pause.

The Pharmaceutical Research and Manufacturers of America (PhRMA) trade group joined the legal battle to reign in the price controls embedded within the Inflation Reduction Act (IRA) by arguing the provisions violate the U.S. Constitution. This marks the fourth legal challenge launched to date with more expected as the implementation process continues.

FDA's scrutiny of drug applications from Sarepta Pharmaceuticals (SRPT) and Intercept Pharmaceuticals (ICPT) reminded investors a certain level of rigor is applied to drug reviews even in the context of significant unmet medical need. SRPT fell ~20% and nearly ~$2 billion of market capitalization following FDA's decision to limit approval of Elevidys, the first gene therapy for Duchenne muscular dystrophy (DMD), to ambulatory pediatric patients aged 4-5.

FDA further commented “a clinical benefit of Elevidys, including improved motor function has not been established” and “a revised indication or withdrawal of Elevidys, may be necessary” if the confirmatory EMBARK trial fails to show a clear clinical outcomes benefit around year end. SRPT disclosed plans to price Elevidys with a WAC of $3.2 million further raising questions around how payers will handle reimbursement authorization.

ICPT also traded down on the announcement FDA rejected the approval of Obeticholic Acid for nonalcoholic steatohepatitis (NASH). There are currently no FDA approved therapies for NASH and ICPT and will discontinue all NASH-related investment. Both outcomes were largely expected following prior negative advisory committee meetings, but apparently some residual optimism remained.

Clinical data continues to move stocks with Moonlake Immunotherapeutics (MLTX) rallying ~80% while Fibrogen (FGEN) fell ~80% and Uniqure (QURE) fell ~40%. MLTX reported phase 2 data in hidradenitis suppurativa (HS) that came in ahead of expectations, FGEN's Phase 3 ZEPHYRUS-1 trial in IPF failed to meet the primary or secondary endpoints and QURE's Phase I/II trial of AMT-130 gene therapy for the treatment of Huntington's Disease (HD) was messy.

Share prices tend to be highly correlated to whether clinical data is considered to be good, bad or ugly.

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