Comeback stories drive small cap risers in 2010

EP Vantage’s review of the best and worst performing small, micro and nano stocks during 2010 highlights some remarkable comeback stories and crushing clinical setbacks. Comeback kid of the year has to be Amarin, a sixfold share price gain driven by earlier than expected and impressive pivotal data on new fish-oil candidate, AMR101.

Pharmasset, Neurocrine Biosciences, Chelsea Therapeutics and Somaxon Pharmaceuticals also witnessed remarkable reversals of fortunes last year, while InterMune managed to finish its rollercoaster ride in 2010 on a high with European approval for idiopathic pulmonary fibrosis (IPF) drug, Esbriet. In contrast, Antisoma, Affymax and Cell Therapeutics all suffered heavily with clinical and regulatory setbacks (see tables below).

Small cap analysis

Questcor topped the small cap gainers, as it had done all year, as sales of the company’s only product, Acthar, for a range of niche indications including infantile spasms, continued to exceed expectations.

InterMune's stock experienced a classic rollercoaster ride last year. A favourable FDA adcom review of Esbriet saw shares gain 160% to $40, which came crashing back down to just $12 when the FDA surprisngly rejected the drug soon after. However, the stock surged once more in December when a European expert panel recommended approval, ending the year at just over $36.

Pharmasset more than doubled its stock price last year, touching record highs of $49 in early December. A 20% jump in November followed strong phase II data presented at the American Association for the Study of Liver Diseases (AASLD) meeting for Roche-partnered hepatitis C drug, RG7128.

Wockhardt was buoyed by wider gains on the Indian stock market, while SIGA Technologies scored a major victory in October with the award of a US Department of Health and Human Services contract, worth potentially $2.8bn, to stockpile its antiviral smallpox product, ST-246.

Small cap ($250m-$2.5bn) pharma companies: top risers and fallers in FY 2010
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-09 31-Dec-10 % change YE 2009 YE 2010 EP Vantage comment and analysis
1  Questcor Pharmaceuticals ($) 4.75 14.73 +210% 293 916 EP Vantage Interview - Questcor fighting Acthar's corner
2  InterMune ($) 13.04 36.40 +179% 609 2,040 InterMune receives welcome European approval gift for Esbriet
3  Wockhardt (Rs) 138.70 364.70 +163% 326 900
4  SIGA Technologies ($) 5.80 14.00 +141% 250 671 Daily Market Movers (13 Oct 2010)
5  Pharmasset ($) 20.70 43.56 +110% 548 1,483 Pharmasset staging a remarkable recovery on hepatitis C franchise
Top 5 Fallers
1  Antisoma (£) 0.33 0.06 -81% 307 64 Antisoma rethinks strategy after lung cancer drug fails pivotal trial
2  MolMed (€) 1.73 0.41 -76% 264 119 MolMed investors asked to settle down for long-term growth
3  mondoBIOTECH (SFr) 224.90 55.00 -76% 294 82
4  Affymax ($) 24.74 6.65 -73% 591 169 Affymax reeling from Hematide safety scare
5  Cell Therapeutics ($) 1.14 0.37 -68% 673 298 Testing times for Cell Therapeutics after adcom rejection of Pixuvri

All five small cap fallers took a tumble earlier in the year and therefore feature in prior quarterly analysis (Steady growth the theme for small cap risers after nine months, October 5, 2010).

Micro cap analysis

Amarin shares rocketed 60% to a three-and-a-half year high of $5.74 at the end of November as strong results were reported for fish-oil-based cholesterol pill AMR101. The company awaits data on a second pivotal trial in a statin-treated population, and is looking to secure a commercialisation partner, although Amarin today raised $100m, suggesting the company could be thinking about going it alone.

Interestingly, fish-oil competitor Pronova BioPharma lost almost half its value in 2010, hurt by partner GlaxoSmithKline cutting back on its inventory of fish-oil drug Lovaza mid-year, Amarin’s data, and a generic challenge from Teva (Glaxo’s cash efficiency drive leaves Pronova reeling, June 14, 2010).

Mesoblast made a late surge into the winners enclosure on the back of the biggest licensing deal struck last year, which saw Cephalon take a 20% stake in the Australian biotech and agree to pay up to $2bn for the successful development of Mesoblast’s stem cells.

Shares in Oncolytics made steady progress through the year as expectations rose over positive clinical data and a partnership for oncolytic virus product, Reolysin; the stock touched a five year high of C$6.96 in December.

Micro cap ($100m-$250m) pharma companies: top risers and fallers in FY 2010
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-09 31-Dec-10 % change YE 2009 YE 2010 EP Vantage comment and analysis
1  Amarin ($) 1.43 8.20 +473% 141 810 Amarin soars on good news from Marine biologists on AMR101
2  Mesoblast (AUS$) 1.36 4.67 +243% 190 1,163 Cephalon closes the blast doors for a rocketing stem cell deal
3  Akorn ($) 1.79 6.07 +239% 162 570
4  Neurocrine Biosciences ($) 2.72 7.64 +181% 120 419 Neurocrine wastes no time delivering deal but hurdles remain
5  Oncolytics Biotech ($) 2.61 6.70 +157% 161 455
Top 5 Fallers
1  Novelos Therapeutics ($) 2.52 0.03 -99% 176 3 Failure of Novelos’ lead drug proves talk is cheap
2  GeoVax Labs ($) 9.00 1.16 -87% 141 18
3  Avexa (AUS$) 0.16 0.04 -75% 124 32 Avexa’s partnering problems could be contagious in HIV space
4  Oxygen Biotherapeutics ($) 5.98 1.92 -68% 128 45
5  TiGenix (€) 3.80 1.26 -67% 171 55 TiGenix reels from surprise US delay

Of the fallers, the setbacks to Novelos and Avexa have been documented before, while Geovax Labs and Oxygen Biotherapeutics suffered from a lack of catalytic events and rapidly dwindling cash reserves.

TiGenix suffered a major regulatory disappointment when its ChondroCelect cell therapy to repair and regenerate knee cartilage was rejected by the FDA, requesting an additional trial resulting in potentially a five-year delay to approval. The stock lost 67% over the year, and decent European sales figures are needed to for any turnaround to happen (EP Vantage Interview - TiGenix seeking regenerative niche, September 6, 2010).

Nano cap analysis

International Stem Cells closed the year close to a three-year high, helped by improved sentiment towards stem cell technology and expanded sales of its skin care products. The company recently struck a three-year deal to raise up to $25m in equity financing from Aspire Capital Fund.

Somaxon won a surprise FDA approval for insomnia drug, Silenor, and signed up P&G as a co-promotion partner, while Chelsea's hypotension drug, Northera, bounced off the ropes with positive phase III data and the FDA's acceptance that further efficacy studies are no longer required, clearing the way for a filing this year; the stock finished the year close to a three-year high.

Positive phase III data for Bioniche's novel bladder cancer candidate, Urocidin, supported by a $4m milestone from partner Endo Pahrmaceuticals, helped shares in the Canadian company recover from record lows at the end of 2009.

Continuing the recovery theme, Inhibitex also staged a comeback last year. Although anti-viral drug FV-100, for the treatment of shingles, failed at the end of the year to meet an ambitious efficacy goal in showing clear superiority over GlaxoSmithKline's Valtrex, some investors clearly see a bright future.

Nano cap ($25m-$100m) pharma companies: top risers and fallers in FY 2010
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-09 31-Dec-10 % change YE 2009 FY 2010 EP Vantage comment and analysis
1  International Stem Cells ($) 0.53 1.85 +249% 30 138
2  Somaxon Pharmaceuticals ($) 1.08 3.15 +192% 27 139 Somaxon seeks to wake up Silenor launch with P&G alarm clock
3  Inhibitex ($) 0.92 2.60 +183% 57 162 Better not quite good enough for Inhibitex
4  Chelsea Therapeutics ($) 2.70 7.50 +178% 90 368 Chelsea soars as it gets positive result second time round
5  Bioniche Life Sciences (C$) 0.56 1.50 +168% 39 135
Top 5 Fallers
1  ARYx Therapeutics ($) 3.21 0.27 -92% 90 9 Broken promises force ARYx to assess strategic options
2  Marshall Edwards ($) 7.00 0.97 -86% 51 7
3  Novogen (AUS$) 0.60 0.12 -80% 52 12
4  OXiGENE ($) 1.14 0.23 -79% 72 25 Asco EventAnalyzer - 2010's winners and losers
5  Poniard Pharmaceuticals ($) 1.83 0.52 -72% 77 25 Poniard's happy talk masks dire future for picoplatin

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