With the second half of 2008 well underway, EP Vantage has taken a look at the best and worst performing pharma and biotech stocks so far this year, in an attempt to gauge which companies might still be topping the tables come the end of December.
When looking outside of the US and Europe to find those drug developers making progress or suffering set backs, the ranking table is dominated by Canadian companies, which is not surprising considering the country is similar in terms of wealth and development to the other two regions.
In fact, both the biggest winner and loser is a Canadian company, respectively Cardiome Pharma and Vasogen. Japan is also present, with Israel the third country to make it into the top five ranking, in the shape of XTL Biopharmaceuticals.
|Share price (local currency)||Growth||Latest Market Cap|
|Top 5 winners||2007||2008||($m)|
|1||Cardiome Pharma (C$)||8.91||12.64||42%||793|
|2||Hisamitsu Pharmaceutical (¥)||3,400||4,700||38%||4,130|
|4||Mitsubishi Tanabe Pharma (¥)||1,059||1,421||34%||7,380|
|5||XTL Biopharmaceuticals ($)||2.85||3.80||33%||111|
|Top 5 losers|
|3||Ambrilia Biopharma (C$)||1.20||0.20||83%||10|
Excludes companies with a market cap less than $50m as of 31 December 2007 and confirmed bid targets
Will the risers keep rising?
Cardiome Pharma's shares this year have been boosted by successful trials of its heart drug Kynapid, in both oral and IV formulations, and anticipation of FDA approval for the latter. The regulator was due to make a decision in January, but delays means the company, and its shareholders, are still waiting to hear the outcome.
The company is searching for either a partner for the product, or a buyer of the whole group, and considering the group has little else in its pipeline, a takeout is viewed as more likely. Considering Astellas already holds US rights to the IV formulation, they are viewed as the main contender.
Even though the shares have made good gains this year, a bid could still generate a decent premium. Therefore if the long awaited FDA decision on Kynapid is positive, as expected, and a bid or partnership deal emerges, there is a good chance that Cardiome will remain one of the winners of 2008. (See EP Vantage: Cardiome’s future should be decided soon, July 15, 2008)
Fellow Canadian company Labopharm makes it into the risers as a result of its sheer persistence in trying to win approval for its painkiller Tramadol OD, a struggle that has gone on for the last two-and-a-half years. That the efforts appear to be paying off have caused the stock to surge. (See EP Vantage: Labopharm sees light at the end of the tunnel, July 1, 2008)
However, the shares have risen from a very low base, and have already dropped back from highs. With a final decision by the FDA not due until January 2, there is a possibility that stock will continue to run out of steam before then, and Labopharm might not be in the winners at the end of the year.
Much the same can probably be said for XTL Biopharmaceuticals. The group’s pre-clinical hepatitis C programme created excitement at the beginning of the year, culminating in a $108m out-licensing deal struck in March with Presidio, a private US biotech. With the remainder of the group’s pipeline early stage, the group might struggle to maintain investor interest.
Mitsubishi Tanabe Pharma came into being last October when Mitsubishi Pharma merged with Tanabe Seiyaku, in an all-share deal that created a group with almost double the revenues, and ranked as the fifth biggest Japanese drug maker. While the transaction has no doubt contributed to the share price rise this year, the group also sells the anti-TNF agent Remicade in Japan, which is forecast to generate strong sales growth over the next few years.
Fellow Japanese group Hisamitsu specialises in pain products, particularly transdermal patches, and demand for its products has allowed it to grow domestic market share significantly. A strong pipeline of products up for approval this year has also probably lifted interest in the stock.
Whether investor interest in either Japanese company remains for the rest of the year will probably depend a lot on domestic issues, in particular stringent measures implemented by the government to increase generic medicine’s share of the market.
The big losers are unsurprisingly small, one-hope companies that have suffered big clinical set backs and wrestled with funding issues, and are unlikely to recover over the rest of the year.
Vasogen’s heart failure treatment Celacade disappointed in a pivotal trial and looks unlikely to win approval; Sosei has declined gradually over the year after struggling to raise cash and having to halt phase III trials with its respiratory device AD923; Ambrilia has struggled to raise cash and progress its pipeline of anti-virals, recently deciding to sell other assets to strengthen its financial position; Isotechnika was hit by concerns about the potential of its kidney transplant drug, worries that were realised when Roche handed back the rights last month; and finally, MethylGene, which after declining steadily all year was finally hit by the suspension of trials of its cancer drug MGCD0103 on safety concerns.
Thus while those in the top end of the table might slip down the rankings, those at the bottom are unlikely to drag themselves out. Considering the number of small, similarly precarious companies out there, they will no doubt be joined by others with similarly precipitous downfalls before the year is out.