Companies on the way to being 2008's winners and losers - US focus

Analysis

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.

Star perfomers in the US this year throw up some interesting companies that may have slipped under the radar, such as Idenix Pharmaceuticals and Emergent Biosolutions, whilst the dog stocks not surprisingly reflect those biotechs that have suffered critical clinical failures, including Favrille and Keryx Biopharmaceuticals.

The analysis presented here excludes companies with a market capitalisation of less than $50m as of December 31st and those which are confirmed takeover targets, such as APP Pharmaceuticals current acquisition by Fresenius.

    Share price ($) Growth   Market capitalisation ($m)
  Top 5 winners 2007  2008      2007 2008 (latest)
1 Idenix Pharmaceuticals 2.70 7.96 195%   152 448
2 Emergent BioSolutions 5.06 13.99 176%   151 416
3 Momenta Pharmaceuticals 7.14 19.53 174%   261 719
4 Micromet 2.06 4.14 101%   84 169
Columbia Laboratories 2.27 4.19 85%   117 218
               
  Top 5 losers            
1 Favrille 1.56 0.06 (96%)   64 2
2 Keryx Biopharmaceuticals  8.40 0.37 (96%)   367 16
3 CellCyte Genetics 7.00 0.45 (94%)   419 27
4 Neurogen 3.45 0.41 (88%)   145 17
5 Vanda Pharmaceuticals 6.88 0.96 (86%)   183 26

Winners

The top star performer this year is Idenix Pharmaceuticals, staging an impressive recovery after a fairly disastrous 2007 in which both lead clinical candidates, hepatitis C treatment valopicitabine and hepatitis B drug valtorcitabine, were abandoned after completing phase II trials.

Valopicitabine in particular, co-developed with Novartis, was an important drug for Idenix and represented most of the company’s value, with sales in 2012 estimated at a decent $218m, according to archived forecasts from EvaluatePharma.

With last year’s disappointment behind them, Idenix appears to be benefitting from reasonable sales by Novartis of its marketed hepatitis B drug Tyzeka/Sebivo, reporting positive phase I/II data for its lead candidate IDX-899 as a potential HIV therapy, whilst highlighting an extensive, if early stage, portfolio of new hepatitis C candidates.

This last point may be more significant when considering that a number of companies that operate within the hepatitis C treatment field have also seen significant share price gains this year. Shares in Pharmasset have surged 73%, whilst Vertex Pharmaceuticals’ and InterMune’s stock have both jumped 36%.

With no significant catalysts expected by the end of the year and a decent cash reserve, meaning limited threats to pressure the shares, Idenix’s recovery could well be maintained.

Emergent Biosolutions, a Maryland-based vaccine company, has seen its shares rise 176%, after a weak end of 2007 that saw the stock reach record lows. The trigger for this surge appears to have been very positive phase II data in January for an orally-delivered typhoid vaccine.

The group already generates annual sales of around $170m from its anthrax vaccine BioThrax and has another couple of vaccine candidates in phase II trials for hepatitis B and anthrax.

Illustrating how share price gains for small-cap biotechs can be fragile, today’s release of Emergent’s quarterly results has been met with a 23% decline in share price, on a slightly lower revenue outlook for the year.

Momenta Pharmaceuticals,the potential bio-generic manufacturer, has seen prospects of the FDA approving M-Enoxaparin, a generic version of Sanofi-Aventis’s blood thinner Lovenox, significantly raised this year after a major setback in November with a not-approvable letter.

In April, the US regulator appeared to do a U-turn and outline a potential path to approval with the submission of further immunogenicity data, but critically without the need for further human clinical trials. Commercial partner Novartis has also made increasingly bullish comments this year about its expectations for FDA approval in 2009. (See EP Vantage: Momenta seeking momentum, April 29, 2008)

Recent sentiment was improved further with the news the FDA had accepted an ANDA filing from the company for a generic version of Teva’s multiple sclerosis blockbuster drug Copaxone. (see EP Vantage: Teva sees tables turned over Copaxone, July 14, 2008)

The chances of Momenta maintaining its momentum this year are reasonable assuming the company re-files its application for M-Enoxaparin in the third quarter. Any delay to this submission may hurt the stock once more, but the critical catalyst of FDA approval will only arrive in the middle of next year.

Losers

Favrille’s stock was reduced to almost worthless status in May with the spectacular phase III failure of its cancer vaccine SpecifId. (see EP Vantage: Favrille failure puts pressure on other cancer vaccines, May 28, 2008) The biotech has subsequently reduced its workforce by 92% and is currently negotiating with its creditors in an attempt to head off bankruptcy. The company now appears destined to be just a footnote in the history of cancer vaccine development.

New York's Keryx Biopharmaceuticals suffered a similar fate to Favrille in March with the failure of Sulonex in phase III trials to demonstrate the required efficacy in the treatment of diabetic nephropathy.

However, despite the company’s market capitalisation of $16m well below its cash reserves of $60m, Keryx has not quite run up the white flag yet and is determined to continue development of cancer drug KRX-0401 and hyperphosphataemia therapy Zerenex.

Quite how the company intends to move forward with current cash reserves and having cut its staff by 50%, remains to be seen.

Bucking the clinical failure trend amongst the year’s biggest losers is CellCyte Genetics' 94% share price crash due to apparent fraud by the biotech’s chief executive and co-founder Gary Reys, in false claims about his professional experience, and the company’s hyping of its stock through the recruitment of Swiss promoter Stockgroup.

With the company being sued by various aggrieved investors and shares showing no signs of recovery since the furore broke in January, CellCyte’s place as one of the biggest losers in 2008 seems assured.

Whilst Neurogen has not suffered from one key clinical setback, 2008 has been a catalogue of disappointments for the company as a pivotal phase II/III trial for adipiplon in insomnia was delayed in April and then suspended last month.

With limited cash reserves the company has also been forced to significantly reduce its workforce. Unless positive data is surprisingly released this year from its ongoing phase II trials of Aplindore, in-licensed from Wyeth, in Parkinson's disease and restless legs syndrome, the outlook for the rest of 2008 looks bleak.

The demise of Vanda Pharmaceuticals came just two weeks ago with the FDA’s rejection of its schizophrenia drug Fanapta, see EP Vantage: Vanda left reeling by FDA's rejection of Fanapta, July 28, 2008.

With the company’s only other hope for stimulating a share price revival, insomnia drug VEC-162, reporting disappointing phase III data in June thereby reducing the chances of signing up a commercial partner, Vanda is also unlikely to escape the unwanted tag as one of the main dog stocks of 2008.

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