InterMune tops small cap gainers in first quarter of 2009

Yesterday’s analysis of share price performance in the first quarter of 2009 among the world’s biggest drug makers found that generic companies have been well favoured by investors so far this year (Generic companies come out on top in first quarter of 2009 April 01, 2009).

The same analysis of smaller companies finds, unsurprisingly, that the fate of these stocks is much more dependent on specific factors (see tables below). Notable gainers in the period include InterMune, on hopes for its phase III product, and vaccines group Crucell, buoyed by takeover speculation. Disappointing clinical data has done for the biggest fallers, with Human Genome Sciences and ViroPharma leading the laggards.

Small cap analysis

Leading the small cap gainers is InterMune. Despite producing mixed phase III data, the group's lead compound pirfenidone, for idiopathic pulmonary fibrosis, treats a fatal condition for which there are no treatments currently available. Analysts believe approval is likely and have pencilled in sales of $922m by 2014, clearly a huge opportunity (Mixed pirfenidone data improves InterMune's capacity February 03, 2009).

Theravance has also benefitted from high expectations around a late stage product, in this case super bug antibiotic telavancin. Despite delays, there is a real chance the drug will become the first new super strength antibiotic to reach the market in a while. Delays to the competition, Basilea for one, which makes it into the biggest fallers, has also helped sentiment (Theravance adds to antibiotic delays March 02, 2009).

Dutch Crucell and South Africa's Aspen have been boosted by takeover speculation; CV Therapeutics and Matrix would have also made the top five gainers, but have been excluded as their respective deals are well on the way to being concluded.

Sepracor is a recovery story; the stock touched a record low at the end of 2008 amid concern about future sales and profits, particularly sleeping pill Lunesta which has failed to grow despite a huge marketing budget.

Small cap ($250m-$2.5bn) pharma companies: top risers and fallers in Q1 2009
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-08 31-Mar-09 % change YE 2008 2009 (latest)
1  InterMune 10.58 16.44 +55% 459 713
2  Crucell 10.89 15.00 +38% 955 1,306
3  Theravance 12.39 17.00 +37% 651 1,064
4  Aspen Pharmacare 33.60 45.60 +36% 1,225 1,659
5  Sepracor 10.98 14.66 +34% 1,199 1,600
Top 5 Fallers
1  Human Genome Sciences 2.12 0.83 -61% 288 113
2  ViroPharma 13.02 5.25 -60% 910 406
3  Basilea Pharmaceutica 148.90 71.00 -52% 1,239 603
4  NeuroSearch 136.00 69.50 -49% 395 201
5  Emergent BioSolutions 26.11 13.51 -48% 788 408

Late stage failures are a theme among the fallers. As well as Basilea and its antibiotic ceftobiprole, money worries following disappointing data from its lead hepatitis C product hurt Human Genome (Human Genome facing money worries after key data disappoints March 10, 2009), whilst ViroPharma's lead phase III product, maribavir, fell at the final phase III hurdle. (ViroPharma's maribavir disappointment will sharpen focus February 10, 2009)

Investors have fled from Denmark's NeuroSearch since the group's phase II depression drug NS2359, being developed by GlaxoSmithKline, failed and was scrapped at the end of February. The loss of partner Astellas Pharma a few weeks later, which was working on a phase I schizophrenia product, added to the woes. 

Micro cap analysis

Excluding the takeover targets Arana Therapeutics and Indevus Pharmaceuticals, ImmunoGen was the biggest micro cap gainer, hitting a three-year high of $7.10 at the end of the quarter. A $6.5m milestone payment from Genentech at the start of March, related to the initiation of phase III trials of Trastuzumab-DM1 in breast cancer, appears to have sparked significant share price gains in recent weeks.

Affymax managed to emerge relatively unscathed from a dilutive financing in February which raised $42m for the company in a private placement, whilst a recently announced restructuring program to reduce headcount by 12% appears to have been well received by investors.

Shares in Galapagos surged in February when the company revealed a potentially crucial drug target, G protein-coupled receptor 3 (GPR3), in the treatment of Alzheimer's disease; Galapagos confirmed it had already started discovery research for a suitable candidate to target GPR3.

SIGA has benefitted from the US government's interest in its small pox treatment, whilst excitement around Pharmaxis' lead product, Bronchitol, a phase III cystic fibrosis treatment has boosted the group's shares. Pivotal data is expected later this month (Event - Pharmaxis on verge of breakthrough February 12, 2009).

Micro cap ($100m-$250m) pharma companies: top risers and fallers in Q1 2009
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-08 31-Mar-09 % change YE 2008 2009 (latest)
1  ImmunoGen 4.29 7.10 +66% 219 362
2  Affymax 9.99 16.11 +61% 188 303
3  Galapagos 3.98 6.25 +57% 112 175
4  SIGA Technologies 3.27 5.07 +55% 118 183
5  Pharmaxis 1.21 1.70 +40% 158 222
Top 5 Fallers
1  Synta Pharmaceuticals 6.12 2.14 -65% 208 73
2  Akorn 2.30 0.86 -63% 207 78
3  Orexigen Therapeutics 5.58 2.61 -53% 193 90
4  Cytos Biotechnology 25.00 12.00 -52% 115 56
5  Idenix Pharmaceuticals 5.79 3.08 -47% 328 174

The micro cap company that suffered the most in the quarter was Synta Pharmaceuticals as phase III trials of the company’s lead drug, elesclomol, to treat melanoma had to be suspended due to a higher death rate in the rate in the elesclomol-paclitaxel combination treatment group (Synta hurt by elesclomol safety scare, February 27, 2009).

Concerns over Akorn’s financial stability appear to have hurt the company, with GE Capital barring Akorn from any further borrowing under a $25m revolving-credit agreement previously established between the parties in February, whilst a delay in filing their 2008 annual report seemingly a concern for investors.

Mixed but largely disappointing phase III data for Orexigen Therapeutics’ lead pipeline candidate, obesity drug Contrave, sparked a sell-off in January from which the stock has failed to recover; no doubt the recent failures of competing obesity candidates, such as Arena Pharmaceuticals’ locaserin, have not helped investor sentiment towards companies operating almost exclusively in this challenging therapeutic area.

The failure of Cytos Biotechnology’s experimental hypertension vaccine to lower blood pressure in patients taking part in phase IIa trial in March, not only significantly harmed the company’s share price, the company has also been forced to cut its workforce in half (Cytos rattles nerves with disappointing hypertension data, March 17, 2009).

Meanwhile Idenix Pharmaceuticals appears to have been affected by a lack of near-term catalysts since GlaxoSmithKline licensed its phase II HIV candidate IDX-899 in February (Idenix should be able to keep the good news flowing, February 09, 2009); put into context the sell off was also partly due to profit-taking, as prior to the Glaxo deal Idenix’s shares had almost doubled over the previous 12 months.

Share This Article