Japan dominates small cap stock price rises in Q1

If the irrepressible rise of Japanese biotech was hinted at in our analysis of big and medium cap stocks last week, it has been firmly underlined by the first-quarter share price performance of smaller drug makers (Biotech consolidates it dominance in the first quarter, April 4, 2013).

Any fears that the Japanese biotech bubble, which has been growing since October, might burst have been belied by share price gains in the order of 834% and 281% for Carna Biosciences and NanoCarrier respectively in just three months. But with little real data or progress with drug development driving share prices, and increases being fuelled by retail investors, it could take very little pressure to turn sentiment suddenly and dramatically.

But for now Japanese companies account for four of the top five small cap risers, as well as four of the top five micro and nano cap gainers, thanks to gains that have put even the effervescent US Nasdaq Biotech Index in the shade. Indeed, even taking into account the recent heavy fall of the Yen against the US dollar, and a slight wobble in some Japanese biotech shares since the beginning of this month, across the board the gains are still impressive and worrying by turns (When will Japanese biotech come off the boil? March 12, 2013).  

Small cap gainers

Flying the flag for alternative nationalities Clovis Oncology was the only non-Japanese company that made it into the top five small cap risers. But like the Japanese stocks, the company’s rise is slightly puzzling given that its lead project, CP-4126, bombed in pancreatic cancer back in November and the next most advanced one, rucaparib, for ovarian cancer, is still in phase I/II trials.

What might have captured investors’ imagination are forecasts from the company that it will have rucaparib in pivotal trials by the end of the year. If Clovis fails to deliver on these promises the shares could find themselves a lot lower by the end of the year.

Small cap ($250m-2.5bn) pharma companies: top risers and fallers in Q1
Share price (local currency) Market capitalisation ($m)
Rank Top 5 risers YE 2012 Q1 2013 Change YE 2012 Q1 2013 EP Vantage comment and analysis
1 NanoCarrier ¥102,000 ¥389,000 281% 370 1,262 When will Japanese biotech come off the boil?
2 OncoTherapy Science ¥131,000 ¥294,700 125% 358 715
3 Takara Bio ¥722 ¥1,444 100% 1,033 1,839
4 JCR Pharmaceuticals ¥1,265 ¥2,470 95% 519 899
5 Clovis Oncology $16.00 $28.67 79% 418 752
Rank Top 5 fallers
1 Affymax $18.99 $1.38 (93%) 706 51 Affymax faces extinction after Omontys debacle
2 Celsion $8.19 $1.05 (87%) 287 53 Celsion bereft after ThermoDox failure
3 Pharmaxis AUS$1.24 AUS$0.33 (73%) 394 107 Weekly Market Movers (to 1 Feb 2013)
4 Ziopharm Oncology $4.16 $1.83 (56%) 331 153 Sarcoma miss an unpleasant surprise for Ziopharm
5 TherapeuticsMD $3.10 $1.80 (42%) 309 233 Daily Market Movers (15 Mar 2013)

While the US barely got a look in for the risers, it was well represented in the small cap fallers, with the Australian company Pharmaxis graciously saving America from a clean sweep of the top five disappointments of the quarter.

The withdrawal of its only drug, Omontys, last month followed five cases of fatal anaphylaxis and has handed Affymax the biggest loser crown for the quarter, leaving the group with few options other than to consider filing for bankruptcy.

Clinical failure of one sort or another was also behind the stock performance of many of the four other share price losers. Celsion plunged after the novel heat-activated liver cancer drug ThermoDox failed to make headway in progression-free survival, while Ziopharm Oncology also failed the PFS test with its drug for soft-tissue sarcoma, Zymafos (palifosfamide).  

Micro cap shares

Sound clinical sucess was behind the stellar performance for Keryx Biopharmaceuticals this quarter. In February the company announced positive results from its phosphate binder Zerenex in a pivotal trial and analysts have speculated that the treatment could become a first-in-class therapy. The success goes a long way to making up for the failure of the group’s cancer drug perifosine in April 2012.

Shin Nippon Biomedical Laboratories' rise was also due to positive data, rather than investor speculation, albeit in the more risky area of brain cell transplantation, which the group hopes to use in the treatment of Parkinson’s disease.

The falls for A.P. Pharma came courtesy of the FDA rejecting its chemotherapy-induced nausea and vomiting treatment APF530, delaying launch until the first half of 2014, while GW Pharma's suffering came at the hands of German insurance companies trying to reimburse its spasticity drug Sativex at a much lower price.

Micro cap ($100-250m) pharma companies: top risers and fallers in Q1
Share price (local currency) Market capitalisation ($m)
Rank Top 5 risers YE 2012 Q1 2013 Change YE 2012 Q1 2013 EP Vantage comment and analysis
1 Japan Tissue Engineering (J-TEC) ¥72,500 ¥388,000 435% 168 796
2 Shin Nippon Biomedical Laboratories ¥313 ¥1,519 385% 136 586 Daily Market Movers (14 Feb 2013)
3 GNI ¥122 ¥406 233% 154 456
4 Keryx Biopharmaceuticals $2.62 $7.05 169% 188 575 Zerenex data heralds a tricky future for Keryx
5 Medinet ¥16,110 ¥41,800 159% 149 368
Rank Top 5 fallers
1 Trimel Pharmaceuticals C$1.91 C$0.79 (59%) 176 72 Daily Market Movers (20 Mar 2013)
2 Bioton PLN0.10 PLN0.05 (50%) 265 135
3 Pernix Therapeutics $7.75 $4.96 (36%) 226 187 Daily Market Movers (18 Mar 2013)
4 GW Pharmaceuticals £0.59 £0.40 (33%) 127 84 German woes reinforce the appeal of the US for GW
5 A.P. Pharma $0.55 $0.37 (32%) 165 113 Daily Market Movers (28 Mar 2013)

Correction

If there is a warning sign that a dramatic correction in Japanese biotech stocks is imminent it can be seen in the nano-cap sector, where despite having no products in the clinic Carna Biosciences and Immuno-Biological have managed to rack up respective share price gains of 834% and 485%.

It also seems that being involved in the highly risky area of gene therapy is no barrier to stock gains, as Anges MG, which has a filed product for peripheral vascular disorder, has discovered. While some air has come out of their inflated valuations in recent days, both Carna and Immuno-Biological remain with significant gains since the start of the year.

Nano cap (<$100m) pharma companies: top risers and fallers in Q1
Share price (local currency) Market capitalisation ($m) 
Rank Top 5 risers YE 2012 Q1 2013 Change YE 2012 Q1 2013 EP Vantage comment and analysis
1 Carna Biosciences ¥22,800 ¥213,000 834% 21 174
2 Immuno-Biological Laboratories ¥4,925 ¥28,800 485% 38 199
3 Evocutis £0.77 £3.37 338% 2 9
4 AnGes MG ¥53,500 ¥200,300 274% 89 335
5 RaQualia Pharma ¥348 ¥1,215 249% 58 181
Rank Top 5 fallers
1 Myrexis $2.83 $0.10 (97%) 76 3 Twilight of the vascular disrupting agents
2 SCOLR Pharma $0.04 $0.005 (88%) 2 0
3 Ark Therapeutics £3.22 £0.44 (86%) 11 1
4 Phytopharm £10.75 £1.55 (86%) 60 9 Daily Market Movers (18 Feb 2013)
5 NeurogesX $0.24 $0.06 (74%) 8 2

As for the fallers, there could be an argument that many of the companies here might be better off returning what little cash they have remaining to shareholders and shutting up shop. Myrexis, which has seen pretty much all of its value destroyed, is a case in point after announcing the suspension of all of its clinical and preclinical products in February 2012.

The UK companies PhytoPharm and Ark Therapeutics have also effectively been mothballed. In February, Phytopharm said it would cease all clinical development for the time being, after the failure of its Parkinson’s disease project Cogane. Ark is to all intents and purposes a manufacturing company, which now relies on developing therapeutic viruses to earn money.

To contact the writer of this story email Lisa Urquhart in London at lisau@epvantage.com or follow @LisaEPVantage on Twitter

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