Obesity turnaround drives small cap gainers in H1

Analysis

The turnaround of fortunes enjoyed by makers of new obesity drugs can clearly be seen in a look at the best stock market performers so far this year among the industry’s smaller drug makers. Leading small caps higher with a staggering fivefold surge in value is Arena Pharmaceuticals, with Vivus not far behind with a tripling of its market cap this year. Orexigen, still somewhat the outlier, has also enjoyed a big share price boost.

Not all the stories are positive, of course. Clinical failures have taken down several of the biggest decliners, including Anthera, which has seen both its phase III projects fail while Æterna Zentaris has been hit hard by the failure of its colorectal cancer candidate perifosine. An FDA roadblock, meanwhile, has hampered Chelsea Therapeutics’ commercial ambitions. With half of the year passed, the winners and losers of 2012 are starting to materialise more clearly (see tables).

Small-cap gainers

Growing anticipation that Arena would score the ultimate goal and win approval for its obesity pill caused shares in the company to rocket this year. Belviq (lorcaserin) finally won approval in June, sending shares up another 29% and landing the company a $90m milestone from its partner Eisai.

The FDA’s endorsement of the first new prescription weight loss treatment to be approved in the US in 13 years also benefited a competitor, Vivus. Its own obesity pill, Qnexa, which has a July PDUFA date and is widely expected to also receive a green light, could sneak ahead of Belviq and be launched first while the drug enforcement scheduling is finalised for Arena’s pill.

Pharmacyclics' impressive share price run continued this year with robust clinical results presented at this year's Asco, when the company released phase II results on its BTK inhibitor ibrutinib (PCI-327675) in leukaemia. The drug demonstrated progression-free survival in treatment-naïve patients and high response rates with combinations in relapsed/refractory patients, and hopes are growing for the agent across a broad range of blood cancers.

The company sold the rights to ibrutinib to J&J at the end of last year for at up-front payment of $150m and an additional $825m in development and regulatory milestones, with Pharmacyclics entitled to half of future global profits (J&J pays handsomely for first-in-class blood cancer drug, December 9, 2011).

Wockhardt remains the one Indian outperformer so far this year. The generics group’s financial performance is benefiting from several new product launches, in particular its copycat versions of the Parkinson’s drug Stavelo and GlaxoSmithKline’s hay fever medicine Flonase (Vivus, Amylin and Threshold notable small cap gainers in Q1, April 5, 2012).

Bid rumours drove Amylin shares higher over the second quarter of the year, peaking at $28.20 before confirmation came in the form of a $31-per-share offer from AstraZeneca and Bristol-Myers Squibb late last week. The takeover is worth $7bn in total.

Small cap ($250m-2.5bn) pharma companies: top risers and fallers in Q2 2012
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-11 29-Jun-12 % change YE 2011 Q2 2012 EP Vantage comment and analysis 
1 Arena Pharmaceuticals ($) 1.87 9.98 433% 273 1,950 Arena fends off the big question as lorcaserin delivers
2 Pharmacyclics ($) 14.82 54.61 268% 1,016 3,771 Asco EventAnalyzer - 2012's winners and losers
3 Wockhardt (Rs) 276.95 932.60 237% 614 2,026 Daily Market Movers (22 May 2012)
4 VIVUS ($) 9.75 28.54 193% 867 2,845 Arena fends off the big question as lorcaserin delivers
5 Amylin Pharmaceuticals ($) 11.38 28.20 148% 1,665 4,592 Joint-venture approach does little to hide risk of Amylin takeover
Top 5 Fallers
1 Anthera Pharmaceuticals ($) 6.14 0.68 (89%) 251 28 Daily Market Movers (28 June 2012)
2 Chelsea Therapeutics ($) 5.13 1.48 (71%) 317 99 Daily Market Movers (31 May 2012)
3 Oncothyreon ($) 7.58 4.68 (38%) 324 267 Oncothyreon falls back as Stimuvax results wait another year
4 Biotie Therapies (€) 0.53 0.37 (30%) 266 189
5 AVEO Oncology ($) 17.20 12.16 (29%) 743 530 Safety data crucial for Aveo to renew market faith

Anthera finished off the second quarter in a dire position with another clinical failure. Its shares lost almost three quarters of their value on news that a phase IIb trial of the lupus project blisibimod had failed. Back in March the company also stopped a phase III trial of its lead drug, varespladib for acute coronary syndrome, owing to lack of efficacy (Anthera shares fall on failure of heart drug, March 12, 2012).

Varespladib has been abandoned but the company is looking for a way forward with blisibimod, although the share price reaction suggests that investors are not confident of progress.

With the receipt of a complete response letter for the dizziness drug Northera at the end of March, the decline of Chelsea Therapeutics continued in the second quarter. It discontinued development of its arthritis treatment CH-4051 at the end of May, causing shares to fall 31%. Signs are that life is not getting any easier: the FDA this week rebuffed the company’s attempts to re-file on existing data, causing shares to sink another 41% to 87 cents.

Oncothyreon’s lacklustre share performance has continued with a delay in the read-out from the lung cancer vaccine Stimuvax, partnered with Merck KGaA. Final results expected next year but few are holding hopes for success.

Finland’s Biotie has declined this year, while it awaits news of its partner Lundbeck’s progress in getting the alcohol dependency drug nalmefene past European regulators. A couple of licensees have also decided to hand back partnered projects throughout the year.

Meanwhile, despite having a partnered phase III kidney cancer drug Aveo has joined the decliners. Since weaker-than-anticipated progression free survival results were released earlier this year - 11.9 months versus 9.1 months for Nexavar – concerns have persisted that tivozanib will struggle to compete in a crowded market.

Micro cap

Among the micro caps of the drug development world, Proximagen benefited over the year seemingly from owning a project in the same class as Arena’s recently approved obesity drug. A final boost came with a takeout bid this month from a long-term partner, Upsher-Smith, which is in the process of buying the UK company for £223m ($347m) up front.

With a move into ophthalmology and positive results from a Baush + Lomb partnered glaucoma therapy, NicOx has seen its shares advance this year. Last month a deal with Rapid Pathogen Screening for access to its ocular diagnostic tests prompted another 12% increase for the French company.

Endocyte has staged a recovery this year after the failure of its ovarian cancer drug vitafolide (EC145) in December wiped two thirds from the company’s valuation. Confirmation that EU regulators would accept a conditional filing based on robust responses seen in a specific subgroup boosted the shares, with a subsequent licensing deal with Merck & Co adding to gains.

Santarus has had a remarkable run this year with no obvious triggers, although the company has made progress with an accepted filing for Uceris to treat ulcerative colitis, and uncertainty around generic competition to its diabetes treatment Glumetza has largely cleared.

NewLink Genetics, meanwhile, has benefited from growing hopes for its phase III pancreatic cancer candidate, HyperAcute Pancreas; data are due later this year or early next.

Micro cap ($100-250m) pharma companies: top risers and fallers in Q2 2012
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-11 29-Jun-12 % change YE 2011 Q2 2012 EP Vantage comment and analysis 
1 Proximagen Group (£) 1.22 3.70 202% 122 370 Proximagen succumbs to bid from long-term partner Upsher
2 NicOx (€) 1.05 2.85 171% 101 274 EP Vantage Interview - NicOx strategy becoming clearer as its gaze shifts to eye care
3 Endocyte ($) 3.76 8.22 119% 134 295 Endocyte gets big deal but more validation needed
4 Santarus ($) 3.31 7.09 114% 201 444
5 NewLink Genetics ($) 7.04 14.98 113% 145 310 Weekly Market Movers (to 13 Apr 2012)
Top 5 Fallers
1 Cardiome Pharma (C$) 2.68 0.45 (83%) 161 28 Merck's call on vernakalant a blow to Cardiome
2 Savient Pharmaceuticals ($) 2.23 0.54 (76%) 159 39 Daily Market Movers (1 May 2012)
3 Columbia Laboratories ($) 2.50 0.68 (73%) 218 59 Vivus, Amylin and Threshold notable small cap gainers in Q1
4 Theratechnologies (C$) 2.79 0.82 (71%) 167 50 Daily Market Movers (22 June 2012)
5 Æterna Zentaris ($) 1.54 0.51 (67%) 160 56 Perifosine failure has Keryx pivoting away from cancer drugs

Among the decliners, Cardiome has not recovered from the loss of Merck & Co as partner on an oral version of the atrial fibrillation drug vernakalent back in March. While Columbia Laboratories has been hit by a negative advisory committee hearing and subsequent FDA rebuff for the preterm birth drug Prochieve.

Savient, which has been struggling to find a buyer for some time while boosting sales of the flagging gout treatment Krystexxa, is also now battling with bondholders.

Theratechnologies, meanwhile, plunged 62% on the news that its partner Ferrer Internacional had withdrawn an EU marketing application for tesamorelin. The company cited safety concerns for the drug, which is indicated to treat excess abdominal fat in HIV-infected patients with lipodystrophy.

Further bad news followed when Health Canada issued a notice of non-compliance also questioning safety issues, the proposed indication and patient population.

Æterna Zentaris and partner Keryx, whose shares are down 29% this year, have suffered from the failure of colon-cancer drug perifosine in phase III. With little else in the pipeline, Æterna in particular felt the failure.

Nano cap

Among the very smallest of the industry, Medgenics stands out as an outperformer. In May the FDA gave the company a green light for a phase IIb trial to begin in patients with haemodialysis, and this could validate the company’s lead product, Epodure, as well as its Biopump technology.

Threshold Pharmaceuticals’ deal with Merck KGaA over the hypoxia drug TH-302 at the beginning of the year and subsequent encouraging results in pancreatic cancer has continued to boost the shares.

Orexigen, the third player in the obesity race, has also seen big gains this year, although arguably it is largely living vicariously through the success of Arena and Vivus. The company has yet to re-file its submission for Contrave with the FDA.

Among the fallers, in March Bionovo announced that it had had to suspend enrolment into its phase III trial of Menerba for the treatment of menopausal hot flushes. Dogged by financial losses the company needs to raise substantial funds if it is to continue.

Neurosearch has continued to suffer in the wake of setbacks to its Huntington disease treatment Huntexil.  In May the Danish company reported safety issues in its multiple ascending-dose study in healthy volunteers.

Nano cap ($<100m) pharma companies: top risers and fallers in Q2 2012
Share price (local currency) Market capitalisation ($m)
Rank Top 5 Risers 31-Dec-11 29-Jun-12 % change YE 2011 Q2 2012 EP Vantage comment and analysis 
1 Medgenics ($) 1.70 10.80 535% 12 106 Medgenics hopes new trial will pump up interest
2 Threshold Pharmaceuticals ($) 1.22 7.40 507% 60 403 Threshold's hypoxia success is notable for field that has disappointed
3 BioDelivery Sciences International ($) 0.81 4.48 456% 24 133
4 Galena Biopharma ($) 0.47 1.65 252% 20 108
5 Orexigen Therapeutics ($) 1.61 5.54 244% 87 375
Top 5 Fallers
1 Arno Therapeutics ($) 1.50 0.10 (93%) 54 4
2 Bionovo ($) 0.23 0.02 (90%) 13 2 Vivus, Amylin and Threshold notable small cap gainers in Q1
3 NeuroSearch (DKr) 18.20 3.18 (83%) 80 14
4 Asterand (£) 0.05 0.01 (82%) 9 2
5 Bio-Bridge Science ($) 0.51 0.10 (80%) 24 5

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