Wockardt and Arena lead small-cap gainers through nine months

The best-performing small-cap companies of the first three quarters of 2012 represent a mix of therapy areas and strategies, ranging from single-product biotechs to big generics companies dependent on growth to maintain sentiment. Investors drove shares in California’s Arena Pharmaceuticals to a five-year high on approval of the first obesity pill in more than a decade – not to mention M&A speculation – while the Indian generics maker Wockhardt pleased shareholders with strong sales performance this year.

Among the smaller companies, Affymax has benefited from patient switches to its anti-anaemic Omontys from Amgen’s Epogen, and shares of Threshold Pharmaceuticals, despite a recent slump on disappointing pancreatic cancer data, still stand at nearly five times their 2011 year-end price. Meanwhile, clinical failure has pummelled Agennix, and K-V Pharmaceutical Company exists only as a shell after filing for bankruptcy.

Big rises

Of course, the analysis excludes Sarepta Therapeutics, whose sevenfold share price increase makes it easily the best performing biotech stock year to date. But the rise – caused by what were seen as highly positive phase III data in muscular dystrophy, occurred on 3 October, just missing the cut for the first nine months of the year.

The three best performing small-cap companies over the nine-month period saw their share prices more than quadruple this year, all for very different reasons. Wockhardt improved its balance sheet by divesting assets such as its nutritional unit and building sales, including that of its generic version of Toprol XL, which accounts for 40% of its US sales. Arena snared approval of Belviq, landing a significant milestone along the way and ramping up hope that partner Takeda or other suitors might seek a takeout.

Excitement over Pharmacyclics grew through the third quarter over rising hopes for ibrutinib, the first-in-class kinase inhibitor partnered with Johnson & Johnson in a $150m deal last year. Phase I and II data reading out in blood cancers in the coming months will provide further catatlysts for market action.

Rounding out the top five, Alnylam Pharmaceuticals’ ALN-TTR02 benefited from the FDA’s decision to require Pfizer to run a new trial on the amyloidosis drug Vyndaqel, and Swedish Orphan Biovitrum was bolstered by hopes for its pair of long-acting haemophilia agents.

Small cap ($250m-2.5bn) pharma companies: top risers and fallers in first 9 mths of 2012
Share price (local currency) Market capitalisation ($m)
Rank Top 5 risers 31 Dec 11 28 Sep 12 Change 31 Dec 11 28 Sep 12 EP Vantage comment and analysis
1 Wockhardt  $276.95 $1,292.75 367% 614 2,554 Daily Market Movers (29 Aug 2012)
2 Arena Pharmaceuticals $1.87 $8.32 345% 273 1,804 Takeovers tick up in 2012 but feeding frenzy still some way off
3 Pharmacyclics $14.82 $64.50 335% 1,016 4,484
4 Alnylam Pharmaceuticals $8.15 $18.79 131% 348 982 Alnylam pushes forward in amyloidosis after Pfizer set back
5 Swedish Orphan Biovitrum SKr16.10 SKr36.80 129% 603 1,404 Biogen and Swedish Orphan fixed for haemophilia success
Top 5 fallers
1 Anthera Pharmaceuticals $6.14 $0.99 -84% 251 79 Anthera springs back to life but more surprises likely
2 Chelsea Therapeutics $5.13 $1.20 -77% 317 80 Daily Market Movers (3 July 2012)
3 Progenics Pharmaceuticals $8.54 $2.88 -66% 288 98 Progenics and Salix suffer as FDA blocks constipation drug
4 Oncolytics Biotech $3.90 $2.33 -40% 278 178 Oncolytics’ rejig of Reolysin trial spooks investors
5 Aveo Oncology $17.20 $10.41 -39% 743 455 Aveo’s kidney cancer candidate looking weaker

The biggest fallers have all been victims of clinical or regulatory failure. Anthera Pharmaceuticals has seen two drugs fail this year, though enough of a glimmer of hope has been seen in the lupus drug blisibimod to initiate a phase III trial. A dilutive public offering in July raising $38m was little help to its share price.

Chelsea Therapeutics looks out for the count with the failure of Northera in neurogenic orthostatic hypotension. Progenics Pharmaceuticals suffered from the surprise FDA complete response letter for Salix Pharmaceuticals-partnered Relistor; Oncolytics Biotech redesigned its trial of Reolysin, raising fears of failure with an expanded population; and Aveo Oncology was battered on news of tivozanib’s disappointing performance in kidney cancer. The last company has filed for FDA approval.

Micro-cap risers

Affymax and its partner Takeda signed an agreement with Fresenius in July to supply their anaemia drug Omontys for use in dialysis patients with chronic kidney disease. While early-stage clinical news saw shares in California-based Xenoport rise in July; partnership interest in XP23829, which is described as a prodrug of Biogen Idec’s BG-12, could pick up once pharmacokinetic and pharmacodynamic data report early next year.

Array Biopharma has had a rollercoaster ride over the past three months. Reaching an enrolment milestone for a phase IIa trial of AMG 151 triggered an $8.5m fee from Amgen, driving shares higher, but safety concerns in August for the company’s pain drug ARRY-797 caused shares to fall. Still, shares have more than doubled on the year. 

After a poor August that saw Santarus announce that second-quarter profits had failed to meet expectations the California company regained ground with a US appellate court ruling reinstating patent claims for its acid reflux drug Zegerid. The reversal prevents Par Pharmaceutical, which launched its generic version in 2010, from any further sale of its product until July 2016 (Santarus suffers heartburn from Zegerid patent loss, April 15, 2010).

Infinity Pharmaceuticals also had its ups and downs. In July the group regained worldwide rights to its PI3K inhibitor IPI-145 and pain program from ex-US partner Purdue/Mundipharma. Although analysts at Rodman & Renshaw are concerned about the loss of the company’s sole source of significant funding the retention of worldwide rights was seen as a new positive, although the company will need to secure a partner to support late-stage development.

Micro fallers

The year just gets worse for German-based Agennix. With one failure under its belt in sepsis, the company’s immunomodulator talactoferrin suffered further setback when it failed to show superiority over placebo in non-small-cell lung cancer, prompting the company to sack employees and close its Houston site.

The first of three Canadian companies in the fallers, Cardiome Pharma, has not recovered since its crash in March when the then-partner Merck & Co discontinued development of an oral version of vernakalant, its atrial fibrillation treatment. In July the company said it would cut staff by 85%. Merck has since terminated its partnership and returned global rights for both the intravenous and oral formulations of the drug.

The Swedish company Bioinvent International suffered continued heartache in July when its atherosclerosis treatment BI-204 failed to meet a phase II primary endpoint. That news came only five weeks after the group announced the failure of its anticoagulant drug TB-402 and Roche returned rights to TB-403.

Theratechnologies has not recovered from its 62% share crash in June when partner Ferrer Internacional withdrew an EU marketing application for tesamorelin, for the treatment of excess abdominal fat in HIV-infected patients with lipodystrophy.

Lastly Helix Biopharma has been sliding over the year and in June delisted its shares from NYSE.

Micro cap ($100-250m) pharma companies: top risers and fallers in first 9 mths of 2012
Share price (local currency) Market capitalisation ($m)
Rank Top 5 risers 31 Dec 11 28 Sep 12 Change 31 Dec 11 28 Sep 12 EP Vantage comment and analysis
1 Affymax $6.61 $21.06 219% 236 762 Daily Market Movers (12 July 2012)
2 XenoPort $3.81 $11.45 201% 135 492 Daily Market Movers (26 July 2012)
3 Array BioPharma $2.16 $5.85 171% 126 538 Daily Market Movers (15 Aug 2012)
4 Santarus $3.31 $8.88 168% 201 559 Daily Market Movers (4 Sep 2012)
5 Infinity Pharmaceuticals $8.84 $23.51 166% 236 766 Daily Market Movers (18 July 2012)
Top 5 fallers
1 Agennix €2.87 €0.28 -90% 151 18 Agennix facing tough questions about its future following talactoferrin failure
2 Cardiome Pharma C$2.68 C$0.32 -88% 161 19
3 BioInvent International SKr16.40 SKr2.27 -86% 163 24 BioInvent scores unpleasant biotech triple
4 Theratechnologies C$2.79 C$0.50 -82% 167 30
5 Helix BioPharma C$1.90 C$0.60 -68% 125 40

Nano-cap movers

Since their January licensing deal with Endo, BioDelivery Sciences International shares have been steadily on the up. In August the companies started enrolment in a phase III trial testing BEMA Buprenorphine for the treatment of moderate to severe chronic pain.

While Threshold stock rose sharply at the beginning of the year when the company signed a development deal with Merck KGaA for the soft tissue sarcoma treatment TH-302, recent news has put a damper on the rise. While phase IIb data in advanced pancreatic cancer demonstrated a statistically significant improvement in progression-free survival, overall survival results were disappointing at 2.3 months, causing shares to drop 19.7% (Esmo – Threshold falls while data awaited on Herceptin-sparing protocols, September 18, 2012).

September was a busy month for Sunesis Pharmaceutical’s shares, which crashed by 22.4% and then rose by 32.2% in less than a week after saying a phase III acute myeloid leukaemia trial of vosaroxin was to be expanded, suggesting that efficacy was promising but that pivotal data are unlikely to read out before next year.

Medgenics received orphan drug designation in June from the FDA for its Infradure Biopump to treat hepatitis D. Analysts expect the product to get accelerated approval for hepatitis C trials in the US.

Nano cap (<$100m) pharma companies: top risers and fallers in first 9 mths of 2012
Share price (local currency) Market cap ($m)
Rank Top 5 risers 31 Dec 11 28 Sep 12 Change 31 Dec 11 28 Sep 12 EP Vantage comment and analysis
1 BioDelivery Sciences International $0.81 $6.32 685% 24 190
2 Threshold Pharmaceuticals $1.22 $7.24 493% 60 399 Daily Market Movers (24 Aug 2012)
3 Sunesis Pharmaceuticals $1.17 $5.63 381% 55 265 Sunesis disclosure farrago leaves markets in the dark
4 Medgenics $2.50 $10.71 328% 12 128 Weekly Market Movers (to 24 Aug 2012)
5 Hemispherx Biopharma $0.20 $0.80 310% 26 109
Top 5 fallers
1 K-V Pharmaceutical Company $1.40 $0.05 -96% 84 3 K-V Pharmaceutical orders a beer in last-chance saloon
2 Arno Therapeutics $1.50 $0.12 -92% 54 4
3 Bionovo $0.23 $0.03 -89% 13 2
4 Lotus Pharmaceuticals $0.35 $0.04 -89% 10 1
5 Omni Bio Pharmaceutical $2.99 $0.35 -88% 96 11

K-V’s struggles have been well known since it launched the premature birth preventive Makena at an incredible premium over therapeutically equivalent versions prepared in compounded pharmacies. Struggling under the weight of debt, bad publicity, widening losses and an FDA review finding the compounded versions to be equal in potency, the Missouri group filed for bankruptcy protection in August. After delisting from the New York stock exchange its shares now trade for pennies on the over-the-counter markets.

To contact the writers of this story email Jonathan Gardner or Joanne Fagg in London at [email protected]

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