Japanese drugmakers stand out at the nine-month mark

Daiichi Sankyo’s incredible stock market performance stands out amid the usual mixed bag of fallers and risers among biopharma’s mid- and small caps.

Quarterly shareprice performance

The third quarter of 2019 is unlikely to be a period remembered fondly by biotech investors. Not in the US anyway: the closely watched Nasdaq Biotechnology Index faded over the three months, eventually hitting a low for the year. Which means kudos must go to those US companies that have managed to remain in positive territory: Seattle Genetics and The Medicines Company stand out in Vantage’s quarterly look at biopharma share prices.

However it is Japanese groups that top both the mid- and small cap tables, with Daiichi Sankyo’s remarkable advance this year particularly notable. Its stock has almost doubled in value, pushing Daiichi’s market cap to $44bn, and well into the league of the sector’s bigger beasts. For example, the company is now worth considerably more than Regeneron and is on par with Biogen, two US biotechs that have been having a torrid time.

A licensing deal with Astrazeneca over Daiichi’s Her2 antibody-drug conjugate, DS-8201, is largely behind the move; the project will be filed in the US later this year. Last month the Tokyo-based firm also won FDA approval for Turalio, a CSF1R-targeted kinase inhibitor, for a very rare cancer of the joints, and it is clear that investors have sat up and taken notice of the company’s progress.

Mid-cap ($5-25bn): top risers and fallers in first nine months of 2019
  Share price  Market capitalisation ($bn)
Top 5 risers 9-mth change (local currency) 30 September 2019 9-mth change ($bn)
Daiichi Sankyo

94%

44.6 22.5
Galapagos 74% 9.7 4.7
Sino Biopharmaceutical 70% 16.1 7.8
Seattle Genetics 51% 13.8 4.7
Vifor Pharma  49% 10.5 3.5
Top 5 fallers      
Teva Pharmaceutical  (55%) 7.5 (9.3)
Sumitomo Dainippon  (49%) 6.5 (5.8)
Nektar Therapeutics (45%) 3.2 (2.5)
Eisai (35%) 15.1 (7.3)
Piramal Enterprises (31%) 4.7 (1.2)

Another Japanese group, Sosei, tops the risers among the small caps, below. This is something of a recovery story – the company has suffered pipeline setbacks over the past couple of years, but recent progress with Novartis’s respiratory franchise, upon which Sosei will receive royalties, has provided a boost. A couple of big research collaborations with Takeda and Genentech also helped.

It is not all good news for Japanese drug makers, however. Sumitomo Dainippon remains one of the mid-cap laggards, and the company’s remarkable decision to hand over $3bn to Roivant for an eclectic mix of assets has not made up for a string of pipeline blow-ups and a looming patent cliff (Sumitomo bets on Roivant to solve its patent expiry woes, September 6, 2019).

Eisai, meanwhile, has been dragged down by disappointments in Alzheimer’s disease – the company was partnered with Biogen on the amyloid project aducanumab and the Bace inhibitor elenbecestat, both of which flunked phase III this year. The two companies are still working on another amyloid-targeting agent, BAN2401, but hopes are not high.

Europe is also well-represented among the mid-cap risers, with both Galapagos and Vifor notching up respectable gains. The former has benefitted from rising hopes for its Gilead-partnered Jak inhibitor, filgotinib, which could reach the market late next year and has been widely pegged as a future blockbuster. A huge research collaboration, forged between the two partners in July, also gave the Belgium company’s stock a boost.

Vifor Pharma, which sells products for iron deficiency and kidney disorders, has been a beat-and-raise story this year, with strong financial results driving share price gains. Hong Kong-based Sino Biopharmaceutical has also been delivering strong sales growth on a raft of new product launches, most notably the anti-VEGF kinase inhibitor anlotinib, which has been swiftly adding indications to its label.

The only US company to make it into the top five mid-cap risers is Seattle Genetics, which is riding high on the prospects for enfortumab vedotin in bladder cancer. The project is filed in a second-line setting, and encouraging data in first-line patients at Esmo this week gave the company a $2bn boost to its market cap. 

Notable decliners among the mid-caps include Teva; the Israeli generics giant has yet to solve its myriad of financial woes. Meanwhile Nektar’s concerns are clinical: efficacy of its lead project, bempegaldesleukin, appears to be waning, and investors have declined to swallow the company’s explanations.

Small cap ($250m-$5bn): top risers and fallers in first nine months of 2019
  Share price Market capitalisation ($m)
Top 5 risers 9-mth change (local currency) 30 September 2019 9-mth change ($m)
Sosei 203% 1,723 1,182
Eidos Therapeutics 161% 1,347 841
The Medicines Company 161% 3,968 2,554
Arqule 159% 862 560
Spark Therapeutics 148% 3,732 2,255
Top 5 fallers      
Inflarx (94%) 64 (879)
Novavax (86%) 120 (584)
Kezar Life Sciences (86%) 63 (388)
Mallinckrodt (85%) 202 (1,114)
Aclaris Therapeutics (85%) 45 (258)

Among the small cap risers, both Eidos and Spark have been the recipients of takeover offers. Eidos's majority shareholder Bridgebio has been trying to buy the remaining stake in the company, attracted by a that group's amyloidosis project, but its overtures have been rejected so far. Meanwhile Spark looks likely to fall to an offer from Roche, though drawn out scrutiny by competition watchdogs in both the US and Europe mean this cannot be considered a done deal.

Clinical successes have driven The Medicines Company and Arqule, the former with a novel cholesterol lowering therapy, and the latter in the field of haematological cancers.

Among the small cap fallers, it is mostly clinical failures that have demolished the companies. For Novavax, it was a second phase III failure for its RSV vaccine, Resvax; a post-hoc data dredge failed to convince Inflarx investors that a phase II study of IFX-1 was actually a success; Aclaris’s Jak posted ostensibly positive results but looks unlikely to live up to the competition; while mid-stage data on Kezar’s lupus project, KZR-616, raised safety concerns.

Finally, Mallinckrodt has been taken down by the opioid selling scandal. With the lawsuits claiming compensation far from concluded, the outlook for this company could still worsen.

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