The biopharma sector's blue chip companies unfortunately got into the Halloween spirit, with the BioWorld Biopharmaceutical index posting a 7 percent swoon in value in October. That performance could be enough to scare investors into remaining on the sidelines for the rest of the year. They may be thinking that the great run biopharmaceutical companies have had this year may have finally run out of steam. In addition, the general markets offer attractive alternatives right now. The Dow Jones Industrial average and the Nasdaq Composite index are on a roll, posting a 4.3 percent and 3.6 percent increase in value in October, respectively. Year to date (YTD), the BioWorld Biopharmaceutical index is up 10 percent compared with a gain of 24 percent for the Nasdaq Composite and 18 percent for the Dow. (See BioWorld Biopharmaceutical Index, below)

Sentiment for the sector certainly shifted quickly, with blue chip biopharmas taking the brunt of investors' concerns.

Unimpressive third-quarter financial performances contributed to the significant drop experienced in stock prices but that, by itself, should not have caused such a major slide. Cowen and Co. analysts, writing in their monthly Biotech Thermometer, said that "since we started authoring these reports in 2011, we can't recall a month when sentiment toward biotech, or at least large-cap biotech, shifted so violently."

The report cites other potential other reasons that added to the sector's woes, including the failure of Celgene Corp.'s GED-0301 (mongersen), an oral antisense DNA oligonucleotide targeting the Smad7 protein to treat moderate to severe Crohn's disease (CD) and related indications. The Summit, N.J., based company halted the mongersen phase III REVOLVE trial in CD as well as an extension study, citing a recommendation of the data monitoring committee following an interim futility analysis. (See BioWorld, Oct 23, 2017.)

The announcement caused company's shares (NASDAQ:CELG) to fall more than 10 percent. Worse was to follow a few days later when the company released its third-quarter financials, which included a slow growth for arthritis/psoriasis drug Otezla (apremilast) and lowered long-term growth targets. The company's sales of Otezla had increased 12 percent, to $308 million, over the third quarter of 2016, but the company acknowledged a challenging market access environment that slowed growth. (See BioWorld, Oct 27, 2017.)

Long-term 2020 financial targets were lowered from total net product sales projected at greater than $21 billion to $19 billion on the low end.

By market close on Oct. 31, Celgene's stock closed at $100.97, down a whopping 31 percent, or $44.85 for the month, and down 13.65 percent YTD. The performance was more than enough for the company to lose its membership in the prestigious $100 billion market cap club.

Also heading out of the club's door after a brief stay was Gilead Sciences Inc. Despite beating earnings estimates for the third quarter, the Foster City, Calif.-based company's hepatitis C virus (HCV) franchise revenues were disappointing. (See BioWorld, Oct 30, 2017.)

Gilead's reported total revenue of $6.5 billion for the quarter was down from $7.5 billion from the same period a year ago. U.S. product sales were down 10 percent year over year at $4.5 billion, while European product sales of $1.2 billion were down 15 percent from the previous year. The drop was attributed, particularly in the U.S., to the lower patient starts in HCV and increased competition in the space.

HCV revenue sales in the U.S. totaled $1.4 billion, down 31 percent year over year and down 26 percent from the second quarter.

Shares of Gilead (NASDAQ:GILD) closed October at $74.96, down 7.5 percent.

The $100 billion market cap club is now down to just one member – Amgen Inc. The company saw its shares (NASDAQ:AMGN) dip 6 percent in October. It couldn't lift the sector's gloom, reporting unimpressive third-quarter financial results. Total revenues for the period fell by 1 percent to $5.8 billion, compared to Q3 of 2016, while GAAP EPS increased only 3 percent to $2.76, and remained flat for net income of $2.02 billion, due to charges associated with the decision to discontinue development of AMG-899, its CETP inhibitor, for dyslipidemia.

Amgen reported non-GAAP EPS increased 8 percent to $3.27, with net income rising 5 percent to $2.4 billion.

Despite surpassing earnings expectations in the third quarter, Alexion Pharmaceuticals Inc.'s shares (NASDAQ:ALXN) took an almost 15 percent hit in the month, reinforcing just how much biopharma blue chip equities had fallen out of favor.

According to the Cowen report, the current "prevailing wisdom is that newer launches have run their course, management guidance can't be trusted, and acquisitions will need to be consummated from a position of weakness."

Drug developers

In contrast to their blue chip colleagues, biopharmas developing drugs took less of a hit, with the BioWorld Drug Developers index slipping just 2.2 percent in value in October. Despite that, the index is returning a healthy 49 percent YTD. (See BioWorld Drug Developers index, below)

Notable performer in the period was Ardsley, N.Y.-based Acorda Therapeutics Inc., whose shares (NADAQ:ACOR) vaulted 12.4 percent. The company reported that its Inbrija (levodopa inhalation powder) product targeting Parkinson's disease is getting back on track. In August, the company received a refusal to file letter from the FDA regarding its NDA for the compound. After constructive dialogue with the FDA, Acorda now expects to resubmit the application this year.

"We believe our resubmission reflects a strong package that incorporates feedback we received from FDA," noted Ron Cohen, president and CEO. "We are also on track to announce top-line data from our phase III study of tozadenant in the first quarter of 2018."

Both Inbrija and tozadenant are being developed as therapies for people with Parkinson's disease: Inbrija for on-demand use to treat symptoms of "off" periods and tozadenant as a daily oral treatment to increase overall "on" time.

By the numbers

The sector closed October with a collective market cap of $833 billion for the 380 public biopharmaceutical companies tracked by BioWorld – a 10 percent drop in value in October. The number of companies with a market cap greater than $1 billion also slipped 8 percent to 77, reflecting the falling share values that biopharmas experienced during the month.