The Dow plummeted a whopping 1,175 points last Monday, the largest single points drop on record, which played havoc with all sector equities. Although recovering back about half of the loss the following trading day, nervous investors were preparing for the worse - an extended turbulent period on the capital markets leading to a full correction of a significant 10 percent to 20 percent drop in the leading stock market indices.

Their fears were certainly justified during the days that followed and by close of the markets Thursday the Dow was flirting with correction territory, down 8.75 percent, with the Nasdaq Composite also down 8.6 percent in February.

In the wake of all that, biopharma companies saw their share values dragged down by the prevailing financial vortex and the BioWorld Biopharmaceutical index slipped 8.3 percent in the same period. (See BioWorld Biopharmaceutical index, below.)

Good start erased

For many, that new state of affairs came as a shock because the sector started out the year in good shape, with the Nasdaq Biotech Index up 7 percent by the close of January. Investors appeared to be in positive mood. Their wishes for more mergers and acquisitions to spark the industry were granted. The month saw a string of high-profile transactions starting off during the week of the J.P. Morgan Healthcare conference in San Francisco with Celgene Corp. pulling the trigger on a proposed acquisition of San Diego-based Impact Biomedicines Inc., built around Impact's lead candidate, the phase III JAK2 inhibitor fedratinib, a potential treatment for myelofibrosis, a rare disease of the bone marrow. Celgene reported that it was paying $1.1 billion up front and future milestone payments linked to the deal could reach a potential $5.9 billion. (See BioWorld, Jan. 9, 2018.)

The Summit, N.J.-based company wasn't finished dealmaking because later in the month it confirmed what had been widely speculated – a further commitment to the white hot chimeric antigen receptor (CAR) T-cell space with a $9 billion move to acquire Seattle-based Juno Therapeutics Inc.

The deal "made a lot of sense since...Celgene will now finally have their own CAR T program in-house," commented Leerink analyst Geoffrey Porges in a research report to investors.

Certainly Celgene indicated that its plans to make Juno's CD19-targeting JCAR-017 in patients with relapsed/refractory (r/r), aggressive B-cell non-Hodgkin lymphoma (NHL) "an anchor molecule" in its own therapeutic approaches for the treatment of lymphoma. (See BioWorld, Jan. 23, 2018.)

During the month, investors were also treated to four additional M&As, with two of them involving Paris-based Sanofi SA: It announced its takeover of Biogen Inc.'s spin-off, Bioverativ Inc., for $11.6 billion and, at the end of January, said it would pay €3.9 billion (US$4.8 billion) for nanobody specialist Ablynx NV. (See BioWorld, Jan. 23, 2018, and Jan. 30, 2018.)

Although not in the $1 billion-plus range, two other significant M&As were revealed. At the beginning of January, Takeda Pharmaceutical Co. Ltd. reported it was acquiring cell therapy specialist Tigenix NV in a deal valued at €520 million (US$626.7 million), giving the Japanese biopharma full ownership of Alofisel, an off-the-shelf allogeneic therapy for anal fistulas. (See BioWorld, Jan. 8, 2018.)

Closing out what would be about $28 billion in reported total M&A transactional value for the month was Seattle Genetics Inc.'s $614 million acquisition of Cascadian Therapeutics Inc. to gain control of tucatinib (previously ONT-380), an oral small-molecule tyrosine kinase inhibitor that is highly selective for the HER2 growth factor receptor. (See BioWorld, Feb.1, 2018.)

With the BioWorld Biopharmaceutical Index, which embraces 21 of the top blue chip companies by market cap, returning a 3 percent gain in January, a full market meltdown appeared to be far from the minds of industry executives.

However, the Cowen and Co. biotechnology analyst team was more cautious. Writing in their month-end biotech thermometer report to clients they noted "signs of frothiness surround us. In our discussions with specialists there is also a healthy appreciation for the fact that biotech has had a great run, and that this rally could end at any time, in any number of ways."

Prescient words indeed because in just a few trading days in February, the great start to the year by the sector was quickly erased.

Great financials...forget about it!

The general market situation could not have come at a worse time, with blue chip companies currently in the middle of reporting their year-end financials. So far, the reports have been extremely positive, but with investors staying on the sidelines, that is not having much effect on the value of their shares.

Tarrytown, N.Y.-based Regeneron Pharmaceuticals Inc. is a typical case in point. The firm posted solid revenues for the fourth quarter 2017, disclosing non-GAAP earnings per share of $5.23, beating the consensus of $4.48. Total revenue of about $1.5 billion was also better than consensus. Its lead product, Eylea (aflibercept) for wet age-related macular degeneration, generated revenue of $975 million vs. consensus of $960 million. Ex-U.S. Eylea end-user revenue of $637 million also proved better than consensus of $578 million.

Its cholesterol drug, Praluent (alirocumab), with revenue of $63 million, beat consensus of $53 million and eczema therapy Dupixent (dupilumab), approved last March, turned in revenue of $139 million, beating the consensus of $122 million.

Piper Jaffray analyst Christopher Raymond said his firm remains buyers on the company's shares "after another solid revenue posting by Eylea and other products, which we think is indicative of both clinical and commercial productivity in the year to come."

Despite that, the company's shares (NASDAQ:REGN) have hit the skids so far this month and are down 12 percent.

Gilead Sciences Inc., which saw its shares (NASDAQ:GILD) soar 17 percent in value last month, gave back 7 percent of that despite a positive flow of news in February.

The company reported that fourth-quarter sales of its hepatitis C virus (HCV) therapies did come under competitive pressure, which has halved sales returns since last year, falling to $1.5 billion from $3.2 billion in the fourth quarter of 2016. (See BioWorld, Feb. 8, 2018.)

However, the company anticipates both pricing and market share to stabilize this year – and receiving the FDA's green light for new HIV combination drug Biktarvy (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg, BIC/FTC/TAF) will, analysts forecast, make a meaningful future contribution to the company's bottom line.

Leerink analyst Porges forecasts $1 billion of sales for the drug this year, which will be derived mostly in the U.S. Leerink's long-term forecast "is for Biktarvy to reach global sales of $10 billion by 2025 and this is considerably above recent consensus estimates of $6.1 billion."

Thousand Oaks, Calif.-based Amgen Inc. shares (NASDAQ:AMGN) have given back all the 7 percent gains achieved in January. The company reported earnings of $2.89 per share for the full year and a loss of $5.89 per share for the fourth quarter, including a $6.1 billion charge related to impacts of U.S. corporate tax reform. However, the company's expectations for a lower 2018 tax rate and its plans to repurchase up to $10 billion of its own shares through a Dutch auction, increased speculations that the company will plow some of the massive $41.7 billion cash it has available to pull the trigger on an M&A transaction in the near future.

CEO Bob Bradway said that "we have felt for some time that there are pockets of excess capacity in the industry and we'll look to see whether we can help create some value by being part of the consolidation around those." (See BioWorld, Feb. 5, 2018.)

Biogen was another biopharma heavyweight to give back the 9 percent gain in share value (NASDAQ:BIIB) earned last month. At market close Thursday, the stock was down just over 10 percent.

Not helping the company's cause was its announcement that in a phase IIb ACTION 2 study in individuals with acute ischemic stroke, Tysabri (natalizumab) did not demonstrate improvement in clinical outcomes compared to placebo.

RBC Capital Markets analyst Brian Abrahams said the disappointing result "is likely to have limited impact, as our sense had been that expectations were quite low. We continue to believe BIIB's midstage neuro pipeline is scientifically sound and should generate more interest as programs reach later stages."

Drug Developers slip back

Members of the BioWorld Drug Developers index also took it on the chin in February and the value of the index has so far slipped just over 8 percent after a promising start to the year. (See BioWorld Drug Developers index, below.)

The only company in the group to so far avoid red figures this month is Array Biopharma Inc., whose shares (NASDAQ:ARRY) are trading up almost 14 percent and 32 percent year to date. Investors reacted favorably to news that the Boulder, Colo.-based company, along with Pierre Fabre SA, reported overall survival results of the phase III COLUMBUS trial testing COMBO-450 (encorafenib plus binimetinib) in patients with BRAF-mutant melanoma. Treatment produced a median overall survival of 33.6 months compared to 16.9 months for patients treated with Zelboraf (vemurafenib, Roche Holding AG), resulting in a hazard ratio of 0.61. COMBO-450 is under review by the EMA, Swissmedic, the Australian Therapeutic Goods Administration and the FDA as a treatment for BRAF-mutant advanced, unresectable or metastatic melanoma. In the U.S., the PDUFA date has been set for June 30.

Queasy rider

With investors still trying to find where the true value of the market lies, volatility will be high for the foreseeable future. The biopharma sector used to be the "safe haven" in times like these but no longer. It will be a wild, stomach-churning roller coaster ride for companies in the space and so expect to see the pace of financings, which hit a record level of $7.7 billion raised in January, to slow dramatically.

A new financial environment is taking over, and one which we are not used to, given the extended bull run that the sector has experienced. Companies may have to amend their game plans if the market slide continues for a significant period.