The biopharmaceutical sector got slammed in early February by an unexpected market correction when the Dow plummeted 1,175 points in a single day, the largest single points drop on record. The market did, however, get off the mat and recover some of its losses as the month rolled on, but it remained susceptible to any negative economic or financial news and often tumbled hundreds of points in a single day following such announcements.

By the end of the month, cooler heads seemed to have prevailed and the Dow finished down about 4 percent, with the Nasdaq Composite down just 2 percent.

In the wake of those market perturbations, biopharma companies saw their share values dragged down and the BioWorld Biopharmaceutical index took a 7 percent dive in value in the same period. (See BioWorld Biopharmaceutical index, below.)

Although that recovery was welcomed, going forward investors may have to live with wild market swings for the time being, with the Cowen and Co. biotechnology analyst team writing on market sentiment in their monthly biotech thermometer report that "volatility appears to be the new norm in biotech, if not in the rest of the market."

Not helping the cause of companies in the group was the fact that they returned not-so-stellar year-end financial reports.

Thousand Oaks, Calif.-based Amgen Inc., the sector's leading biopharmaceutical company by market cap, set the tone early in February reporting that it missed its fourth-quarter earnings targets. It 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. For the fourth quarter, Amgen's total revenues decreased 3 percent to $5.8 billion vs. the fourth quarter 2016 revenue of $5.97 billion. For full-year 2017, total revenues decreased 1 percent to $22.85 billion from $22.99 billion in 2016. (See BioWorld, Feb. 5, 2018.)

Amgen's shares (NASDAQ:AMGN) closed February at $183.77, down 1.4 percent, but, thanks to a good start in January, they remain in positive territory, up almost 6 percent so far this year.

Gilead Sciences Inc. also failed to brighten the picture with its shares (NASDAQ:GILD) down 6 percent in the month. Competition for its hepatitis C virus (HCV) therapies have eaten away at its market share and the company reported that fourth-quarter sales had halved since last year, falling to $1.5 billion from $3.2 billion in the fourth quarter of 2016. (See BioWorld, Feb. 8, 2018.)

Overall, Gilead's fourth-quarter 2017 product sales hit $5.8 billion vs. $7.2 billion for the same period in 2016, and totaled $25.7 billion for the full year vs. $30 billion in 2016.

Total revenues at the Foster City, Calif.-based company fell to $5.9 billion for the fourth quarter of 2017 vs. $7.3 billion for the same period in 2016.

Both Amgen and Gilead's share value erosion paled in comparison to two other biopharma heavyweights, Celgene Corp. and Biogen Inc., whose shares dipped dramatically, 14 percent and 17 percent, respectively.

Some of Summit, N.J.-based Celgene's woes were general market related, but about 10 percent of the drop was its own making when it revealed the FDA had issued a refuse to file (RTF) letter on the new drug application (NDA) for ozanimod to treat relapsing multiple sclerosis (MS). The company had high hopes for the potential blockbuster oral selective sphingosine 1-phosphate 1 (S1PR1) and 5 (S1PR5) receptor modulator and now its future is on hold. (See BioWorld, March 1, 2018.)

Although Biogen reported upbeat year-end financials at the end of January, the company's shares (NASDAQ:BIIB) have been on a downward trajectory ever since. 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.

There is no doubt that companies in the index group are glad to see the back of February with, according to Cowen analysts, "cautious optimism seeping back into the sector."

Bullish on small

In contrast to investors' angst on big biopharma companies, analysts noted that they were gravitating to those emerging drug developers and other small and mid-cap (SMID) companies that are developing platform and "hot" technologies. During the period, investors reacted favorably to strong deal flow that featured those types of assets.

"Nearly all specialists are positioned positively on SMID cap biotech as they want to believe that novel innovations (CRISPR, gene therapy, T-cell therapies) are sparking a new product cycle, a trend that will likely conclude with more M&A," the Cowen report noted.

As a result of that prevailing sentiment, the BioWorld Drug Developers index only slipped 3 percent in February and remains up 5 percent year to date. (See BioWorld Drug Developers index, below.)

According to Suntrust Robinson Humphrey (STRH) analysts in their Biotech Monthly Monitor, "February saw a number of high-profile partnerships with positive read-throughs for SMID caps."

They pointed to several high-profile deals announced in the month, including Nektar Therapeutics Inc.'s immuno-oncology deal with Bristol-Myers Squibb Co. (BMS). The transaction provides Nektar with $1.85 billion up front, consisting of $1 billion in cash and the remainder through an $850 million purchase of approximately 8.28 million Nektar shares (NASDAQ:NKTR) at $102.60 each, a 35 percent premium at the time. (See BioWorld, Feb. 15, 2018.)

The companies will evaluate the potential of NKTR-214 with Opdivo (nivolumab) or Opdivo plus Yervoy (ipilimumab) in registration-enabling trials in more than 20 indications across nine tumor types. Nektar shares closed out February at $86.56, up 3.5 percent and 45 percent for the year.

Sangamo Therapeutics Inc.'s shares (NASDAQ:SGMO) also jumped 15 percent on the strength of its potential $3 billion-plus deal with Gilead's Kite Pharma unit, which is designed to lever Richmond, Calif.-based Sangamo's zinc finger nuclease (ZFN) platform for the development of next-generation ex vivo cell therapies in cancer. Kite will use ZFN to modify genes and develop new cell therapies for autologous and allogeneic approaches. (See BioWorld, Feb. 23, 2018.)

Don't forget to Wave

STRH analysts also felt that Wave Life Sciences Ltd.'s deal with Takeda Pharmaceutical Co. Ltd., shone a light on "the value of the company's stereopure oligonucleotide platform."

Wave received a $110 million up-front payment and a $60 million equity investment from Takeda to discover, develop and commercialize nucleic acid therapies for CNS disorders. Takeda will also fund at least $60 million of Wave research over a four-year period to advance multiple preclinical targets it selects and licenses. (See BioWorld, Feb. 22, 2018.)

The performance of the shares of Immunogen Inc. (NASDAQ:IMGN) led the gainers in the Drug Developers index. Its 21 percent hike (73 percent YTD) was driven by the potential of its lead antibody-drug conjugate mirvetuximab soravtansine.

In its year-end operating results, company President and CEO Mark Enyedy noted that "we advanced our monotherapy registration study and published compelling combination data with mirvetuximab, expanded our clinical pipeline, and established a high-value partnership with Jazz Pharmaceuticals supporting our earlier-stage programs."

The company reported it had activated more than 100 sites in North America and Europe in its ongoing phase III FORWARD I trial of mirvetuximab soravtansine as single-agent therapy for platinum-resistant ovarian cancer and progressed the phase Ib/II FORWARD II trial evaluating mirvetuximab soravtansine combination regimens in separate expansion cohorts with Keytruda (pembrolizumab, Merck & Co. Inc.) and Avastin (bevacizumab, Roche Holding AG) for platinum-resistant disease.

Spring forward

Even given the expected ongoing market volatility, the future for the sector looks bright, according to analysts' forecasts. In the view of STRH, "sentiment on SMID caps is likely to remain positive as tax reform/repatriation is expected to drive further M&A and consolidation in 2018."

We could even see the biotech IPO market pick up, too. According to the Cowen report, "It appears there are an almost limitless number of companies gearing up for spring/summer IPOs should market conditions prove supportive."

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