Several interesting ongoing story lines reignited investors' interest in biotech during the month and helped halt the slide in the sector's valuation. Biopharma M&A is always an attention-grabber and Sanofi SA's hostile $9 billion-plus bid for Medivation Inc. provided that, with the latest chapter seeing the pharma seeking to oust the Medivation board and replace it with its own slate of candidates. There has also been an intriguing subplot with Amgen Inc., Celgene Corp. and Gilead Sciences Inc. all rumored to be contemplating their own bids for Medivation. Gilead has certainly made it known that it would be interested in an acquisition if the right opportunity presented itself. While it did pull the trigger on a $1.2 billion deal to acquire Nimbus Therapeutics unit Nimbus Apollo Inc., bringing into the fold a lead acetyl-coA carboxylase (ACC) inhibitor program, including a phase II-ready and preclinical allosteric ACC inhibitors aimed at treating non-alcoholic steatohepatitis, hepatocellular carcinoma and other metabolic and liver diseases, many investors are still waiting for the company to pull the trigger on a blockbuster M&A transaction. (See BioWorld Today, April 5, 2016.)

Shares under pressure

Despite that deal, Gilead, of Foster City, Calif., a solid biopharma favorite with investors, has run into some headwinds and its share value has come under pressure recently, falling almost 16 percent since the beginning of the year (12 percent in May alone); that was enough for the company to surrender its number one spot in terms of market cap, a position it has held for about three years, to Amgen. (See Share performance of Gilead and Amgen year-to-date, below.)

The company's first-quarter financial results did not impress the Street, leading J.P. Morgan analyst Cory Kasimov to suggest in a research note that Gilead "looks to be at a crossroads. The days of big HCV-driven beat-and-raises look to be in the rearview mirror, if 1Q is any indication, and shares have felt the fallout."

Amgen itself hasn't performed well, either, in the prevailing tough capital market environment for biotechs. Year to date (YTD), its shares (NASDAQ:AMGN) have fallen about 4.2 percent (3 percent in May). As of market close Thursday, the company's market cap was $116.8 billion, with Gilead's market cap standing at $113.6 billion.

The less than stellar performance of the sector's top two companies has been a contributing factor to the 13 percent drop in value of the BioWorld Biopharmaceutical Index so far this year. The general markets have in contrast fared much better, with the Nasdaq Composite index down only 2 percent so far this year and the Dow Jones Industrial average performing even better, up 2.3 percent in the same period. (See BioWorld Biopharmaceutical Index, below.)

However, there have been some encouraging signs of late that the sector is beginning to recover from its horrendous start to the year where at one point the BioWorld Biopharmaceutical Index had swooned by 23 percent. May's performance, for example, saw a modest 0.6 percent gain.

Leading the gainers was Incyte Corp., whose shares jumped 13 percent in May Earlier in the year, the Wilmington, Del.-based firm's stock (NASDAQ:INCY) took a beating following its decision to back away from experiments in solid tumors with JAK1/JAK2 inhibitor Jakafi (ruxolitinib). (See BioWorld Today, Feb. 12, 2016.)

Although Incyte's share value still remains down almost 25 percent YTD, the stock could continue its recovery with strong data from the company's more than 20 abstracts featuring its clinical development candidates at the 2016 American Society of Clinical Oncology (ASCO) annual meeting at the beginning of June.

Presentation of long-term data from the COMFORT-I phase III study will "further advance the understanding of Jakafi in the treatment of patients with myelofibrosis," noted Steven Stein, Incyte's chief medical officer.

Incyte also announced at the beginning of May that it had entered a definitive agreement to acquire Ariad Pharmaceuticals Inc.'s European operations for $140 million. At the close of that transaction, the companies said they will also enter a license agreement that will see Incyte obtain an exclusive license to develop and commercialize Iclusig (ponatinib) in Europe and other select countries. The drug is approved in Europe for the treatment of patients with chronic myeloid leukemia and Philadelphia-positive acute lymphoblastic leukemia who are resistant to or intolerant of certain second-generation BCR-ABL inhibitors and all patients who have the T315I mutation.

Ariad will be entitled to receive tiered royalties of between 32 percent and 50 percent on net sales of Iclusig in the licensed territory and up to $135 million in potential development and regulatory milestones for Iclusig in new oncology indications in the territory.

Waiting on investors

It is taking a little longer for investors to find favor with emerging drug developers and, as a result, the BioWorld Drug Developers Index still languishes, down 28.3 percent YTD. (See BioWorld Drug Developers Index, below.)

The group, however, managed to halt the slide in May, with the index closing down slightly at just 0.5 percent. Helping the cause was the whopping 60 percent jump in the share price of Sarepta Therapeutics Inc. (NASDAQ:SRPT). The company's shares have been on a wild ride as investors speculate on whether its lead exon-skipping drug candidate, eteplirsen to treat Duchenne muscular dystrophy (DMD), will get the green light from the FDA. The sentiment was definitely negative at the end of April following the FDA's Peripheral and Central Nervous System Drugs Advisory Committee, meeting on eteplirsen. (See BioWorld Today, April 27, 2016.)

The drug candidate failed two key votes, with committee members voting 3-7 with three abstentions against full approval. In its first voting question, the committee voted 5-8 with no abstentions against accelerated approval of the drug. Sarepta's shares closed the end of April at $13.80, down almost 30 percent from a month earlier.

In a dramatic turnaround during May investors turned bullish again, believing that an FDA approval for the drug could be possible, particularly when the company announced that the agency will not meet the PDUFA date of May 26 to complete its review of the pending new drug application. Investors speculated the delay could mean the FDA was still considering approval. In a research note, titled "Extending the agony (and the hope) in DMD," RBC analyst Simos Simeonidis wrote that the delay can be viewed as an incremental positive for Sarepta, since it buys more time for further advocacy. However, "we continue to believe that the chances of an approval are limited, and we continue to expect a complete response letter (CRL) for eteplirsen," he noted.

On the other side of the coin, shares of Ionis Pharmaceuticals Inc. (NASDAQ:IONS) took a beating in May, closing down 48 percent. The main hit came last week after the company clarified that "less than a handful of patients" enrolled in its phase III NEURO-TTR study evaluating IONIS-TTRRx in transthyretin (TTR) familial amyloid polyneuropathy experienced a serious decline in platelets. The small number of events, in seriously ill patients often taking other medications, might have been a minor blip on the radar screen except that partner Glaxosmithkline plc, which holds an option to license IONIS-TTRRx exclusively, decided to postpone a phase III cardiovascular study, CARDIO-TTR, that was planned to evaluate IONIS-TTRRx in patients with TTR amyloid cardiomyopathy. (See BioWorld Today, May 27, 2016.)

Positive news flow expected

There is no doubt that the sector has a good chance of getting its mojo back following the U.S. Memorial Day holiday weekend. Some excellent data are expected out the ASCO meeting set to start this week in Chicago. In addition, the BIO 2016 international convention is expected to draw more than 16,000 delegates from around the world to San Francisco next week. Those two events alone will keep investors fully engaged in the sector.

The ongoing land grab for Medivation will add to the drama as well as other likely transactions that are predicted to take place in the near future. This news flow will be positive for the sector and we expect that by the end of the second quarter the sector will be well on its way to getting back to even.