SUMMARY
Biotech stocks were up ~14% last week
The huge biotech stock week was driven mainly by biotech M&A activity
It's unlikely that the biotech sector can repeat the 14% gain of last week, this week
How will biotech stocks do this week? This year?
CLICK HERE to become an Amp Pro subscriber and check out the Amp version of this article to get Amp's view on this week and the rest of the year for biotech stocks, and its strategy for its biotech portfolios.
When we published our article in mid-July (Amp Pro version; free version; Seeking Alpha version) we saw promising signs of life in biotech stocks, especially small and mid-cap biotech and the $XBI biotech ETF. Between June 13, 2022 and July 8, 2022, XBI beat the broader stock market indices by over 25%. However, with drug pricing legislation progress in the headlines, it appeared to us that XBI would stay in a range between $75 and $85 until that legislation either became law or died. We did not anticipate the major biotech M&A activity last week, which drove biotech stocks to an ~14% gain, especially given that we are still in the biotech stock summer doldrums. Last week was the week we biotech investors have been waiting for, for 18 months.
Let's review the 5 major drivers of public biotech stocks, which in turn drive IPOs and private biotech investments, as we set out in our mid-July article (clarifying the direction of the factor):
1) Present valuations vs. historical valuations (lower present valuation is a positive factor for biotech)
2) Concerns about the economy/broader market (More concerns about the broader market is a positive factor for biotech)
3) U.S. drug pricing reform discussions/progress (negative factor for biotech)
4) High profile clinical trial and FDA readouts (positive or negative readouts = positive or negative factor, respectively, on biotech stocks)
5) Biotech M&A activity (more M&A activity is a positive factor for biotech)
Last week, we had some huge M&A/corporate development activity, and other high profile positive clinical trial news too, which drove $XBI up over 13%:
- 8/3 #PSTX enters into a large collaboration in the immuno-oncology (CAR-T) area with Roche (#RHHBY) for $110M up-front and up to $6B in milestones (Poseida 8/3/22 press release)
- 8/4 #AMGN agreed to buy #CCXI for $3.7B (CCXI 8/4/22 press release), for CCXI's approved TAVENEOS oral complement 5a receptor inhibitor and other assets for inflammatory and auto-immune diseases.
- 8/4 #GILD agreed to buy private biotech company MiroBio for $405M for its technologies related to treating inflammatory diseases (Gilead 8/4/22 press release)
-8/4 #SNY (Sanofi) and Innovent (01801 Hong Kong stock exchange) enter into collaboration to advance combination therapy of their oncology assets in China and Sanofi invests $350M in Innovent (Innovent 8/4/22 press release)
And the M&A rumor-mill continued to heat up as last week went on, with the following chatter:
Sickle-cell therapeutics company #GBT, and its approved therapy #Oxbryta, is rumored to soon to be acquired by Pfizer, #PFE, for $5B? (8/5/22 Reuter's article).
Dr. Reddy's lab (#RDY) and Intas Pharma were rumored to be bidding to buy oncology company #ATNX for $200-$250M, which has almost $100M/yr in product revenue. (Seeking Alpha article)
In addition to the positive corporate development/M&A news, there was a high profile positive readout and FDA approval last week as well:
- 8/3 ALNY reported high profile positive data on its RNAi against TTR for the treatment of cardiomyopathy of ATTR amyloidosis (ALNY 8/3/22 press release).
- 8/5 FDA approved AstaZeneca and Daiichi Sankyo's Enhertu for HER2-low breast cancer 4 months ahead of its PDUFA date (8/5/22 FDA press release)!
So with this backdrop, will biotech stocks have another strong week this week?
Well, it's not probable that this week (or any week this year) can have as much biotech M&A and positive clinical trial news. However, the GBT deal, and less likely this week, the ATNX deal, might be announced. Furthermore, this week, like last week, is a huge week of biotech quarterly report-outs. These are opportune times for companies to close/report M&A activity, even if it is still in the vacation season. And we already have our first positive clinical trial news of the week with HCM's fruquintinib meeting its primary OS endpoint in metastatic colorectal cancer (Hutchment 8/7/22 press release)
Overall though, there is likely to be far less M&A activity this week than last week mainly because there are not many weeks where we will ever see that much M&A activity, especially in the summer. However, even though there are no PDUFA dates this week, it is possible that we will have some major readouts since we still have ~6 Mover to Watch/Big Mover events left with mid-2022 readout dates, which should read out before August 31 and possibly this week. On the other hand, now that XBI is over $90 per share, although still with lots of possible room to move up, it is not looking as undervalued as it did last week when it was ~14% lower.
How will biotech stocks do this week? The rest of this year?
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This article is not investment, tax, or legal advice. Please do your own diligence and seek advice from professional advisors representing your interests.
Article history: Posted 8/8/22 by MV and Amp team