Biotech Movers: NewLink Genetics Corporation (NASDAQ:NLNK) and Endo International plc (NASDAQ:ENDP)

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The week subsequent to ASCO is always a busy one and the last few trading days have been no exception. The biotech space is littered with catalysts and rumor right now, with presentations at ASCO dominating the chatter.

There have also been a number of non-ASCO developments, however, and while perhaps not taking center stage, these outside developments have translated to plenty of volatility in the market capitalizations of the companies involved.

With this in mind, and ahead of things settling down (a bit) next week, here’s a look at which companies are moving, why, and what’s likely to happen next for each.

The two companies we have in our crosshairs on Friday are NewLink Genetics Corporation (NASDAQ:NLNK) and Endo International plc (NASDAQ:ENDP).

We’ll start with NewLink as it’s a little simpler than the Endo situation.

NewLink announced on Thursday that Genentech will return the rights of IDO inhibitor GDC-0919 (navoximod) back to the company. For those not familiar with Genentech, it’s a subsidiary of Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY), so a deal with Genentech is, for all intents and purposes, a deal with big pharma. For a company of NewLink’s size, that’s a big thing. And it’s also a big thing to lose.

So what’s happened?

Well, we didn’t get too much information from Genentech or NewLink as to why the rights to the drug have been returned, so for now, the specifics remain unclear. With that said, we can speculate pretty reasonably that the drug just doesn’t serve up enough of a benefit for the company in its target combination indication to justify resource allocation. It’s what’s called an IDO inhibitor, and the plan was to add it to one of Roche’s PDL1 checkpoint inhibitors called Tecentriq in a target indication of patients with various solid tumors. Early data proved promising, but the follow-up data to this initial promise doesn’t look particularly good. Less than 10% of patients responded to the combination and those that did were partial.

There’s also the suggestion that a competitor product, Incyte (NASDAQ:INCY)’s epacadostat, which is basically the same in terms of MOA as GDC-0919, works better than the latter when used in combination with Merck & Co. (NYSE:MRK)’s PD-1 checkpoint inhibitor Keytruda. This combination translated to response rates of between 30% and 35%, dramatically outperforming the NewLink combo.

So, the deal is off, NewLink is disappointed and – as is expected – so are the company’s shareholders.

NewLink traded for a share price of close to $13 a piece at the end of last week. At last close (Thursday, June 8) the company went for $6.24 – a more than 50% depreciation on the news. As far as forward trading goes, it’s unlikely the company is going to recover the lost strength in its entirety, especially near term. With that said, we may see some degree of recovery on the bounce as markets realign to accommodate the sell-off.

So, moving on, let’s look at Endo.

As noted earlier, this one’s a little complicated. Well, not complicated as such, but unusual. The company announced yesterday that the FDA has requested Endo remove its opioid pain medication, reformulated Opana ER (oxymorphone hydrochloride), from the market. The justification for the removal, as per the release detailing it, is that the FDA is concerned that the benefits of the drug may no longer outweigh its risks.

There are certain risks associated with abuse potential for the drug and as far as justification goes, and taking into consideration alternatives that have come to market subsequent to the drug’s approval (as well as post-marketing reports) it seems understandable. With that said, this is so unusual because it’s the first time that the agency has taken steps to remove a currently marketed opioid pain medication from sale due to the public health consequences of abuse.

It’s an interesting one and it certainly changes the face of the development pathways for these sorts of opioid therapies going forward. Specifically, an approval is no longer necessarily a golden ticket – a company needs to ensure that its product remains safe and effective or, as illustrated by this latest move, the FDA is more than willing to pull it from shelves.

Again, as expected, this one is down on the news. Endo trades for a close to 15% discount on after hours trading.

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