It’s been another busy week in biotech, and we’ve had plenty to discuss from a data perspective. All the updates have translated to some considerable volatility at both ends of the space. Here are two of the week’s biggest movers so far, and a look at what’s driving the action in each. The two companies in focus are Oculus Innovative Sciences, Inc. (NASDAQ:OCLS) and Insys Therapeutics Inc (NASDAQ:INSY).
Let’s kick things off with Oculus. This company opened up the session at $3.98 a share, fresh off gains from the previous session. By the Wednesday close, however, the company had gained a further 14% to close out at $4.55 a share. The gains come on the back of an approval from the FDA for its post dermal procedures product, Microcyn. The product is intended to aid the removal of foreign debris in patients that have just undergone a dermal procedure, and the approval brings a development to the market that seems to vastly outweigh its competitor products in terms of ease of use, safety and efficacy.
It’s been developed by IntraDerm, which is a wholly owned subsidiary of Oculus. The company put together a 510(k) based on some solid data earlier this year, and while expectations for a approval were relatively high, markets seemed cautious to go all in ahead of an FDA nod. Oculus has had a rough half decade from a market capitalization perspective. The company traded for as high at $53 a share mid 2011, and the decline has come counter to the overarching bullishness in the wider biotech space. The latest approval has given it a boost, but far from represents any reasonable level of recovery, so caution ahead of the news seems well placed.
Marketing is set to begin during the second quarter of 2017, by which point the assumption is that the company will have raised some capital to fund the execution. Shareholders should keep in mind that this will undoubtedly be dilutive.
Moving on, let’s look at Insys.
This is a bit of a counterintuitive one at first glance. The company reported data from a phase III trial in its lead buprenorphine spray candidate, and the data suggested that the spray met its primary endpoint across all doses. The drug is targeting a moderate to severe pain indication, and is one of a wave of cannabis derived candidates that have hit the clinical pipeline over the last few years.
An endpoint hit should inject some upside momentum into the company, but it didn’t. Insys closed down nearly 5% on its daily open on Wednesday, and is down almost 20% across the last couple of weeks. Why?
The company is under investigation for allegedly deceptively marketing and selling an addictive fentanyl-based medication, its approved product Subsys, which under FDA recommendation is only intended to treat cancer pain, to doctors for off-label uses. The drug is a big revenue generator for the company ($330 million during 2015) and the Illlinois attorney general just announced that it is suing Insys for its actions. A suit of this nature can cause considerable damage for a company of Insys’s size, and that’s likely what’s weighing on market capitalization right now.
Whether this will blow over and the current levels, in hindsight, will turn out to be a discount entry remains to be seen. For what it’s worth, we like the company’s products but as an investment it looks a little risky right now.