As we noted last week, the close of the third quarter and the start of the final quarter of the year is when volume really starts to pick up in wider financial asset markets, and there are no markets where this is more apparent than the biotech space. News and data driven catalysts come and go, but if there’s volume behind them, they can have a sustained impact on the medium term directional bias of the companies to which they relate.
Here are two companies that have moved over the last few days, and a look at what’s driving the action in both – Lantheus Holdings Inc (NASDAQ:LNTH) and Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN).
Let’s kick things off with Lantheus. On Friday, the company announced an offering that will see if issue 5.2 million shared of common stock to Credit Suisse and Jefferies, as part of an underwritten public offering. The issue is pursuant to a shelf offering, so it’s been a while coming, but markets have still reacted negatively to the volume of shares on offer, and in turn, the dilutive impact this will have on shareholders’ current holdings.
At Friday market open in the US, the company traded just off annual highs for a little over $9.4 a share. By market close, the company went for two dollars lower, $7.44, having fallen close to 22% on the session.
For those not familiar with the company, Lantheus is a medical device and imaging company (Lantheus Holdings is parent to its client facing brand, Lantheus Medical Imaging, Inc) based out of Massachusetts. The company has a current market cap of $250-300 million, and generates within this range in annual revenues, which at a glance makes it look cheap at current prices. However, a look at the balance sheet somewhat negates this bias. The company has juts shy of $350 million long term debt on its books, and this weighs heavily on its potential to generate an income, despite its reasonable revenues figures.
The raise is going to go towards paying down some principal on its senior secured credit facilities, which is basically a black hole from a shareholder perspective (it will loosen the interest burden a bit but far from offset the dilution) and that’s why the company is selling off to the extent it has.
Moving on, let’s look at Achillion.
Achillion has had a pretty rough few weeks, and is down nearly 15% on August highs, However, the company just put out data relating to a phase IIa trial of its lead hepatitis C candidate, and looks set for a certain level of reprieve on the back of the numbers. The trial setup is pretty convoluted, based on the fact that Achillion out licensed the development and commercialization to Johnson & Johnson (NYSE:JNJ). A company called Alios BioPharma is conducting the trial, with the latter being a sub of Janssen, which in turn is a sub of J&J.
Two of the drugs in the trial are Achillion’s, and the third is simeprevir, an already approved Hep C SOC. The data showed that all the patients receiving a triple combo dose of all three drugs remained HCV RNA undetectable 24 weeks after completing therapy. The drugs under scrutiny didn’t add any safety or tolerability concerns onto the current regimen, and while it’s still early days, the combo looks like a shoo-in for an easy phase III and, beyond, a succesfull application with the agency.
We should see the full release as part of a presentation set to take place at the European Association for the Study of the Liver (EASL) Special Conference, in Paris, France, on September 23-24. Chances are we will see some further upside on this presentation, as the numbers draw speculative volume towards Achillion in anticipation of a momentum play.
Another one to watch closely going forward.