It’s earnings season, and yet again, financial data has given us plenty to talk about across the markets in the US. Especially so in biotech, where operational updates underscore the quantitative data. In the development side of the space, it’s the operational element of the reports that generally drive market capitalization, so here are two of the week’s biggest movers so far – Heron Therapeutics Inc (NASDAQ:HRTX) and AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG).
We’ll kick things off with Heron. This California based company opened the session on Wednesday at a little over $22 a share. It will open today’s session in the US at $19.80 – a close to 11% decline on the Wednesday open. We alluded to operational highlights in the opening paragraph of this piece, and last month Heron offered us an update on its primary development program – its chemotherapy-induced nausea and vomiting (CINV) drug, Sustol. On the update, Heron gained strength, as the FDA announced there were no material deficiencies in the drugs New Drug Application (NDA) and – as a result – the regulatory body would kick off discussions with the company regarding labeling.
Since this announcement, however, markets have repeatedly sold off on Heron stock, and the company now trades (including the latest 10% decline) nearly 30% down on its post NDA related release price. This begs the question – what’s driving the decline? Operational highlights were just that – highlights – so it must simply be down to sentiment.
There may be an opportunity to pick up an exposure at a discount as a result. The company is almost certain to kick off commercialization before the end of the year, and when it does, and assuming its Sustol labelling isn’t too severe, we should see some upside in its market capitalization. A recovery to the $23-25 range looks likely as an initial upside target, and beyond that $30 would give the company a circa $1 billion market cap, and as such, presents a nice secondary target as part of a speculative medium term allocation. There have been a few analyst upgrades as late to support this bias, which should serve to overcome some of the negative sentiment going forward. One to keep an eye on.
Moving on, let’s take a look at AMAG. For those not familiar with the company, it’s a Massachusetts based biotech with a few drugs currently on the market, most notably its Makena asset, which is a drug designed to reduce the chances of preterm birth in mothers who have delivered early in the past. The company just announced it sold $65 million worth of the drug during the first quarter of this year – up 17% on the same period last year – and pulled in total revenues of a little over $109 million. Earnings came in at a beat, with $0.94 cents reported versus a consensus forecast of $0.89.
Despite these numbers, however, AMAG will kick off today’s session at a, 11% discount to its Wednesday open. Why? Because the revenues figure missed consensus, which analysts had forecast at $123 million. Additionally, while earnings beat expectations, it still came in lower than the January-March figure for 2015, which was reported at $1.17 – a 25% deficit this time around.
Operationally, the primary highlight was an anemia pipeline update, and this is the likely focus going forward as far as forming a medium term bias is concerned. The company’s lead development candidate in this indication – Feraheme – is currently in a head to head trial to extend its current indication beyond oral administration. Data is expected during late 2017, and if the company can demonstrate efficacy in the alternate dosing method, we should see a quick turnaround on the sNDA application and – with any luck – a quick target population expansion.
Again, this one could be a nice opportunity to get in on a pullback. While the company missed expectations, more often than not it’s the fault of the analysts rather than the company in this sector, and with a positive bottom line (something of a rarity in a company of this size, in this space) chances are we will see a recovery in AMAG stock before the year is out. Once again, one to keep an eye on going forward.