Here’s a look at two of the early week movers in the biotech space with an analysis of what’s moving each and what we expect to see next from the companies in question as their respective situations mature. The two companies in our sights today are (NASDAQ:RXDX).
Let’s start with Sunesis.
This one’s a downside mover. The company announced on Monday that it has withdrawn a Marketing Authorization Application (MAA) for a drug called vosaroxin. An MAA is the European equivalent of a New Drug Application (NDA) in the US – a company submits the filing to the European Medicines Agency (EMA), which is the European equivalent of the FDA in the US.
Anyway, vosaroxin is an oncology drug and Sunesis was hoping to pick up a European approval for the asset in a relapsed/refractory acute myeloid leukemia (AML) indication. Unfortunately for shareholders, management now believes that the drug doesn’t have a chance of picking up said approval (at least with the application in its current format) and so the company has pulled out. The initial announcement came at the start of the week and Sunesis took an immediate hit on the back of its release. Subsequent to the initial reaction, we’ve seen further decline and a flurry of lawsuits hit the ticker.
How this one will play out is unsure. There may still be a chance of approval on reapplication, but it looks unlikely that the company intends to fund any such reapplication near term. For now, and in the immediate future, Sunesis is shifting its focus (by way of a capital reallocation) towards a secondary program in its BTK-inhibitor asset.
Moving on, let’s look at Aeterna Zentaris.
This is one we covered earlier in the week when the company first announced that its lead endometrial cancer asset had failed a phase III study. The drug, called Zoptrex, was the asset on which a large portion of Aeterna Zentaris’s valuation rested, and the failure of the phase III marked a considerable setback for the company. It’s one that markets expected to hit press as positive, so not only did we get a response to the failure, we also saw what amounts to a sell the fact readjustment – a double hit if you will.
Management held a conference call after the release, and the purpose of these conference calls is generally to try and stem the bleeding through reassuring shareholders that the company in question has a path forward. While there seems to be such a path for Aeterna, the call was unable to convince markets that it would be anywhere near as rewarding (or as quick to traverse) as would be the then-current Zoptrex path, and the company has continued to sell of subsequent to the event.
At last count, Aeterna went for a little over $0.90 a share, for a market cap of just $13.4 million. Prior to the release, and for some perspective on the scale of the decline, the company traded at $3.35.
OK, let’s close out with Ignyta.
This one is yet another decline, but it’s far more straightforward than the ones outlined above. The company announced on Tuesday that it has commenced an underwritten public offering of 10 million shares of its common stock. These sorts of announcements are two-fold in their implications for a company, especially one in the biotechnology space. They involve share issue, and share issue is dilutive. No investor likes dilution, so markets will often sell off on a stock that announces a raise (generally representative to the degree of the dilution).
On the other side of things, if used well, a capital injection can carry a company to a major catalyst. Catalysts add value longer term, and therefore a raise can often close its own gap. This, of course, requires smart allocation, and that the capital isn’t just swallowed up by opgenadmin costs.
Immediately post announcement (so during the normal session on Tuesday) Ignyta sold off to the tune of 12%. After hours, a couple of percentage points were added to this dip.
We expect the company to recover medium term and we’re watching the most recent swing high at $9.2 as a key resistance level. If it can break through this level, we expect a run towards the $10 mark as the company nears its catalyst.