Biotech Movers: Theratechnologies Inc. (OTCMKTS:THERF) and Loxo Oncology, Inc. (NASDAQ:LOXO)

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We are now midway through the week and things don’t seem to be showing any sign of letting up in the biotechnology space near term. Action throughout the week so far has brought with it plenty of fresh inputs across a variety of companies – big and small – and we have covered quite a few of these inputs in our biotechnology movers analysis early on in the week.

As we move into a fresh session today, then, here is a look at which companies are moving right now, why each is moving and what we expect to happen from each of the companies in question going forward.

The two companies in our crosshairs for the session today are Theratechnologies Inc. (OTCMKTS:THERF) and Loxo Oncology, Inc. (NASDAQ:LOXO).

So, let’s kick things off with Theratechnologies.

This one is rooted in a recent announcement from the company that the FDA has decided to extend its review of an outstanding Biologics License Application for a drug called ibalizumab by three months.

This is a drug that Theratechnologies is developing in combination with a privately held biotechnology company called TaiMed Biologics, Inc. and it was actually the latter that first reported the delay, given that TaiMed has somewhat taken the lead in pushing the drug towards commercialization over the last 12 months.

While we don’t really have any insight into why the agency has decided to delay the decision, markets generally regard this sort of delay as negative and – as such – trade down on the company in question. This is very much the case here, with Theratechnologies losing a little over 11% during the session on Tuesday to enter today’s session trading in and around $5.17 a share.

The drug is an HIV drug that is designed as a monoclonal antibody that binds CD4, the primary receptor for HIV, and inhibits the viral entry process. It was shown to be highly effective in achieving viral suppression in HIV patients across its development program and the safety profile of the drug looked relatively clean, but the FDA has obviously spotted something in the application that it is not comfortable with and this is what’s causing the delay. This goes against previous guidance that the company had picked up priority review for the asset and this is amplifying the negative sentiment surrounding the development.

Moving forward, all we can do now is look to the revised PDUFA date of April 3, 2018, as a near-term catalyst and – from a shareholder perspective – hope that the delay is not rooted in anything terminal for the program.

Next up, Loxo.

This one is on the more positive side of things.

On Tuesday, Loxo announced that it has inked a deal with healthcare giant Bayer AG (ETR:BAYN) that will see the latter pick up the rights to one of Loxo’s lead development assets – a drug called larotrectinib – which is being investigated as a potential treatment for late-stage breast cancer patients.

The drug is part of a family of drugs called TRK inhibitors and this type of drug has been very much in the spotlight over the last couple of years, with a number of big-name biotechnology companies looking to develop (or buy-in) their own versions of larotrectinib and push them towards commercialization.

Loxo’s larotrectinib has proven one of the most promising of the bunch so far and it’s likely for this reason that Bayer has decided to jump in at this stage. The latter has paid $400 million upfront for rights to the assets (as well as another drug, called LOXO-195) and is in line to receive another $650 million in potential milestone payments as the drug moves towards approval and subsequent commercialization.

There is some mid-stage data strongly support of efficacy already in place but chances are that Bayer will need to conduct its own pivotal trial before it can submit to the FDA for approval in its target indication of breast cancer.

As such, we are probably looking at between 12 and 18 months’ worth of development pathway left before the drug hit shelves and before Loxo picks up the remaining capital tied to the rights deal.

Markets have responded to the news somewhat counterintuitively, currently trading the company down to the tune of around 4%. However, as the implications of the arrangement are properly digested, there is good chance we will see a recovery for the company heading into the close of the year.

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