Alkermes Plc (NASDAQ:ALKS) was an end of the week mover in the biotechnology space but the action wasn’t driven by what we might deem a ‘standard’ biotech input.
Here’s a look at what happened, why it happened and what it means going forward.
On Friday, news hit press from Bloomberg reporting that Nektar Therapeutics (NASDAQ:NKTR) was considering a number of restructuring-type options and that, potentially, the company was considering the sale of one or more of its assets or, if the price was right, itself as a whole entity.
This is a $15 billion healthcare company meaning any potential outright sale would be a big deal and would probably involve a top-tier drugmaker, however, at the same time Bloomberg pointed out that an asset sale (as in, breaking down the company’s development pipeline and selling it in parts) might serve to mitigate some of the risk any interested party might be asked to take on.
Here’s a snippet pulled directly form the piece:
“Nektar has attracted interest from larger drugmakers, though some potential suitors are wary of a full takeover because of the high valuation and risks related to its pipeline of experimental drugs, the people said.”
Nektar shares responded positively to the development initially, spiking into the middle of the US session on Friday. However at close, Nektar shares went for around a 15 discount to their pre-announcement pricing.
So where does Alkermes come into all this?
Nektar’s lead development asset is a drug called NKTR-214 and it’s currently under investigation as a potential therapy for patients with melanoma, renal cell carcinoma and non-small cell lung cancer. The idea is to use it in combination with Opdivo, the Bristol-Myers Squibb Co (NYSE:BMY) blockbuster cancer asset. It works by expanding and activating specific cancer-fighting T-cells and natural killer (NK) cells directly in the tumor micro-environment and, at the same time, works to increase expression of cell-surface PD-1 on these immune cells.
Opdivo is a PD-1 immune checkpoint inhibitor, so increased expression of cell-surface PD-1 as brought on by the NKTR-214 should help to boost the efficacy of the treatment as compared to treatment just using Opdivo on its own.
And as this data shows, this hypothesis seems to be valid.
As fro Alkermes, one of Alkermes’ most promising development assets is a drug called ALKS 4230 and it’s in phase I studies right now.
It’s got pretty much exactly the mechanism of action (MOA) as Nektar’s NKTR-214.
The belief then, and the driver behind the run we are seeing in Alkermes is rooted in this, is that the willingness of a big name to pick up Nektar’s assets is indicative of a potential similar pathway to success for the Alkermes asset.
If a company wants to buy NKTR-214, or to buy Nektar outright to gain access to the drug, it’s highly likely that we’ll see some similar interest in ALKS 4230.
So, on the back of the news, Alkermes is trading up to the tune of 9%, reaching intraday highs of $63.42.
Another company is also picking up some strength on the back of the news and in the same vein – ARMO Biosciences Inc (NASDAQ:ARMO). The latter’s AM0010 asset is pretty much exactly the same in composition as the Nektar and Alkermes assets and, as a result of the added market attention that the Bloomberg report has induced, traders are now looking at the asset as a potential target. At the close of play on Friday, Alkermes went for $33.32 – up a little over 11% on the company’s pre-announcement market cap.
As far as what happens going forward is concerned, there’s a good chance we’ll see some of the gains deplete as markets settle down a bit and absorb the implications of any buyout rumors.
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