We’re about half way through the week, and it’s time to take a look at some of the companies in the biotech sector that are drawing volume. There’s plenty to choose from, but here are some of the week’s biggest movers from the bunch, and a look at what’s driving the action (as well as what we expect next) from each.
The two companies we’re focusing on today are Innocoll Holdings plc (NASDAQ:INNL) and NewLink Genetics Corporation (NASDAQ:NLNK).
So, first up, Innocoll.
Yesterday this one was all about rumors, but as the session kicks off today in the US, these rumors have proven valid. Before we get into the detail, and for those not familiar with Innocoll, the company is a small biotech player with a focus on the development of treatments based on collagen. It’s lead product is CollaGUARD, a transparent bioresorbable collagen film for the prevention of post-operative adhesions in various surgical applications, but it’s got a couple of late stage development assets – one called Xaracoll, which is a post surgical pain candidate, and one called Cogenzia, a sort of collagen based sponge that the company is trying to get approved in a diabetic foot indication.
It’s not had much luck with either, however.
Back in November, Innocoll reported that the Cogenzia asset had failed two phase III trials, and shifted near term focus to Xaracoll. The latter was an NDA filed in October, but late December, the FDA reported a Refuse to File, basically arguing that the asset should be considered a drug/device combination, which would require the submission of additional information.
Anyway, the latest news is that the company is set to be acquired by an entity called Gurnet Point LP, which is a healthcare investment fund headquartered in Cambridge, Massachusetts, USA. The deal will see the latter pay $1.75 a share in cash and up to $4.90 in cash from a contingent value right (CVR), for a total potential per share value of up to $6.65. That’s a total potential valuation of around $209 million – a serious premium on the company’s pre-deal market cap of just $54 million.
After the slew of setbacks, this looks like a decent deal for Innocoll shareholders. The company basically collapsed on the two above discussed situations, and any return to valuation parity was looking a long way off. Some will, of course, not be satisfied, based on seemingly optimistic expectations of a Xaracoll approval on refiling, but we think many will just be glad to exit at a premium.
The deal hasn’t closed yet, but we don’t see any regulatory concerns that would see it fall through on the terms outlined.
So, moving on, let’s look at NewLink.
This one’s a data driven move, but it’s a little bit convoluted. The company reported interim data from a phase II study designed to investigate the efficacy of its lead melanoma asset. The drug, called indoximod, was under investigation as part of a combination therapy with checkpoint inhibitors in a target indication of patients with advanced melanoma. Overall, the ORR came in at 52%. In patients with what’s called non-ocular melanoma, this rose to 59%.
On the face of it, these aren’t bad numbers. However, the company is currently trading down on the release, having closed down to the tune of 10% on its pre release market cap.
So why the decline?
Well, as many readers might already be aware, indoximod is part of an investigational family of therapies called IDO inhibitors. A number of companies are working to bring these IDO inhibitors to market as combination therapies with the above mentioned checkpoint inhibitors, and any data from one is (rightly) immediately compared to data from the other. In this instance, the data that NewLink has put ot potentially looks unfavorable when compared to a drug called epacadostat. The latter is an investigational asset currently being trialed by young drug maker Incyte Corporation (NASDAQ:INCY), as part of a collaboration effort with big pharma incumbent Merck & Co., Inc.(NYSE:MRK).
This doesn’t mean the trial is a failure. There’s every opportunity to play with dosing and admin regimen ahead of a pivotal, and there’s also a chance that the drug will expand in efficacy as the population expands. At this stage, however, markets are interpreting the result as indicative of inferiority, and that’s why NewLink is down. We expect the company will recover near term, as markets realign ahead of trial advance.