Here’s What’s Moving Novartis AG (ADR) (NYSE:NVS) and Kamada Ltd (NASDAQ:KMDA)


We’ve come to the end of another week in the biotechnology space and, just as was the case last week, it’s been a pretty interesting one. Inputs of all different types have moved companies of all shapes and sizes, and we’ve seen a number of surprises hit press and induce volatility. As we head into the final session of the week then, and beyond, into the final week of the quarter, here is a look at two end of the week movers, with an analysis of what is moving each and where we expect the companies in question to go next based on what is driving the action so far.

The two companies in our crosshairs for today are Novartis AG (ADR) (NYSE:NVS) and Kamada Ltd (NASDAQ:KMDA).

We will kick things off with Novartis. This one is a data-driven move and one that fell favorably for the company. Novartis has spent the last six years attempting to prove the clinical benefit (and concurrently, the safety) of a drug called ACZ885, canakinumab or LLaris, in cardiovascular risk patients. The drug is already approved in patients with a high degree of cardiovascular risk caused by genetic factors, but the real population in this sort of indication is patients that have suffered a heart attack or some kind of cardiovascular event already. These patients are at increased risk of a second cardiovascular event (heart attack, stroke etc.) and a number of blockbuster drugs already exist as standard of care treatments to try and keep the subsequent and resulting risk down.

Novartis believed that Llaris could serve this population as a standard of care adjuvant (i.e., administered alongside standard of care) and the trial in question, the six-year phase 3 CANTOS study, was set up to demonstrate just that.

As it turns out, it can.

We don’t have all the data in hand as yet (as we have mentioned in the past, these mega-cap companies like to put out the data at major conferences as opposed to by way of press releases like a small company might) but we did get a topline implication, which suggested that the trial exhibited a reduction in the risk of further heart attacks or strokes in patients with a prior heart attack and inflammatory atherosclerosis (hardening and narrowing of the arteries).

The company is going to present the data at a major congress later this year and we expect an application submission (supplemental New Drug Application, sNDA) before the end of 2017. This opens up the potential for approval early to mid-2018 and dramatically increases the target population for this asset in the US.

As expected, markets are responding positively to the news, and Novartis currently trades up around 5% on its preannouncement capitalization. This may not sound like much, but for a company of Novartis’s size, it’s a considerable appreciation.

So, moving on, let’s look at Kamada.

This was not quite so positive.

Kamada announced on Thursday that it has withdrawn the Marketing Authorization Application (MAA) for its inhaled Alpha-1 Antitrypsin (AAT) therapy. The company has been developing this asset in an indication of Alpha-1 Antitrypsin Deficiency (AATD), and submitted to the European Medicines Agency (EMA) for approval based on what looked like some relatively solid phase 3 data. As per the latest news, however, the data isn’t as strong as it first looked. We don’t have too much information on the driver behind the withdrawal, other than a statement by Kamada saying that the EMA believes that the data provided is insufficient and that an additional clinical trial will be required.

The fact that an additional clinical trial will be required is the key input here. When a regulatory agency turns down a drug, it isn’t always necessarily really bad news, but if it turns down a drug and requests a fresh trial, it means the company in question is going to have to allocate capital towards conducting said trial.

Generally, this capital derives from equity raise, and any such equity raise is normally dilutive to shareholders. Markets take this into account and will often sell-off on a company on the back of such news as a result, in an attempt to rebalance share price against the potential impact of dilution.

That is exactly what we are seeing here, and Kamada currently trades for a 17% discount to its preannouncement capitalization.

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