At the end of last week, a couple of companies announced FDA approvals in the biotechnology space and picked up some strength on the back of the news in each instance. Here’s a look at two of the biggest movers with a consideration of what’s behind the action in each and where we expect the companies in question to go next based on the most recent updates. The two companies in our crosshairs for the session today are Seattle Genetics, Inc. (NASDAQ:SGEN) and Heron Therapeutics, Inc. (NASDAQ:HRTX).
So, let’s kick things off with Seattle.
This one is rooted in the approval of a supplemental new drug application (sNDA) for a drug called Adcetris. Many reading might already be familiar with this drug, especially those with a bit of knowledge in the oncology space. For those that aren’t, it is an antibody-drug conjugate used to treat relapsed or refractory Hodgkin lymphoma and systemic anaplastic large cell lymphoma.
As per the latest news, the recent approval expands the target population from the four types of cancer previously cleared for treatment with Adcetris by another couple of patient groups and, specifically, adult patients with primary cutaneous anaplastic large cell lymphoma (pcALCL) and CD30-expressing mycosis fungoides (MF) who have received prior systemic therapy.
These are the two most common types of cutaneous T-cell lymphoma (CTCL) and, right now, have very limited treatment options on shelves in the US – especially once early-stage standard of care therapy (chemotherapy, radiation) has failed. With the addition of Adcetris to the list of available therapies, Seattle has dramatically improved the chances of (relatively) long-term survival for these patients and, at the same time, has boosted its chances of generating substantial revenues from this asset going forward.
Right now, the company generates just shy of $100 million quarterly from the drug, which accounts for somewhere in the region of 60% to 70% of its overall sales figure.
The incremental increase in revenues over time is rooted in Seattle’s ability to gradually increase its target population and, in turn, its ability to successfully get supplemental applications green lighted by the agency in the US. While the latest approval isn’t going to double revenues, therefore, it is important in the sense that it is one small step towards a significant outcome and markets are recognizing this incremental (successful) approach, as illustrated by the response to the news.
At close of play last week, the company was trading up a few percentage points on its preannouncement capitalization. At first glance this seems low, but when considered against the fact that this is a close to $10 billion entity, a few percentage points add a substantial amount to total value.
We expect the stock to continue appreciating into the fresh week this week as markets digest the topline implications of the latest FDA green light.
Next up, Heron Therapeutics, Inc. (NASDAQ:HRTX).
As noted in the introduction to this piece, this one’s also rooted in an FDA approval. This time around, however, it’s an entirely fresh asset hitting shelves – a drug called Cinvanti.
The drug is an injectable treatment designed to aid the prevention of acute and delayed nausea and vomiting associated with chemotherapy.
Prior to this approval, there was only really one asset in the space that was targeting this patient population – a drug called Emend, which was developed and is now marketed by healthcare giant Merck & Co., Inc. (NYSE:MRK).
The latter generates somewhere in the region of $550 million annually and, with Cinvanti, Heron is hoping that it can direct a large portion of these revenues towards its own balance sheet. This potential is rooted in the fact that, while its own drug has the same active ingredient as Merck’s, it doesn’t contain what is called polysorbate 80, which has been known to cause allergic reactions (anaphylaxis, in some cases) and infusion-site reactions.
This improved tolerability profile could help the drug overcome the fact that it isn’t available in pill form (while Emend is) and, in turn, could translate to some real long-term strength for Heron going forward.
In line with this statement, we expect Heron to continue to appreciate throughout the majority of this week. At time of writing, and subsequent to announcement, markets are trading relatively flat on the news but we don’t expect this to be the case for long.