The end of last week brought with it some considerable volatility in the biotechnology space, with a number of companies moving on fresh news. Here’s a look at two of the biggest movers with an analysis of what’s moving each and what’s next.
So, the two companies we’ve got on our watch list for today are TESARO Inc (NASDAQ:TSRO) and Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
We’ll kick things off with Tesaro.
This one is a bit of a strange one. The company is developing a drug called Niraparib and it’s currently under investigation as part of a phase II study that’s being conducted in collaboration with Johnson & Johnson (NYSE:JNJ). Early Friday morning, the latter circulated a press release detailing the suspension of the enrollment side of the study, and markets read the update as implying the study had been put on clinical hold. In the development stage biotechnology sector, you don’t want a clinical hold, as it suggests there are safety concerns associated with the drug under development.
So, in response to the assumption that the trial was placed on hold, markets sold off on Tesaro to the tune of 10%.
As it turns out, however, the interpretation was ill-informed. There are two stages in the study and the company (J&J) needs to take a look at the data from the first stage before it advances the drug into the second stage. Enrollment for the first stage happened at a quicker rate than initially expected and – so as to avoid enrolling the whole trial before getting access to the data from the first stage – the company temporarily suspended its recruiting of new patients.
Here’s how J&J responded to the event:
“There’s no clinical hold, no suspension, no safety issues, nothing going on. The first cohort enrolled quickly and we need to see data before starting to enroll the next group – standard trial conduct.”
So basically, it’s a non-event. Markets made a mistake (courtesy of what probably should have been a clearer release from J&J) and have since corrected to rebalance the error. As things stand, Tesaro trades for a market capitalization of a little over $7.47 billion at a price per share of $138 – a couple of points down on its Friday open, but practically flat when considered against the initial decline.
So that’s Tesaro, what about Lexicon?
This one is a little more straightforward.
Lexicon just put out data from a trial of its lead development asset, a trial investigating a drug called sotagliflozin as a potential treatment for patients with Type 1 diabetes. The trial is a phase III study and – as per the latest release – the numbers came in as indicative of clinical benefit.
The trial hit on its primary endpoint, demonstrating the superiority of sotagliflozin 400 mg compared to placebo in the proportion of patients with a A1C (average blood glucose) level of less than 7%.
This drug is an oral small molecule asset that acts as a dual SGLT1 and SGLT2 inhibitor and if the company can get it approved in the US it’s got a large potential patient population to go at. Markets recognize this potential and are responding to the news as might be expected – buying the company up and boosting share price in the process.
At last count, the Lexicon traded for a little over $16.40 a piece, which represents a premium of around 7% on the day’s open and brings the company to trade in and around highs not seen since the end of the first quarter of this year.
We expect a short-term correction (as the shorter term operators pull profits off the table) but chances are this on should continue to appreciate as the company moves forward. Full data (and a full analysis) from the trial is set to hit press near term (by way of a publication in a peer-reviewed journal) and this should translate to some strength as and when it’s released. We should also see the safety data from the study hit as part of the publication and assuming it’s clean, this should compound the run.