It’s been a busy week in biotech so far, and the late start out of the US doesn’t seem to have had too much of an impact on volatility. As the week draws to a close, here are two of the biggest movers, one up one down – Kite Pharma Inc (NASDAQ:KITE) and Eleven Biotherapeutics Inc (NASDAQ:EBIO).
Let’s kick things off with Eleven. This Massachusetts based biotech closed out the session on Thursday at $1.96 a share. At Friday’s open, the company traded at $2.68, and at time of writing, comes in at $2.78 – a 42% gain. The upside comes as Eleven reported the effectiveness of its lead investigational new drug application (IND) for EBI-031, an experimental ocular disease candidate.
The drug is a humanized monoclonal antibody that is designed to bind what’s called interleukin-6 (IL-6). The science behind it isn’t all that complicated. IL-6 is a cytokine (which is just a type of small protein) that is responsible for the cell signaling process that induces inflammation. The ocular disease that Eleven is targeting with EBI-031 comes about as a result of inflammation at the surface of the eye, so (theoretically), through the binding of this cytokine, the cell signaling process doesn’t happen and the inflammation doesn’t occur. No inflammation, no ocular disease.
It’s not uncommon for this sort of announcement to serve up some upside in small cap biotech, but a close to 50% gain is a more active response than standard. Why is Eleven up so much, then?
Because the effectiveness of the IND, which basically just means the drug has the green light for clinical testing, triggers a milestone payment for Eleven. The company has a collaboration agreement with Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY) that sees the two work together on the development of the drug, which at the top end will see Eleven pick up $262.5 million in milestone payments.
This first milestone payment totals $22.5 million – a number that amounted to circa two thirds of the company’s market capitalization pre-today’s gains. That’s why the market has responded in this fashion despite it being such early days for the drug, and the company, in question.
Kite Pharma Inc
This one is a little more convoluted than the Eleven Biotherapeutics situation. At time of writing (mid morning session, US) Kite is down nearly 10% on its Thursday close and looks set to lose further strength before the week draws to a close. This comes as the company announced it had completed its enrollment in its lead lymphoma trial, and that it expects to report top line and file for FDA approval before the year draws to a close. Ordinarily, this would serve up some positive sentiment. So why is the company down today? Well, Kite’s pipeline is primarily composed of a family of oncology drugs called CART therapies. We won’t go into too much detail about how these drugs work for the purposes of this discussion, but as a broad description, they are modified cells designed to induce an immune response to cancerous cells in cancer patients. Anyway, another company that is working in the space, Juno Therapeutics Inc (NASDAQ:JUNO), just announced that the FDA has placed a clinical hold on its lead phase II CART candidate. Reportedly, three of the twenty patients in the trial have dies of what’s called cerebral edema, which is where fluid builds up in the brain and causes pressure. Juno itself is down nearly 30% at time of writing, and while the situation looks to be specific to a combination therapy of the company’s own candidate and an SOC chemotherapy drug, it’s had a collateral impact on the CART space as a whole. How long this impact will last remains to be seen – markets look to have sold off a little heavily on the situation, especially when considering companies like Kite are suffering double digit losses, but it’s tough to gauge the overall impact. Chances are the sector will start to recover early next week as more details become clear.