Yet again we’ve seen some considerable volatility across certain areas of the biotech space this week. Here’s a look at the movers and shakers so far, alongside a discussion if what’s driving the action.
Biotech 1: Clovis Oncology, Inc. (NASDAQ:CLVS)
This is the big biotech news of the week. Clovis just announced an FDA request for more data on the efficacy of one of its lead pipeline candidates, CO-1686, or rociletinib. This is a common occurrence, and Clovis has announced that it has the data prepared, so it wont need to initiate any further trials and add cost to the development total. So why is it an issue? Well, because the data the company has prepared reveals a drop in efficacy of nearly 20 base percentage points from the initial data submitted as part of the drug’s NDA. The difference is rooted in the disparity between confirmed and unconfirmed response rates. Anything interim, i.e. recorded before the trial evaluation period completes, is classed as unconfirmed. Many companies will submit an NDA based on unconfirmed responses, especially in indications granted priority review, as Clovis did with rociletinib. However, the request by the FDA suggests it is not willing to approve the drug based on unconfirmed data alone. At US open on Tuesday, Clovis is down more than 70% on its market capitalization last week, having lost nearly $2.8 billion on the news.
So what’s next? Is this an opportunity to pick up an exposure at a discount? Well, probably not. Not only has the confirmed data slashed the efficacy rate of a drug that just last week looked like a great candidate for approval early next year, it has also made it inferior to a direct competitor – AstraZeneca PLC (NYSE:AZN) – who’s drug got a surprise FDA approval just a few days ago. This could play into the FDA’s opinion as it considers whether or not to approve rociletinib. If there is already a comparable therapy approved, for an identical indication, with superior efficacy, why approve Clovis’s candidate? There are arguments against this suggestion, including the FDA’s desire to introduce competing therapies to market to encourage lower prices, but it all builds onto the newly introduced uncertainty as to rociletinib’s future. Expect further downside as we head into the middle of this week – this situation is unlikely to blow over for Clovis any time soon. We’ve already gotten word of lawsuits springing up, with the suggestion seemingly being that Clovis should have disclosed the confirmed data to investors, and these could further impact the company’s market capitalization going forward.
Biotech 2: Lipocine Inc. (NASDAQ:LPCN)
Moving to the other end of the biotech spectrum, Lipocine is a small cap with a market valuation in the region of $260 million at time of writing. On November 12, 2015, Lipocine closed out the session at a little of $10 a share. At US open on Tuesday, it traded at $14.38 – a 40% gain across the period. Why? Well, as ever with these development stage companies, it comes down to its lead pipeline candidate – LPCN 1021. The drug is a testosterone treatment with a target indication of testosterone replacement therapy (TRT). Every month in the US, pharmacists serve up more than half a million TRT prescriptions to patients. However, the vast majority of these prescriptions come with a black box warning – essentially, the side effects of each are so severe that the FDA requires specific and obvious label warnings at biotech commercialization. The primary reason behind the warnings is that most therapies are intravenous, which makes for obvious risks. LPCN 1021 is an oral candidate, which removes a large art of the risk associated with TRT. If approved, therefore, the company believes it can capture a large part of the TRT market very quickly. We got efficacy and safety in the phase III on which Lipocine based its NDA, which the FDA accepted on November 12, the day that kicked off the 40% gains we have seen since. A PDUFA date is always an upside kicker for a biotech, even more so for one of this size, and therein lies the market cap inflation. Often we’ll get an FDA advisory committee meeting and review ahead of PDUFA, but not on this occasion, with the FDA already having confirmed this as unnecessary. This is likely a positive indication, but it extends the time to next catalyst by a month or so. The date to watch is June 28, 2016, so a good few months away yet, but keep an eye out for any follow up data from Lipocine that supports the efficacy argument as potential catalysts leading up to the FDA’s decision.