Saturday, 14 December 2013

2013 Biotech & Pharma IPO Review – Most Popular Therapeutic trends, Trending Clinical Stages and post-IPO Winners & Losers

2013 was generally a good year for the markets (and underwriters!). The S&P 500 is up 26% on this time last year, with the NASDAQ composite running slightly higher at 30% - but not even close to the stellar 56% performance of the Biotech Index (fig 1). In fact, few events in other industries could compete with the Great Biotech IPO Fever of 2013, when the IPO conveyor belt went full overdrive, churning out an average of four biotechs a month into the public domain.

Figure 1. Performance of the NASDAQ composite Index, the S&P500 and the NASDAQ Biotech Index, Dec 11, 2012 – Dec 11, 2013
An awesome $3.5 billion was raised in 46 NASDAQ biotech IPOs this year (not even including the monster $1 billion IPO of the global CRO Quintiles, or companies which have gone public on other exchanges) – second only to the historic year 2000, when altogether 63 biopharmaceutical players floated, raising nearly $6 billion. Table 1 has a list of this year’s 46 biopharmaceutical IPOs – the last one of which, TetraLogic, began trading just 20 hours ago (on Dec. 12th).

Judging by the performance of the biotech IPO class of ’13, the markets didn’t seem to mind the craze at all. In contrast with last year, when the opening share price median was 20% below anticipated target range, the vast majority of ’13’s IPOs opened above IPO offer price (despite several necessary revisions), and as of December 11 are performing at an average of +46% on IPO price, and at +32% (mean) and +3% (median) since their share price on the first day of trading.

Table 1. Biopharmaceutical IPOs on the NASDAQ in 2013

For some companies, dreams of public markets did not materialize this year. Some companies have postponed going public as the markets no longer seem favorable this year, whilst others have withdrawn IPO filings altogether. Table 2 has queued, postponed and withdrawn IPOs.

Table 2. Queued, postponed and withdrawn IPOs
(CLICK HERE for PDF Text version of this table)

Stage of Development

PhII and PhIII products constituted an equally shared majority of this year’s IPOs’ products (fig. 1), as one of the Phase III products already failed in clinical trials (Prosensa’s disapersen). 9 of the leads in 2013 were already marketed products, and one somewhere in between—the yet-unapproved Omthera’s (now AstraZeneca) Epanova is anticipating an FDA verdict on May 5th.

There were no pre-clinical lead players in the 2013 IPO frenzy, unlike the two – Verastem and Regulus—seen in 2012. However, the non-negligible portion of 5 Phase I leads appears to show that going public for earlier-stage companies is certainly trending, although not excelling – see below.   

Figure 1. Development stages of lead products of companies which had an IPO in 2013

Best performing clinical stage

As one would expect, market interest is very visibly deterred by perceived clinical development risk. Development stage is directly proportional to the performance of the company’s stock post-IPO, and 2013 was no exception (Fig. 2). Companies with leads in PhI have performed at an average of just +5% since opening day, whilst marketed products in contrast performed at t 87% - thanks to some major stars like Insys and GW Pharmaceuticals.

Figure 2. Average performance of 2013 IPO Companies’ lead products by stage of development

Therapeutic Area

The most popular therapeutic area of leads whose companies went public in 2013 was, by a large margin, cancer – no surprises there (fig. 3). The popularity of this therapeutic area resonates in other 2013 pharma activities, such as Mergers and Acquisitions and Drug Approvals. With a higher chance of success, CNS would have long been the therapeutic area of choice, but pharma and biotech are seemingly shying away as chances to trial success are now extremely low (with the exception of pain).

A novel therapeutic area in this year’s IPO landscape was pet therapeutics (which will probably be gaining popularity in the near future). Meanwhile, ophthalmology is a quickly expanding therapeutic field, mainly aimed at eye disorders in the growing elderly population.

So far, hematology, CNS and pet medicine players are the best performers of this year’s IPO cycle. The worst performers are orphan and genetic diseases, with a -44% average since first trade. 

Emerging trend in biomarkers & other diagnostic tools

Novel diagnostic tools took second place in this year’s therapeutic area popularity rankings, comprising 11% of 2013 IPO leads. Biomarkers and novel indicators of hard-to-detect disease, or disease which needs to be detected in its early stages, such as Alzheimer’s, are a quickly emerging trend – not just for diagnostic purposes in hospital settings, but as useful tools which would help companies better define concrete endpoints in clinical trials.

Many failed CNS drugs of recent years, for instance, have failed to demonstrate efficacy based on endpoints which many have deemed far too ambiguous (cognitive improvement based on verbal memory/performance tests, etc).  In fact, it is likely that the massive potential of CNS will only explored again when better metabolic and/or genomic markers are present – firstly, to signal the presence of disease decades before it manifests, and secondly, to eradicate the destructive ambiguity of questionnaire-type clinical trial design. 

Figure 3. 2013 Biopharma IPOs by therapeutic area of lead product

Rising Stars

Some of the brightest stars in this year’s IPO group were perhaps unexpected, particularly because two of them – Alcobra Pharma and GW Phrarmaceuticals are foreigners, hailing from Israel and the UK, respectively.

Rather suspiciously, the markets were particularly interested in the “weed experts” Insys Therapeutics (INSY) and GW Pharmaceuticals (GWPH), which specialize in opioid and cannabinoid marijuana-derived therapeutics for cancer pain and nausea management. Unlike the majority of IPOs this year, both companies already had products on the market prior to IPO. Insys has had everyone talking with a 564% surge in just 5 months, from an opening price of $8.50 on May 2nd all the way up to $53.64 in October. GW Pharmceuticals is up 264% since its debut in May, having hit a peak performance of 338% in November. Two more opioid developers are due to join GW and Insys soon: Cara Therapeutics and the Danish Egalet have both filed for IPOs in Nov/Dec.

Update: On Dec 13th Insys Therapeutics received a subpoena from the Office of Inspector General of the Department of Health and Human Services in connection with an investigation of potential violations involving Health and Human Services programs. Insys stock plunged by 22% intra-day. 

Another rising star is Aratana Therapeutics (PETX) – one of the first ever developers of specialty medicines for pets (primarily cats and dogs). Aratana’s $6 IPO share price was below its expected $11-13 range, as the company’s unfamiliar business model may have caught some investors off guard. Having conveyed the massive, untapped and much-too-long ignored potential of the pet market, the PETX share price has now been steadily climbing, currently up 129% since it started trading. Despite the fact that pet owners spent $53 billion in 2012 on their animal companions (according to Aratana’s website), pet drugs are still mostly dose-adjusted drugs prescribed for humans. Aratana’s business model is centered around licensing drugs proved effective in animals and humans, and commercializing them through the FDA's Center for Veterinary Medicine (CVM). The cost of licensing Aratana pays is low in comparison to potential returns, and CVM regulatory pathways are obviously less stringent than pathways regulating human drugs. Aratana is currently advancing three pet drugs through their pipeline, and it shares soared on October 14 when the company announced its intention to acquire Vet Therapeutics, Inc. 

Entanta Pharma (ENTA) is another starlet worth watching – the company is now at +111% on its first-trading-day price as its Hepatitis C drug ABT-450, co-developed with AbbVie, and is getting encouragingly close to the market following some great results of its Phase III Sapphire-II trial. ABT-450 is part of an antiviral  cocktail shown effective in treating an amazing 96% of the most common genotype 1 HepC sufferers who have not responded to older treatments. Enanta’s drug is seen as one of the most threatening contenders to the throne of new, safer and more effective HepC medications – a throne currently being conquered by Gilead with Sovaldi, approved just last Friday (December 6th). Like Sovaldi, ABT-450 received a Breakthrough Therapy Designation (BTD) from the FDA, which shortens development and paperwork times. ABT-450 is thus looking at a New Drug Application (NDA) in Q2 2014, and a Prescription Drug User Fee Act (PDUFA) date of 3-4 months later.

Alcobra Pharma (ADHD), based in Israel, is the newest entrant to the Attention Deficit Hyperactivity Disorder (ADHD) scene, dominated by drugs like Ritalin, Concerta, Vyvanse and Strattera. Alcobra’s lead compound, MG01CI, is an extended-release version of metadoxine – a hepatoprotective drug which has been on the market for nearly 30 years for the treatment of acute alcohol intoxication, alcoholism and alcoholism-related fatty liver.  Although MG01Cl is not a novel compound, it has a crucial advantage over its “black box warning competitors” in that it is not a neurostimulant based on methylphenidate or amphetamines. In addition, having been tried and tested for 30 years now, metadoxine has a significantly better side effect profile than other ADHD meds – an important factor for a medication intended to be taken daily for many years.

An encouraging sign of buyout potential for Alcobra is the fact that New River Pharmaceuticals, the original developer of Vyvanse - now an $800-million-a-year modified version of Adderall, was bought by Shire in 2006 for $2.6 billion. New River was a company roughly comparable to Alcobra, and was acquired when Vyvanse was in Phase III clinical trials. Shire and New River were already in collaboration on the drug since Phase II.

Update: On Dec. 18, 2013 U.S. Food & Drug Administration has granted "Orphan Drug" designation to Alcobra's metadoxine for the treatment of Fragile X Syndrome.

Falling comets

The Dutch Prosensa (RNA), developing disapersen for the treatment of Duchenne’s muscular dystrophy in collaboration with GlaxoSmithKline, announced that the drug did not meet its primary endpoints in Phase III clinical trials, just two months after the company began trading. Prosensa’s share price tumbled on the news, and is currently hovering at -78% on first trading price. Several investors are holding on, as Prosensa has two more drugs in the pipeline, which are, however, based on the same RNA Exon-skipping idea as disapersen. 

Sunday, 8 December 2013

2013 Pharma M&A Review: Earlier-Stage Pipelines, Lower Premiums, and Cancer

2013 will go down in history as the year of biotech IPO frenzy, but some may also know it as the year dealmaking bounced back to fertile levels. In 2012, $109 billion was spent on biopharma and medical device M&A, with only one deal exceeding the $10 billion mark, in contrast with four in 2011. In 2013, three $10+ billion megadeals have been struck, which include Amgen’s $10.4B takeover of Onyx and Thermo Fisher’s $13.6 billion takeover of Life Technologies.

Overall, pharma, biotech and medical device M&A deals have continued to outpace the global market, according to Dealogic. Whilst the global M&A scene performed only 9.3% on last year, pharma deals are up 38%. The average deal volume is 15% up on last year, with the total standing at over $141 billion. So far, there have been 225 biopharma, diagnostics and medical device deals, 14 of which exceeded the 500million+ mark in 2013.

The most voluminous mega-deals of the year were in medical device and diagnostic sectors, as pharmaceutical players have opted for less pricey earlier-stage acquisitions. In terms of numbers, however, biotech has certainly outshined the rest, accounting for 76% of all Pharma, Medical and Biotech (PMB) sectors, according to a recent report by Mergermarket.

Unlocked Pharma Cash

Post-patent-cliff in-house R&D closures are unlocking substantial deal-ready cash for Big Pharma. After several years of pawning, re-organizing and sorting out previous acquisitions the giants entered 2013 with cash, strategy and malnourished pipelines, braced for more inorganic growth. Whilst mega-M&A activity of recent years has been filled with power play and consolidation activities, 2013 was more about pipeline acquisitions and occasional foreign market entries. 
Below (table 1) is a list of the year’s most prominent acquisitions:

Table 1. Top 2013 Biopharma deals
Pipeline interests
Liver, kidney, breast, colorectal, thyroid cancers
Alzheimer’s, bipolar, Down syndrome, Multiple Sclerosis, Crohn’s disease
Warner Chilcott
Seven pipeline products in women’s health and Urology
Five investigational antiviral products
Four investigational gastrointestinal products
Endo Health
Paladin Labs
Gastroenterology and growth in Canadian and emerging markets
MAP Pharma
Migraine specialty
Seven oncology products
Cubist Pharmaceuticals
Trius Therapeutics
Antibiotic-resistant gram-positive antibacterials
Novel drug delivery platforms
650 (+350 milestones)
Johnson & Johnson
Aragon Pharmaceuticals
Phase II prostate cancer lead, milestone subject to FDA approval
560 (+590 milestones)
Pearl Therapeutics
Chronic respiratory diseases
Cubist Pharmaceuticals
Omthera Pharmaceuticals
Cardiovascular: fish oil – derived medicines
Obagi Medical Products
Specialty skin health products
AOP Orphan
Orphan diseases
Genetic vaccines
Lymphoma drug mechlorethamine gel, deal subject to FDA approval, which was granted in August
225 (+275 milestones)
Medimmune (AstraZeneca)
Cancer and autoimmune diseases
Targeted Secretion Inhibitor (TSI) in development for treatments of cancer, neurological, endocrine and inflammatory disorders
200 (+240 milestones)
Medimmune (AstraZeneca)
DNA sequence targeted agents for cancer
200 (+470 milestones)
Clovis Oncology
EOS (Ethical Oncology Science)
Targeted Therapies business of Nordion
TheraSphere targeted technology for cancer treatment
Microdose Therapeutx
Seven respiratory, constipation, COPD and auto-immune pipeline products
S.A. Uteron
Women’s health
140 (+334 milestones)
The Medicines Company
Rempex Pharmaceuticals
Gram-negative antibiotic resistant anti-bacterials
Respiratory disorders

Development Stage

2010 and 2011 M&A landscapes were characterized by late- and marketing-stage pipelines, in line with pharma’s pressing need to compensate for immediate patent cliff losses. In 2012, earlier-stage shifts became apparent with 42% of acquired products in Phase II clinical trials. In 2013, Phase III products marked a nearly 10-fold comeback, whilst the number of market-stage acquisitions remained virtually unchanged from last year (Fig. 1). Early-phase and pre-clinical leads remained a popular acquisition choice in 2013. Roughly two thirds of early-stage deals included some form of approval-dependent milestones.

Figure 1: Development stage of acquired products in 2013 and 2012 

Therapeutic landscape

Oncology remained the most popular acquisition area in 2013, growing in popularity nearly 35% on last year, in line with increasing global incidence (fig. 2). However, CNS disorders, which still appear to be the most lucrative therapeutic area in terms of numbers and unmet need, accounted only for 7% of acquisitions in 2013 (down 10% from 2012), following a series of loud and painful CNS trial failures in recent years. Rather than embarking on high-risk CNS trials, pharma players have this year opted for new therapeutic entrants, such as novel drug delivery systems, women’s health, and orphan specialists. In comparison with 2012, when cardiovascular leads accounted of 12% of all acquisitions, 2013 saw virtually no activity in this area, with the exception of AstraZeneca’s acquisition of the fish oil specialist Omthera.

Another strong comeback was made by the infectious diseases niche, growing nearly 3-fold in 2013. For the most part, drugs in this area are targeting the unmet need for effective treatments against antibiotic resistant bacteria, particularly gram-negative bacteria. Vaccines and anti-viral agents remain highly coveted.

Ophthalmic acquisitions have made a surprising comeback in recent years, due to increasing incidence of eye disorders in the world’s ageing populations. They have accounted for 4% of all acquisitions in 2012 and 2013.

Figure 2:  Therapeutic area of acquired products in 2013 and 2012 


Of the top 28 biopharma deals shown in Table 1, 12 of the acquisitions were public companies, 15 were private and one was a divested unit. In terms of premiums paid by public companies, the average premium figure for 2013 was 37% - significantly lower than the 52% average of 2012, pushed up by the Bristol-Myers – Inhibidex 163% acquisition - the highest premium paid in five years. 2013’s highest premium was 89% in the year’s most expensive Amgen-Onyx deal, followed closely by the 88% AstraZeneca – Omthera acquisition deal. It will be interesting to watch happens to the premiums of the graduating IPO class of 2013.

Wednesday, 4 December 2013

Order your FREE print copy of Israel's Reign in the Golden Age of Neuroscience!

Bioassociate's "Israel's Reign in the Golden Age of Neuroscience", written in conjunction with Israel Brain Technologies, proved to be a great hit amongst brain enthusiasts. A digital copy can be downloaded here.

Due to popular demand, we are now offering the copies in print, free of charge - just pay for shipping.

Order your copy below (via Paypal), and check out the intro to the report here.

Shipping Options

Contact Bioassociate for more info.