Industry Report – Biotechnology Industry Overview July 2020

Friday, July 10, 2020

Biotechnology Industry Overview

Ahu Demir, Ph.D, Biotechnology Research Analyst, Noble Capital Markets, Inc.

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Refer to end of report for Analyst Certification & Disclosures

• YTD- 2020 INDEX PERFORMANCES. The biotechnology sector has outperformed the broader markets in year-to-date (YTD) 2020. The NYSE Arca Biotechnology (BTK, +16.4%), NASDAQ Biotechnology (NBI, +16.3%), NYSE Arca Biotechnology (BTK, -2.1%), and NASDAQ Biotechnology (NBI, -2.6%) indices have outperformed the S&P 500 (SP50, -2.6%) and Russell 3000 (RUA, -3.0%) benchmark indices in YTD-2020 (as of 7/7/2020, Exhibit 1). The Nasdaq Biotechnology Index gained 450% over the last ten years compared to an approximately 200% gain in S&P 500 index. As the coronavirus pandemic has impacted the global and U.S. economies, the biotechnology sector has been weathering the crisis.
• YTD- 2020 FINANCING. The deal-making momentum has slowed down in YTD-2020 disrupted by the coronavirus pandemic, following record-breaking M&A deals in 2019. The total gross proceeds of public and private M&A deals in H2 2020 showed a decline compared to H1 2019 (-10% and -37%, respectively, Exhibit 5). Contrarily, the median IPO transactions reached the record high median number in Q2 2020 (Exhibit 4).
• 2020 OUTLOOK. As the markets remain uncertain, the eyes are on the biotechnology sector for an innovation to prevent and treat coronavirus infection. There are currently over a hundred treatments and more than a dozen vaccine candidates in clinical testing across the biopharmaceuticals industry, academic institutions, and non-profit organizations. Nevertheless, the record high approval and financing numbers from 2018-2019 cannot be reached. We believe the biotechnology sector will continue to endure the current circumstances and outpaced the broader markets in 2020.

Click ‘view previous report’ for company specific disclosures on Noble covered companies.

Scientific Highlight

The first RET inhibitor is approved by FDA

On May 8, 2020, Eli Lilly’s RET inhibitor Retevmo (selpercatinib) was approved for three types of RET-driven cancers including advanced RET fusion-positive NSCLC and two types of thyroid cancer (advanced medullary thyroid cancer (MTC) and RET fusion-positive thyroid cancer). The first-in-class agent belonged to Loxo Oncology, which was acquired for $8 billion by Eli Lilly in 2019.

The approval was received based on the findings from LIBRETTO-001 trial, which selpercatinib was evaluated in 702 patients with RET fusion-positive solid tumors.

• Among 105 patients with RET fusion-positive NSCLC who were previously treated with platinum chemotherapy, 64%. of them achieved overall response rate (ORR), which reflects the percentage of patients that had a certain amount of tumor shrinkage. The duration of response (DOR) was 18 months. Treatment-naïve patients (n=39) had an ORR of 85% and the median DOR was not yet reached. Their response lasted at least six months.
• Selpercatinib showed 69% ORR in 55 patients with advanced or metastatic RET-mutant MTC who had not received prior treatment with chemotherapy (cabozantinib, vandetanib or both), and 73% ORR in 88 patients who had not been previously treated with an approved therapy for MTC.
• In the trial, 19 patients with RET fusion-positive thyroid cancer who were radioactive iodine-refractory (RAI, if an appropriate treatment option) and had received another prior systemic treatment showed 79% ORR following selpercatinib treatment. Among 8 patients who had not received therapy other than RAI, ORR was 100%.

Figure 1. Selpercatinib Response Rates from LIBRETTO-001 trial

Source: Eli Lilly SEC filings

There is no companion diagnostic for Retevmo, next-generation sequencing, or other approaches recommended to identify patients who are most likely to respond to treatment. A tissue-agnostic approval, which means the drug is available for all patients with RET alterations regardless of origin of the cancer started. The trial continues to enroll patients. Retevmo still hold a potential tissue-agnostic approval. Blueprint Medicines and Turning Point Therapeutics are also developing RET inhibitors. Turning Point Therapeutics is currently at Phase ½ stage assessing dual RET and SRC inhibitor TPX-0046. On July 1, 2020, Blueprint Medicines submitted New Drug Application (NDA) to FDA for Pralsetinib for the treatment of advanced RET mutant and ret fusion-positive thyroid cancers.

Financial Highlight

What Crisis?

Capital flow was strong in the biotech sector in 2019 although it did not reach the high numbers of 2018. Total public biopharma fundraising was over $122 billion, with 60% from partnerships, 18% follow-on offerings and 9% from IPOs (Figure 2).

Figure 2. Global biotech financing in the past 6 years

Source: BCIQ BioCentury Online Intelligence

 Despite the slowdown in 2020 driven by the pandemic, capital raise has not stopped in the biotechnology sector. The initial public offerings (IPOs) have picked up reaching $8 billion among two dozen 2020 Nasdaq Biotechnology (NBI) listings. In June, CAR-T cell therapy company Legend Biotech raised $424 million. Follow-on public financing topped $19 billion in H1 2020, including almost $2 billion raised by RNA vaccine company Moderna (two offerings in February and May 2020).

The Nasdaq Biotechnology Index gained 450% over the last ten years (compared to approximately 200% in S&P 500) as shown in Figure 3. The Nasdaq Biotechnology Index (NBI) has also performed a lot better than S&P 500 (SPX) in 2020 (Figure 4).

 Figure 3. Nasdaq Biotechnology Index Outpaced S&P 500 in the past 10 years, (as of 7/7/2020)

Source: CapitalIQ and Noble Research

Figure 4. Nasdaq Biotechnology Index and S&P 500 Comparison (as of 7/7/2020)

Source: CapitalIQ and Noble Research

Recent Sector News

• Novavax received $1.6 billion in funding from the U.S. government to develop and manufacture a potential vaccine for the novel coronavirus in the United States. The company aims to produce 100 million doses by January 2021.The shares gained approximately 30% value attributed to the funding news. (July 7, 2020)
• Gilead priced its Covid-19 drug remdesivir at $390 per vial. The majority of patients are expected to receive a five-day treatment course, which equates to $2,340. (June 29, 2020)
• Allogene’s ALLO-501 (ALLO-501) showed 63% response rate in 19 lymphoma patients (37% were complete responses, CR) based on data presented at American Society of Clinical Oncology (ASCO) 2020. ALLO-501 competitors include currently marketed Yescarta and Kymriah (Yescarta: 73% ORR – 51% CR and Kymriah: 50% ORR – 32% CR). (May 29-31, 2020)
• Ayala Pharmaceuticals, an Israel-based clinical-stage oncology company focused on developing small molecules targeting NOTCH signaling, began trading on the Nasdaq under the stock symbol “AYLA”. The company raised $55 million through its IPO. The company’s pipeline includes two clinical-stage cancer drugs licensed from Bristol Myers Squibb. (May 8, 2020)

 Important upcoming catalysts in our SELECTED coverage universe

Onconova (ONTX), Outperform rating, $1.30 Price Target (PT, view
previous report by Ahu Demir, Ph.D.)

• IND filing for ON 123300 (novel CDK 4/6 and ARK 5 dual inhibitor) in Q4 2020
• Launch of Early Access Program with Inceptua Medicines Group in 2H 2020
• Topline data readout from INSPIRE study in H2 2020

Neovasc (NVCN), Outperform rating, $15 Price Target (PT,
view previous report by Ahu Demir, Ph.D.)

• CE Mark decision for Tiara transapical (TA) mitral valve replacement system in 2H 2020
• Tiara transfemoral (TF) first-in human transplant in 2H 2020
• FDA panel meeting for Reducer for the treatment of refractory angina in 2H 2020
• FDA decision for Reducer in US.S. in 1H 2021

Cocrystal (COCP), Outperform rating, $5.00 Price Target (PT, view previous report by Ahu Demir, Ph.D.)

• IND filing for CC-42344 (Influenza A PB2 Inhibitor) to treat influenza infection
• Initiation of coronavirus program preclinical studies
• Initiation of CC-31244 Phase 2b study for the treatment of Hepatitis C

Market Dynamics

Exhibit 1: Biotechnology Relative Price Performance in YTD-2020 (as of 7/7/2020)

 

Source:  Noble Life Science Research, Capital IQ

S&P 500 (SP50, -2.6%) and Russell 3000 (RUA, -3.0%) benchmark indices have underperformed the NYSE Arca Biotechnology (BTK, +16.4%) and NASDAQ Biotechnology (NBI, +16.3%) indices in YTD-2020 (as of 7/7/2020). Notable stock price outperformance in the BTK index (in alphabetical order) include Acadia, (ACAD, +242.3%), Alnylam (ALNY, +119.9%), Bio-Techne (TECH, +88.0), Seattle Genetics (SGEN, +206.4%), and Ultragenyx (RARE, +110.6%).

Exhibit 2: Top/Bottom 5 Stock Performance, YTD-2020 (as of 7/7/2020)

Source:  Noble Life Science Research, Capital IQ

 Exhibit 3: Biotech Financing in Q4 2019/YTD-2020 (below $200mm)

Source:  Noble Life Science Research, Capital IQ

The largest transactions include Generation Bio (GBIO, $200mm), Constellation Pharmaceuticals (CNST, $192mm), and Denali Therapeutics (DNLI, $180mm).

 Exhibit 4: Biotech Financings—IPO and Follow-on Capital Raised by Quarter

Source:  Noble Life Science Research, Capital IQ

The median IPO proceeds in Q2 2020 ($201mm) exceeded ten-year-high Q1 2020 numbers ($165mm). The median IPO transactions in Q2 2020 reached the record high median number.

 Exhibit 5: Biotech M&A Deals

Source:  Noble Life Science Research, Bloomberg

The total gross proceeds of public and private M&A deals in H2 2020 showed a decline compared to H2 2019 (-10% and -37%, respectively). The private deal counts in H1 2020 represented a modest incline (+4%) compared to H1 2019, while public M&A deal counts decreased (-16%).  

Lock-Up Expirations

Exhibit 6: IPO and Follow-On Lock-Up Expiration Data for July-August 2020

Source:  Noble Life Science Research, CapIQ

Selected Industry Conferences

Exhibit 7: Medical, Scientific and Industry Conferences in H2 2020

Source:  Noble Life Science Research, Biomed Tracker

Exhibit 7: Medical, Scientific and Industry Conferences in H2 2020 Cont.

Source:  Noble Life Science Research, Biomed Tracker

FDA Approvals

Exhibit 8: Selected Pending Approvals of New Molecule Entities (NMEs) and Biologics in H2 2020

Source: Biomed Tracker, FDA

Exhibit 9: Upcoming Advisory Committee Meeting Dates

Source: Noble Life Science Research, FDA

Exhibit 10: Selected Approved Drugs and Biologics in YTD-2020

Source: Noble Life Science Research, Biomed Tracker, FDA

In total, 27 drugs were approved in YTD-2020.

Drug Landscape

Exhibit 11: New FDA Drug Approvals

Source: Noble Life Science Research, Bloomberg

27 drug approvals in 2020 demonstrated a low productive year following all-time record of 59 approvals in 2018 and 48 drug approvals in 2019.

Exhibit 12: Number of Drugs in the Pipeline

Source: Noble Life Science Research, Global Data Intelligence

Oncology continues to be the dominant development category. Infectious disease showed the strongest uptick (+10%, 35 thousand clinical trials in 2020 compared to 31 thousand in 2019), which is fueled by newly initiated clinical studies to treat coronavirus.

Exhibit 13. Catalyst Calendar

Source: Noble Life Science Research, Global Data Intelligence

Appendix

Exhibit 14: Cash Analysis, sorted by E/P (as of 7/8/2020)

Note: Market cap as of 7/8/2020, Cash value for 2Q20

Source: Noble Life Science Research, Capital IQ

Exhibit 14: Cash Analysis, sorted by E/P

Note: Market cap as of 7/8/2020, Cash value for 2Q20

Source: Noble Life Science Research, Capital IQ

Exhibit 14: Cash Analysis, sorted by E/P

Note: Market cap as of 7/8/2020, Cash value for 2Q20

Source: Noble Life Science Research, Capital IQ

Exhibit 14: Cash Analysis, sorted by E/P

Note: Market cap as of 7/8/2020, Cash value for 2Q20

Source: Noble Life Science Research, Capital IQ

Ahu Demir, Ph.D.

Biotechnology Research Analyst

Dr. Ahu Demir, Ph.D. covers the small cap biotechnology sector. She joined Noble Capital Markets as a Biotechnology Research Analyst in 2018. Prior to that, she worked at Roth Capital as an Associate Biotechnology Analyst. Dr. Demir started her Wall Street and sell-side equity research career in biotechnology at Cantor Fitzgerald Research Division, where she served as Associate Biotechnology Analyst and followed a range of publicly traded biotechnology companies focused on the development of therapeutics in oncology, infectious disease and central nervous system diseases.  Prior to joining Wall Street, Dr. Demir was a Post-Doctoral Fellow at Columbia University and New York University. During her fellowship, she has also worked as a scientific consultant for the industry and as Marketing and Patentability Agent at the Technology Transfer Office of New York University. She holds a Ph.D. in Chemistry from University of Florida.

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ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE

Ahu Demir
Equity Research Analyst focusing on the Life Sciences sector. 5 years of industry experience. PhD in Chemistry from University of Florida.Post-Doctoral training at Columbia University and New York University. Her scientific training focused on antiviral therapy, oncology and immuno-oncology.

FINRA licenses 7, 63, 86, 87.

Cosme Ordonez
Senior Equity Analyst focusing on Life Sciences. More than 16 years of experience in his field. Former President and co-founder of Ciclofilin Pharmaceuticals. Held various roles in Buy-side and Sell-Side specializing in drug development, medical device, specialty pharma and healthcare services areas. Medical Doctor with a Ph.D. in Experimental Medicine and Biochemistry from McGill University in Montreal, Canada. Completed post-doctoral training at the Karolinska Institute/Hospital in Stockholm, Sweden.

Holds FINRA licenses 7, 79, 86, 87.

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Report ID: 11561