Biotech Market Update: Q1 2019 in Review

- April 16th, 2019

With Q1 2019 officially over, the Investing News Network shares a biotech market update on the biggest news and trends in the space.

The first quarter of 2019 was robust with activity for the biotechnology industry thanks to merger and acquisitions (M&A) in addition to initial public offerings (IPOs). 

Looking back to the end of 2018, the biotech sector took a significant hit in terms of stock performance, according to a year in review report from Evaluate. The report’s findings show that the NASDAQ Biotechnology Index (INDEXNASDAQ:NBI) ended up declining in value by 9 percent over the course of the year and lost a fifth of its value in the last quarter of the year.

That momentum, however, has shifted so far in 2019. Year-to-date, the index has risen by more than 13.5 percent, which should be encouraging for those interested in investing in the space.

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In terms of what to expect in the biotech industry this year, M&A activity will continue to thrive based on the need for companies to strengthen their research and development (R&D) efforts, licensing and strategic partnerships, according to a report from Deloitte.

So far this year, that momentum has certainly been felt, with a number of blockbuster deals already having taken place.

On that note, with Q1 2019 officially in the books, here the Investing News Network (INN) is taking a look back on the first quarter of the year, including the biggest news in the biotech space and what’s in store for the rest of the year.

Biotech market update: M&A dominates

In an interview with INN, Irene Birbeck, partner with Clarkston Consulting, said that there were several key mergers and acquisitions in the first quarter of the year.

She used the announcement of Bristol-Myers Squibb’s (NYSE:BMY) purchase of Celgene (NASDAQ:CELG), which came in January, as an example of the major blockbuster deals of Q1. The takeover is the largest healthcare deal in history at approximately US$74 billion. Under the deal, Celgene stockholders will receive one Bristol-Myers share and US$50 in cash for each Celgene share they own.

At the beginning of March, however, CNBC reported that the deal was in jeopardy, as hedge funds Wellington Management and Starboard Value claimed it did not “sit well” with them. In a press release issued by Wellington Management in February, the investment management firm confirmed that it did not support the acquisition of Celgene. As of February 25, Wellington Management was Bristol-Myers’ largest institutional investor, owning 8 percent of the company’s common stock.

By April, however, Bristol-Myers shareholders had approved the merger with Celgene, which is projected to be completed sometime in Q3 this year.

The second notable deal Birbeck referenced was Eli Lilly and Company’s (NYSE:LLY) US$8 billion acquisition of Loxo Oncology, which was first announced in January. By the middle of February, the deal had officially been completed, and will provide Eli Lilly with Loxo Oncology’s “promising pipeline of investigational medicines.”

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The last noteworthy union Birbeck touched on was Roche’s (OTCQX:RHHBY) intended acquisition of Spark Therapeutics (NASDAQ:ONCE) for US$4.3 billion, which was first revealed in late February. In April, however, Roche withdrew its premerger notification and report form relating to its acquisition of Spark Therapeutics.

Birbeck said that, in the case of these M&A deals, what’s being seen is companies refining their strategies into a specific therapeutic area, which for these companies has been oncology.

“I think what we’re seeing is the trend of [companies] doubling down on their therapeutic area strategies, whereas we used to see [M&A] be expected,” she explained. “I talk about the M&As and innovation very much in the same breath, because with oncology drugs particularly, it shows a really exciting time that we’re in with innovative therapies.”

Birbeck expanded on that, stating that cell therapies and gene therapies have had “great indications” for oncology in particular.

Despite these mega deals, a report from Evaluate states that a decrease in the number of acquisitions could give “pause to those hoping for a bumper year.” In total, US$92 billion was spent on M&A in the first quarter of the year, which Evaluate says is the largest quarterly total in five years.

Biotech market update: IPOs launch

The first quarter of the year also saw a number of biotech companies make their official public debuts through IPOs.

The first notable IPO of the year was that of INmune Bio (NASDAQ:INMB), which launched on the NASDAQ in early February with a price of US$8 per share. Following its launch on the NASDAQ, INN had the opportunity to speak with David Moss, CFO of INmune Bio, about the company’s clinical trial for Xpro1595 to treat Alzheimer’s disease.

In the interview, Moss credited the Alzheimer’s Association for supporting the company’s trial thanks to a US$1 million grant in order to develop the drug candidate.

Secondly, Harpoon Therapeutics (NASDAQ:HARP) went public on the NASDAQ on February 8 and priced its IPO at US$14 per share. Gross proceeds of Harpoon’s offering totaled approximately US$75 million. The company is focused on immunotherapy and is currently in clinical stage developing its Tri-specific T cell Activating Construct platform to treat solid tumors and hematologic malignancies, including metastatic castration-resistant prostate cancer.

Anchiano Therapeutics (NASDAQ:ANCN) also went public in February after it closed its US$30.5 million IPO on February 12. The company’s current focus is on developing therapies for cancers that have unmet medical needs. Its primary program is gene therapy for early stage bladder cancer.

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The life science and healthcare market is a booming, multi-billion dollar industry. Read our 2021 life science outlook report!

Other notable IPOs in Q1 2019 include:

  • TCR2 Therapeutics (NASDAQ:TCRR), a company developing T cell therapies for cancer patients, went public on February 15 at a price of US$15 per share.
  • Stealth BioTherapeutics (NASDAQ:MITO), which priced its public offering on February 14 for US$12. Stealth BioTherapeutics’ primary focus is on developing therapies for diseases with mitochondrial disfunction.
  • Kaleido Biosciences (NASDAQ:KLDO), a clinical stage company using a chemistry-based approach with microbiome organs to treat diseases and overall human health, closed its IPO on February 28 at US$15 per share.
  • Precision BioSciences (NASDAQ:DTIL) priced its IPO at US$16 for proceeds totaling US$126 million on March 27. The company is using its genome editing platform, ARCUS, and is developing therapies in areas such as allogenic CAR-T cell immunotherapy and in vivo gene correction, as well as working on increasing food safety. It officially began trading on March 28.

Biotech market update: What’s ahead

With the second quarter of 2019 already in full swing, Birbeck told INN that the industry will continue to see the trend of organizations going after targeted extensions of their therapeutic capabilities, similar to what happened with oncology.

In terms of M&A activity, Evaluate’s report says that the need for growth, which drives M&A, is not slowing down. The report says that big name companies such as Biogen (NASDAQ:BIIB), AbbVie (NYSE:ABBV) and Allergan (NYSE:AGN) could use a boost in activity.

In a report on where the market is heading in 2019, Evaluate says that investors will need to see more deals in order for them to believe that activity is still on the rise.

“Big biotechs are all looking for the next blockbuster, so we might see some buying smaller companies with products on the market as they start to look cheaper. But that difficult second album is always much more challenging than they expect,” the firm says.

Don’t forget to follow us @INN_LifeScience for real-time news updates!

Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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