Biotech Update: Q2 2018 in Review

- July 11th, 2018

At the halfway mark of the year and with Q2 officially behind us, the Investing News Network takes a look back at the most notable highlights over the quarter, and what investors may expect in Q3 for the biotech industry.

While Q2 2018 for the biotech industry bared resemblances to Q1, there was an abundance of regulatory and company news to keep investors engaged.

Aside from a fair share of license agreements and drug approvals, the merger and acquisition (M&A action) seems to be driving the industry to the next level, Robert Driscoll healthcare analyst with Wedbush told the Investing News Network (INN) in a phone interview.

With Q2 officially out of the books, INN is taking a look back at how the previous quarter went, and some highlights investors can look forward to moving into Q3.

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Biotech Q2 update: License agreements raise share prices

License agreements are an opportunity for companies to bring new drugs or technologies into their pipelines. Whether used as a way to commercialize internationally, the agreement is generally complimentary to every company involved in the transaction.

In addition to these benefits, there’s also a multitude of payments the licensee receives for the agreement. Upfront payments, milestone payments and royalties are among some of the most common. While both companies ideally profit well from these agreements, each is able to use the funds for further development, or arrange new agreements.

Earlier in the quarter on April 25, Daré Bioscience (NASDAQ:DARE) announced it had secured an exclusive licensing agreement with Juniper Pharmaceuticals’ (NASDAQ:JNP) for its intravaginal ring technology, including three preclinical candidates.

Although the payment amount wasn’t released for this transaction, Daré’s share price increased nearly 73 percent the day of the announcement, but by market close the daily increase totaled 56.69 percent to US$1.27 per share.

Another notable agreement includes that with Verastem Oncology (NASDAQ:VSTM) and Yakult Honsha (TYO:2267) announced June 5, in which Verastem will receive an upfront payment of US$10 million. The company may be eligible to receive up to US$90 million in future milestone payments plus royalties for the development and commercialization of its Duvelisib in Japan.

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Just two days later on June 7, Athersys (NASDAQ:ATHX) entered into an agreement with Healios K.K. (TSE:4593) expanding its collaboration into additional therapeutic areas. As per the agreement, Healios can now develop and commercialize MultiStem therapy for the treatment of acute respiratory distress syndrome and MultiStem cells used in combination with iPSC-derived cells for the treatment of certain organs.

Biotech Q2 update: Regulatory approvals

Big pharmas have received approvals and expanded approvals galore for biotech drugs in Q2. But, regardless of FDA approvals, the anti-infector space has taken a hit.

Back in April, Shire (NASDAQ:SHPG) received FDA approval for its rare disease drug Vonvendi, a treatment for perioperative bleeding management in adults with von Willebrand disease, making it the only recombinant treatment for the disease. This was an expanded indication for on-demand treatment and control of bleeding episodes.

Then in June, Merck (NYSE:MRK) received double expanded FDA approval in two days for its immuno-oncology drug Keytruda. The new indications are for primary mediastinal large B-Cell lymphoma and cervical cancer whose tumors express PD-L1.

While those approvals may be for Merck, they also support a variety of other biotech companies creating companion diagnostic for Keytruda. Agilent Technologies (NYSE:A) is among the companies developing diagnostic tools for Keytruda.

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Meanwhile Achaogen (NASDAQ:AKAO) received FDA approval in late June of Zemdri for the treatment of treatment of adults with complicated urinary tract infections (cUTI), but the approval fell short of an additional approval for the treatment of bloodstream infection. The latter proved to stand out to investors and the share price took a hit.

Biotech Q2 update: News and trends

“The anti-infective space continues to be extremely weak,” Driscoll told INN. “We might expect that to turn around going forward.”

Nabriva (NASDAQ:NBRV) is another anti-infective company which released positive top-line results from its Phase 3 trial of Oral Lefamulin for the Treatment of Community-Acquired Bacterial Pneumonia. The investor response: an 11.44 percent share price drop following the news.

However, ignoring the broader market moves “the large caps continue to drop but the smaller caps seem to be doing pretty well,” Driscoll added. Kura Oncology (NASDAQ:KURA) and Sierra Oncology (NASDAQ:SRRA) are among the companies Driscoll covers which have seen an increase.

Driscoll said he’s skeptical of the lower valuations given to I/O companies and explained the space could benefit from a more careful selection of patients for clinical trials moving forward.

Biotech companies also presented encouraging data at the American Society of Clinical Oncology (ASCO), which took place from June 1-5. Blueprint Medicines (NASDAQ:BPMC) and CytomX Therapeutics (NASDAQ:CTMX) were among the presenters Driscoll said showed exciting data.

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BluePrint presented targeted therapy data while CytomX showcased data from its technology to fuse antibodies for the treatment of cancer. Driscoll said this demonstrated for the first time how the platform works in human patients.

Beyond Q2: What to look for

With all these updates, it may be hard to believe this quarter is relatively slower compared others, but Q3 should pick up when the summer season comes to a close.

“Going into the conference season in September and October, we should see some companies presenting data there,” Driscoll said. Companies that present at medical conferences are generally the sign of a good biotech, he added.

By mid-to-late July, resTORbio (NASDAQ:TORC) should be presenting data from its Phase 2b clinical study for RTB101, a potential respiratory tract infections treatment. The trial finished dosing in Q1.

Driscoll said M&A activity is a key to driving biotech valuations, as big pharmas take the opportunity to “snap up” smaller companies to accommodate declining revenues and pipelines. Meaning investors can look forward to M&A activity driving the biotech sector to the next level.

Investor Takeaway

The biotech space Q2 had healthy growth, especially with the ASCO meeting and other medical conferences to show the potential of companies.

As Driscoll added there’s more conferences and news to watch out for in the coming quarter. Investors can also look forward to more FDA approvals, M&A activity and possible license agreements in Q3.

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

Securities Disclosure: I, Gabrielle Lakusta, 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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