Before I answer your questions in this week's Biotech Stock Mailbag, I want to let you know about the start of a live (and lively) monthly biotech stock chat featuring me and Joe McCann, founder of the research outfit Slingshot Insights.
On the third Friday of each month, Joe and I will break down the latest burning issues in biotech and what they mean for investors. We promise hot takes on biotech and perhaps some talk of our favorite cold beers.
Our first call is taking place today at 2 pm EST and you're all invited to listen in. More details can be found here. Please sign up.
As I tap out this column on my computer keyboard, the SPDR S&P Biotech ETF (XBI) is hitting a 52-week high. For the year, the XBI is up 16% compared to a 5% gain for the S&P 500.
Remember how miserable everyone was last year at this time when the XBI was down 30%!
That's quite the turnaround, made even more surprising given all the concerns expressed about Trump tweets and government intervention of drug pricing.
What is going on? The markets like Trump because he's promised to cut taxes and ease federal regulations. From a healthcare perspective, there's a growing confidence that Trump is too preoccupied with other matters (Flynn, Russians, his war with U.S. intelligence agencies and the media, rambling press conferences) to tackle drug pricing. Throw in speculation and expectations for a big bump in biopharma M&A and you have the ingredients for a rah-rah stock rally. It's like 2014-2015 all over again!
If you want the rally to continue, pray Trump and Tom Price, his Secretary of Health and Human Services, pick Scott Gottlieb as the next FDA commissioner. Anyone else, particularly Peter Thiel acolyte Jim O'Neil, will cause some serious agita for biopharma and investors.
Cary A. is not a fan. "I know why they call you Fraudstein. You can't write one damn honest word about Acadia Pharmaceuticals (ACAD) . When they get bought, I will [sic] laughing at you and your nonexistent credibility."
Cary responded to my skepticism of this week's Acadia takeover rumor, which I placed in context on Twitter.
Obviously, there is always some chance Acadia is acquired but at a current enterprise value exceeding $4 billion, any suitor would have to make some wildly optimistic sales assumptions about Nuplazid to rationalize the cost.
Acadia is trading at 50 times expected Nuplazid 2017 sales of $82 million, according to Factset.
Bulls believe Acadia will expand Nuplazid into new indications like Alzheimer's disease psychosis (ADP) that will turn the drug into a billion-dollar blockbuster. If you get past the hope and spin propping up the Nuplazid ADP phase II study data disclosed last year, you'd be, like me, a lot more skeptical.
Acadia shares are 35% higher this year, so Cary shouldn't complain too much.
@adamfeuerstein what are your thoughts on PLX so far?— Sebastian F. (@Mr_Uptown212) February 11, 2017
Protalix Biotherapeutics (PLX) is the best-performing drug stock this year, with shares 180% higher. (I exclude stocks with market caps lower than $100 million in my ranking.)
The stock's comeback appears related to a renewed investor interest in the company's plant cell-based protein drug manufacturing technology. Most therapeutics proteins (think injectable drugs like monoclonal antibodies) are made from genetically altered mammalian cells. Protalix uses genetically altered plant cells (carrot cells, actually) to do the same thing at lower cost.
Protalix's drug manufacturing platform is capable of making real drugs, but it has not proven adept at selling them. To me, that's the biggest risk factor with the stock.
The company's commercial track record is poor. Elelyso was the first protein replacement therapy developed by Protalix. The drug secured U.S. approval for Gaucher's disease in 2012, but sales through Pfizer are negligible next to its competition, Sanofi's (SNY) Cerezyme/Cerdelga.
The pharma giant doesn't break out Elelyso sales. Sales of "other rare disease drugs" (of which Elelyso is one) totaled $22 million in 2016, according to Pfizer's annual report.
Next up in Protalix's pipeline is a protein replacement therapy for Fabry disease, known as PRX-102. The drug is basically a plant cell-based copy of Sanofi's Fabrazyme. Protalix has two phase III studies of PRX-102 in Fabry disease underway with interim results expected in 2018.
The other two drugs in Protalix's pipeline are a "plant-based" biosimilar of the cystic fibrosis drug Pulmozyme, made by Genentech/Roche, and an oral anti-TNF being studied in ulcerative colitis.
It's going on five years since Elelyso was approved. Under the best circumstances, Protalix is still two years away from the potential approval of a second drug in a disease (Fabry) where it will face entrenched and strong competition. I don't know if Protalix can get it done.
Charles K. asks, "Do you expect any new information or updates from Sarepta Therapeutics (SRPT) on Feb. 23, or reiteration of Jan. 10?"
I don't know the exact date of Sarepta's fourth-quarter conference call, but whenever it takes place, I don't expect management to offer new or updated Exondys 51 launch numbers. The company pre-announced $5.4 million in fourth-quarter sales before its presentation at the J.P. Morgan Healthcare Conference. The company also said that 250 boys with Duchenne muscular dystrophy had started the process required to obtain reimbursement for Exondys 51.
On its call, I expect you will hear Sarepta providing further descriptive comments about the state of the Exondys launch, but without new numbers. Those will come after the first quarter closes.