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Few Cinderellas this time

Big biotechs suffer least in 3Q11, as smaller cap groups drop as much as 25%

Big caps suffered the least in a very ugly quarter. But that's not saying much: biotechs with market caps of more than $5 billion were still down 10% as a group in 3Q, while other market cap groups shed 18-26%.

The best performer among the big caps was Alexion Pharmaceuticals Inc., which gained 36%. It was the only big cap that gained double digits.

Alexion shares bounced off an August bottom and continued rising through September on positive Phase II data for Soliris eculizumab to treat myasthenia gravis; an FDA approval for Soliris to treat atypical hemolytic uremic syndrome (aHUS); and a positive opinion by EMA's CHMP recommending approval of an MAA for Soliris to treat aHUS.

Soliris is already approved to treat paroxysmal nocturnal hemoglobinuria (PNH).

Dendreon Corp. was the worst-performing big cap last quarter. It fell 77% on weaker-than-expected sales of prostate cancer treatment Provenge sipuleucel-T.

Microarray and genetic services company Illumina Inc. dropped 46% on reduced guidance for EPS and revenue, as tool companies were hurt by concerns about cuts to research budgets.

Pharmasset Inc. soared in the $1-$4.9 billion market cap space, adding 47% on the quarter. It got a 7% boost on the last day of 3Q with positive Phase IIb data from its ELECTRON trial of PSI-7977 to treat HCV (see B23).

In September, the company reported additional positive data from the Phase IIb PROTON study of PSI-7977 from patients infected with HCV genotype 1. Pharmasset had already reported good data from that study for genotype 2 or 3.

Last quarter, Pharmasset also started the QUANTUM trial testing a combination of PSI-7977 and PSI-938, which the company noted is the first interferon-free, all-nucleotide study with a sustained virologic response (SVR) endpoint.

Jazz Pharmaceuticals Inc. gained 24% on a quarter that included the proposed acquisition of Ireland's Azur Pharma Ltd. The deal will reduce the combined company's tax rate to the mid-20% range.

In contrast, Alere Inc. shed 46% on its hostile offer for fellow diagnostic company Axis-Shield plc.

The worst performance in this group came from Human Genome Sciences Inc., which was dragged down 48% on launch fears after the Dendreon difficulties. The biotech and partner GlaxoSmithKline plc launched lupus drug Benlysta belimumab in the U.S. at the end of March and in Germany and Canada in August. Last Friday, NICE recommended against use of Benlysta in the U.K. (see Online Links, A25).

Another launch story in this group, InterMune Inc., also was hard hit by investor skepticism, falling 44% on the quarter.

InterMune launched Esbriet pirfenidone in Germany in September to treat idiopathic pulmonary fibrosis. It plans to launch the treatment in France, Spain and Italy in 1H12.

Unsightly under $1B

The market segments under $1 billion were

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