3:25 PM
Jan 09, 2018
 |  BioCentury  |  Finance

Stars in China

Biotech winners, losers in 4Q17

A major clinical flop and a spate of weak earnings reports by U.S. large cap biotechs reverberated throughout the sector in the fourth quarter, breaking a three-quarter-long streak of outperformance. Across all market cap bands, $15 billion in global equity value was erased.

Several Chinese biotechs, however, stood out despite the noise. The biggest gainers in each of the top three market cap bands are Chinese companies working on or quickly moving into innovative therapies or technologies.

Large caps valued over $10 billion had a median gain of just 1% in 4Q17, and $57 billion in market value was destroyed in the tier.

But Shenzhen-based BGI Genomics Co. Ltd. jumped 22% in 4Q17 to reach a market cap of $13 billion. The company’s MGI Tech subsidiary launched two new next-generation sequencers at the 12th International Conference on Genomics on Oct. 31. Since BGI’s IPO on July 14, the shares have surged 1,425%.

Celgene Corp. took the worst beating in the large cap band. First, mongersen failed a Phase III trial to treat Crohn’s disease, which was followed by weak 3Q17 earnings and a hefty cut to its 2020 guidance. The company fell 28% in 4Q17, corresponding to a $32 billion loss in market cap.

Biotechs valued at $5-$9.9 billion fared best last quarter, with 13 of the 20 companies appreciating in value. The median performance in this band was a 5% gain, and the band added $9 billion in aggregate market cap during the period.

Shanghai Fosun Pharmaceutical Group Co. Ltd. led the way and broke into the large cap band for 2018, gaining 30% to end 2017 with a $13 billion market cap.

On Dec. 5, Fosun Kite Biotechnology Co. Ltd., the company’s JV with Gilead Sciences Inc.’s Kite Pharma Inc. subsidiary, began manufacturing the chimeric antigen receptor (CAR) T cell therapy Yescarta axicabtagene ciloleucel in advance of possible regulatory approval by China FDA.

Less than a week later on Dec. 11, Fosun gained exclusive Chinese rights from Ardelyx Inc. to develop and commercialize tenapanor to treat irritable bowel syndrome with constipation (IBS-C) and hyperphosphatemia related to chronic kidney disease.

Oncology play Tesaro Inc. was by far the worst performer in the group, losing 36% in value and dropping a tier, with a closing market cap of $4 billion.

Weak 3Q17 sales of oral PARP inhibitor Zejula niraparib disappointed investors, stoking fears that the oft-cited take-out candidate may not be acquired near term. Nonetheless, several buysiders named the company as one of their biotech picks for 2018, because they think the company’s valuation is now more reasonable and big caps are still interested in adding PARPs to their portfolios. (see “Burgeoning Bellwethers”).

Companies in the $1-$4.9 billion tier inched up a median of 1% last quarter, but the winners had a bigger impact than the losers; $24 billion in market value was generated.

Genscript Biotech Corp. led the band, spiking 168% to finish 2017 with a market value of $4...

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