4:09 PM
Apr 06, 2018
 |  BioCentury  |  Finance

Fundamentally driven

Biotech winners, losers in 1Q18

Continued struggles by the mega-cap bellwethers and the resurgence of volatility in global equity markets were the major themes of 1Q18, whipsawing biotech stocks throughout the quarter but leaving index values little changed on the whole.

Deeper inspection revealed a sectorwide dispersion in market prices, however, with fundamental drivers of value ultimately determining the quarter’s biggest winners and losers.

Despite the volatility, the first quarter proved to be another strong one for fundraising.

Sixteen biotechs raised $1.2 billion via IPOs worldwide, more than doubling the $564.6 million raised by 15 biotechs in 1Q17.

In fact, 1Q18 was the most robust first quarter for new issues since 1Q15 saw 23 IPOs that raised $1.9 billion.

NASDAQ IPOs by elite biotechs are expected to remain strong, with syndicates comprised of deep-pocketed VCs and crossover investors doing most of the heavy lifting in financing the deals.

The proposed new biotech chapter by Hong Kong Exchanges and Clearing Ltd. (HKEX) is likely to see its first bolus of activity in 2Q18 as well.

A number of biotechs with operations in or exposure to the Asia Pacific region are rumored to be eyeing a listing once the exchange implements the new chapter, which is expected by the end of April.

The follow-on market was likewise exceptionally strong in the first quarter, with 82 financings raising $9.4 billion. Since BioCentury began tracking financings in 1994, only 1Q15 proved to be a busier start to a year, when 95 follow-ons secured $11.4 billion.

Winners and losers

Across all market cap tiers, biotech stocks gained a median of just 2% during 1Q18, although this translated into $20.8 billion in total value creation.

Large caps valued over $10 billion did little to help, declining a median of 5% and erasing $18.4 billion in market cap during the quarter.

European bellwether Genmab A/S was the biggest gainer, adding 30% in market value to $13.2 billion.

The oncology and autoimmune disease play issued preliminary 2018 guidance in February for multiple myeloma (MM) drug Darzalex daratumumab that surprised to the upside. Partner Johnson & Johnson is expecting to book $2-$2.3 billion in 2018 sales, translating to about DKK1.75 billion ($291.3 million) in royalty revenue.

Shenzhen-based BGI Genomics Co. Ltd. was the worst performer of the group, losing 16% to finish 1Q18 with a market cap of $10.7 billion.

The biotech had limited newsflow during the period, with the only corporate announcement being its purchase of 10 Sequel Systems from fellow genomics play Pacific Biosciences of California Inc. for an undisclosed sum on Jan. 25.

BGI had been the top performer in the large cap band in 4Q17, finishing 2017 valued at $12.7 billion after seeing its shares surge 1,425% following its IPO last July.

Companies valued in the $5-$9.9 billion group inched up a median of almost 1% in 1Q18, but collectively gained $9.2 billion in equity value.

Oncology and drug delivery play Nektar Therapeutics was responsible for the bulk of the gains, jumping 78% to finish the quarter with a market cap of $17 billion and graduating into the top tier.

On Feb. 14, the company partnered with Bristol-Myers Squibb Co. in a $3.6 billion deal to develop and commercialize its NKTR-214 in combination with BMS’s anti-PD-1 mAb Opdivo nivolumab and Opdivo plus Yervoy ipilimumab in select solid tumors.

NKTR-214 is an immunostimulatory cytokine engineered to selectively activate IL-2 receptor beta chain (CD122; IL2RB) receptors on cytotoxic T cells, resulting in increased PD-1 expression on T cells and natural killer...

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