• Update-1 …12/12/19…China Deal Announcement Boosts Dow S&P and NASDAQ.
  • IBB up 0.68%, XBI up 0.58%, XLV up 0.93%.
  • Large cap leaders: ABBV ALXN BMY,
  • Chips, energy, financials strong; real estate weak.
  • 10 year yield moves up to 1.894%


Early Stage Pipeline Deals Diversify Oncology Portfolios

Biotech Momentum Ebbs as Tariffs Deadline Looms

Sanofi (SNY) Buys Synthorx (THOR) for $2.5B at a 170% Premium-THOR-707 a Lead Phase-1 Pipeline Asset for Immuno-Oncology Portfolio

Synthorx is not a well known biopharma Company but the THOR-707 Phase 1 program is targeted for solid tumors utilizing the novel technology of Synthorins, a  DNA base pair an important discovery in synthetic biology. The therapeutic proteins created by synthetic biology (synthorins) have the potential not only for oncology but for autoimmune disease.by dampening immune cell activation utilizing multiple IL-2 candidates.Other cytokine programs are also under development.

Merck (MRK), a leader in immuno-oncology with the blockbuster cancer drug Keytruda, expanded its pipeline into targeted therapies that treat hematological malignancies with the acquisition of ArQule (ARQL) for $2.7B. ArQule’s lead Phase 2 program is a novel oral Bruton’s tyrosine kinase (BTK) inhibitor for treatment of B-cell malignancies. ArQule has been around since October 1996 with several strategy shifts but is now focused in biomarker defined, small molecules with four programs in its pipeline including AKT inhibitors.

The retained earnings of ARQL since inception is ($548M)!

Monthly chart of ARQL since 2011;

Deals large and small have provided the underpinnings of the biotech bull market for many years and deals have accelerated recently. With these two acquisitions we see large biopharmas bolstering their R&D base and platforms with earlier stage programs that have greater risk for clinical development.

The momentum trade in biotech ebbed today as the XBI was up only 0.1% on lower volume.NASAQ lost 0.4%. Small caps (IWM) were flat.  The current rally began in early October. Traders may be more cautious as they await the December 15 deadline for increased tariffs on the China trade as a deal does not appear imminent. Other macro events this month include Brexit , a USMCA bipartisan deal and a FED meeting.

A battle of drug pricing bills is also under consideration between Dems and Republicans including issues such as Medicare pricing caps and protection for the uninsured.

Our core biopharma positions for 2019 have been doing well: ABBV, AMRN, BMY, MRK and RHHBY and we trade the XBI when we want portfolio overweight. mRNA stocks show profit taking: ALNY, DRNA, MRNA. Biotech stocks are mixed amidst speculation on American Society of Hematology (ASH) data and maybe disappointments on clinical data and what deals would be next.

Note: a special play on the Celgene pipeline (BMY-R) was up 25.8% today.

  • Gene therapy stocks are very weak today: CRSP, QURE, SLDB, SGMO but CLLS and MGTX is holding.
  • Mid-caps that we follow are mixed with several winners: AGIO, ICPT, IMMU, MRTX, NKTR. BPMC is down 10%

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