Slow But Steady Biotech Rally

RNA Therapeutics-Duchenne Muscular Dystrophy (DMD)

Despite some overhanging concerns about drug pricing and major setbacks from clinical trials like Clovis Oncology (CLVS) and BioMarin Pharmaceutical (BMRN) the sector looks like it wants to go up another 8-10% before it hits resistance from the most recent big sell-off in mid-September. Today we have a little buying which should give us positive performance in November setting us up for another December rally. Our most recent picks are doing well over one month:

Cepheid (CPHD) 36.7 up 19%, Curis (CRIS) 2.75 up 41%, Geron (GERN) 4.53 up 27.9%, Neogen (NEOG) 58.5 up 15.7%,Ocera Therapeutics (OCRX) 3.75 up 15%. See our Rayno Life Science Portfolio picks.

And biotech ETFs are outperforming over the past month:

IBB 339 up 7.1%, QQQ 114 up 1.21%, XBI 72.45 up 10.1%, XLV 72 up 3.8%

XBI SPDR S&P Biotech ETF daily Stock Chart

Macro issues remain a risk particularly terrorism from ISIS and lately warnings about corporate profits, global growth and retail sales in ‘bricks and mortar”. Recent expectations for a FED rate hike for the December Meeting are over 60% probability. MACRO uncertainty could favor domestic stocks such as healthcare.


Case Study: RNA-based Therapeutics a New Drug Class

Here is a good albeit older review of RNA targeted drugs. Among the top players are Alnylam (ALNY) and Isis Pharmaceuticals (ISIS) and recently Moderna messenger therapeutics.  Many RNA drugs are under clinical investigation for genetic diseases, cardiovascular, cancer and infectious disease.

The hot story of the week is the FDA panel’s concern about the Biomarin (BMRN) Duchenne drug drisapersen for muscular dystrophy which affects 3500 patients in the U.S. and Worldwide. The drug with the trade name Kyndrisa is an antisense oligonucleotide that induces Exon 51 skipping to provide a molecular patch for certain mutated dystrophin genes allowing production of a functional protein. Exons are parts of the gene that contain the instructions for generating the protein. The trial  included 300 Duchenne patients in multiple randomized, placebo controlled studies. The FDA panel of outside advisors concluded that the data on the muscle wastage disease was not persuasive enough although they did not officially vote on approval.Both the efficacy and side effects of the drug  were an issue and the FDA may decide to focus on dystrophin production as a “biomarker” to measure how the drug is working. Final FDA approval will be decided by a PDUFA date of December 27.The disease affects 1 in 3600 newborn boys or 2300 patients in the U.S. eligible  for treatment with peak market potential estimated in the $300-$500M range.  A competitive experimental DMD drug by Sarepata Therapeutics (SRPT) is also awaiting approval with a PDUFA action date of February 26, 2106 with priority status. The Sarepta drug eteplirsen if approved has analyst forecasted sales in the $50-100M range for 2016.

We have not covered these stocks but some analysts have said that the FDA may approve either both or neither drug based on current data. Biomarin (BMRN) is a much larger Company with 2015 forecasted revenues of $890M and an extensive pipeline of rare drugs for treating genetic diseases whereas there are higher expectations for the Sarepta eteplirsen approval and 2016 revenues. The Sarepta late stage pipeline is focused on DMD with a few Phase I antiviral drug candidates.

Both stocks were volatile today BMRN 96.06 down 1.78% in heavy volume; SRPT 37.49 up 0.46% on heavy volume but was up 33.8% over the past five days.

Disclosure long CPHD, FBIOX.

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