Small caps continued to struggle and lagged large by 12.5% in 1st half, marking the widest spread since 1973. The S&P Select Biotech Index is hovering above the 100-day moving average on the back of rebalancing to be more market cap weighted and an incremental M&A Monday.
The sector remains under pressure from the current administration following a recent USA Today OpEd attributed to Joe Biden and Bernie Sanders calling for Novo Nordisk to lower obesity drug prices suggesting "If Novo Nordisk and other pharmaceutical companies refuse to substantially lower prescription drug prices in our country and end their greed, we will do everything within our power to end it for them". Expansion of the IRA price controls to 50 drugs per year is also mentioned, but details around the proposed expansion were sparse. Bloomberg is reporting the most likely outcome of the election is a GOP win, blunting the perceived risk from IRA expansion for the time being.
M&A:
Eli Lilly (LLY) announced the acquisition of Morphic Holding (MORF) for $3.2 billion, a 79% premium to the prior close. MORF is developing an oral integrin inhibitor for inflammatory bowel disease. The $57 deal price is ~20% below where the company was trading in 2023 prior to releasing endoscopic improvement data that came in below that seen with market leader Entyvio
Regulatory:
Eli Lilly (LLY) announced FDA approval of Kisunla (donanemab) for Alzheimer's patients with a similar label to Biogen's (BIIB) Leqembi. Pricing was set at $695 per vial or ~$32,000 for a year
eVenus Pharmaceuticals, a subsidiary of China-based Jiangsu Hengrui Medicine Company (600276-CN) received FDA approval for a generic liposomal bupivacaine version of Pacira BioSciences' (PCRX) Exparel. PCRX has a number of ongoing of patent infringement suits, the first of which will have a ruling by August 1. Analysts expect generic launch will be blocked until all the patent suits are concluded a process expected to take ~years
Clinical:
HilleVax (HLVX) crashed ~90% on announcing the NEST-In1 Phase 2b trial of norovirus candidate HIL-214 failed to mee the primary endpoint. The company will discontinue further development of HIL-214 in infants
Roche (RHHBY) finally announced the failure of the SKYSCRAPER-06 study, which compared its Tira (tiragolumab, anti-TIGIT) plus PD1 Atezo + chemo against standard of care in frontline metastatic non-small cell lung cancer PD1 Keytruda + chemo
Corporate Updates & Earnings:
Novo Nordisk (NVO) shares ticked lower after a retrospective study from a single ophthalmology/ENT hospital published in JAMA Ophthalmology showed higher incidence nonarteritic anterior ischemic optic neuropathy in patients prescribed semaglutide
Ardelyx (ARDX) shares were under pressure on announcing they would not apply to include lead drug XPHOZAH in a government reimbursement adjustment program since "restrictions placed on XPHOZAH would be such that patient access to this novel therapy would be effectively eliminated for all patients". ARDX is calling for a legislative solution that would exclude oral-only medications such as XPHOZAH from such draconian restrictions
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