INMB - Biotech Market Update: Q1 2019 in Review

The first quarter of 2019 was robust with activity for the biotechnology industry thanks to merger and acquisitions (M&A) in addition to initial public offerings (IPOs). 

Looking back to the end of last year, the biotech sector took a significant hit in terms of stock performance, according to a 2018 year-in-review report from Evaluate.com.  The report’s findings states the NASDAQ Biotechnology Index (INDEXNASDAQ:NBI) ended up declining in value by 9 percent over the course of the year, losing a fifth of its value in the last quarter of the year.

That momentum, however, has shifted so far in 2019. Year-to-date, the index has risen by more than 13.50 percent, which should be encouraging for interested investors in the space.

In terms of what to expect in the biotech industry this year, M&A activity will continue to thrive based on the need for companies to strengthen their research and development (R&D) efforts, licensing and strategic partnerships, a report from Deloitte says.

So far this year, that momentum has certainly been felt with a number of blockbuster deals already having taken place.

On that note, with Q1 2019 officially in the books, here the Investing News Network (INN) is taking a look back on the first quarter of the year as to what the biggest news in the biotech space was in addition to what’s in store for the rest of the year.

Biotech market update: M&A dominates

In an interview with INN, Irene Birbeck, partner with Clarkston Consulting, said that there were several key M&A’s in the first quarter of the year.

She first exampled the announcement of Bristol-Myers Squibb’s (NYSE:BMY) acquisition of Celgene (NASDAQ:CELG), which came in January, as the major blockbuster deals of Q1. In the same breath, the takeover is also the largest healthcare deal in history. According to Bristol-Myers Squibb’s announcement, the acquisition totals approximately US$74 billion, where Celegene stockholders will get one Bristol-Myesr stock and US$50 in cash for each Celgene stock.

At the beginning of March, however, CNBC reported the deal was in jeopardy as hedge funds Wellington Management and Starboard Value claiming it did not “sit well” with them. In a press release issued by Wellington Management in February, the investment management firm had confirmed that it did not support the acquisition of Celgene. As of February 25, Wellington Management was Bristol Myers’ largest institutional investor, owning 8 percent of the company’s common stock.

By April, however, Bristol-Myers’ shareholders had approved the merger with Celgene, which is projected to complete sometime in Q3 this year.

The second notable M&A Birbeck referenced was Eli Lilly and Co.’s (NYSE:LLY) US$8 billion acquisition of Loxo Oncology, which was first announced in January. By the middle of February, the deal had officially been completed, and will provide Eli Lilly with Loxo Oncology’s “promising pipeline of investigational medicines.”

Finally, the last noteworthy M&A Birbeck touched on was Roche’s (OTCQX:RHHBY) intended acquisition of Spark Therapeutics (NASDAQ:ONCE) for US$4.3 billion, which was first revealed in late-February. In April, however, Roche withdrew its premerger notification and report form relating to its acquisition of Spark Therapeutics.

Birbeck said that in the case of these M&A deals, what’s being seen is companies refine their strategies into specific therapeutic area, which has been oncology.

“I think what we’re seeing is the trend of [companies] double down on their therapeutic area strategies, whereas we used to see [M&A] be expected,” she explained. “I talk about the M&As and innovation very much in the same breath, because with oncology drugs particularly, it shows a really exciting time that we’re in with innovative therapies.”

Birbeck expanded on that, stating that cell therapies and gene therapies have had “great indications” for oncology in particular.

Despite these mega deals, a report from Evaluate states that a decrease in the number of acquisitions could give “pause to those hoping for a bumper year.”  In total, US$92 billion was spent on M&A in the first quarter of the year, which Evaluate says is the largest quarterly total in five years.

Biotech market update: IPOs launch

The first quarter of the year saw a number of biotech companies make their official public debuts through IPOs.

The first notable IPO of the year was INmune Bio (NASDAQ:INMB), which launched on the NASDAQ in early February with a price of US$8 per share. Following its launch on the NASDAQ, INN had the opportunity to speak with David Moss, CFO of INmune Bio, about the company’s clinical trial for Xpro1595 to treat Alzheimer’s disease.

In our interview, Moss credited the Alzheimer’s Association for supporting the company’s trial thanks to a US$1 million grant in order to develop the drug candidate.

Secondly, Harpoon Therapeutics (NASDAQ:HARP) went public on the NASDAQ on February 8 and priced its IPO at US$14 per share. Gross proceeds of Harpoon’s offering totaled approximately US$75 million. The company is focused on immunotherapy and is currently in clinical stage developing its Tri-specific T cel Activating Construct platform to treat solid tumors and hematologic malignancies, including metastatic castration-resistant prostate cancer.

Anchiano Therapeutics (NASDAQ:ANCN) also went public in February after it closed its US$30.5 million IPO on February 12. The company’s current focus is on developing therapies for cancers that have unmet medical needs. Its primary program is gene therapy for early stage bladder cancer.

Other notable IPOs in Q1 2019 include:

• TCR2 Therapeutics (NASDAQ:TCRR), a company developing T cell therapies for cancer patients, went public on February 15 at a price of US$15 per share;
• Stealth BioTherapeutics (NASDAQ:MITO), which priced its public offering on February 14 for US$12. Stealth BioTherapeutics’ primary focus is on developing therapies for diseases with mitochondrial disfunction;
• Kaleido Biosciences (NASDAQ:KLDO), a clinical stage company using a chemistry-based approach with microbiome organs to treat diseases and overall human health, closed its IPO on February 28 at US$15 per share; and
• Precision BioSciences (NASDAQ:DTIL) priced its IPO at US$16 for proceeds totaling US$126 million on March 27. The company, which is using its genome editing platform, ARCUS, and developing therapies in areas such as allogenic CAR T immunotherapy, in vivo gene correction and food, officially began trading on March 28.

Biotech market update: What’s ahead

With second quarter of 2019 already in full swing, Birbeck told INN that the industry can continue to see the trend of organizations going after targeted extensions of “their therapeutic capabilities” similar to what happened with oncology.

In terms of M&A activity Evaluate’s report says that the need for growth, which drives M&A “is not abating.” The report says big name companies such as Biogen (NASDAQ:BIIB), AbbVie (NYSE:ABBV) and Allergan (NYSE:AGN) could use a boost in activity.

In a report on where the market is heading in 2019, Evaluate says that more deals are needed in order to “convince investors that activity is on the rise.”

“Big biotechs are all looking for the next blockbuster, so we might see some buying smaller companies with products on the market, as they start to look cheaper. But that difficult second album is always much more challenging than they expect,” the report says.

Don’t forget to follow us @INN_LifeScience for real-time news updates!

Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.