Dr. Daniel Koller, Head Investment Team BB Biotech
Broader equity markets increased in the mid- single digit range in Q3 driven by solid corporate results and continued favorable interest rate environment. BB Biotech gained 11 percent in Swiss Francs in the third quarter and 24 percent in 2017, outperforming the Nasdaq Biotech Index in 2017 by almost 10 percent.
Several factors drove favorable biotech performance during the third quarter. High-revenue companies reported solid Q2 results. A significant number of products achieved regulatory approval, and progress was reported for a range of potentially valuable clinical candidates.
We expect incremental changes in the U.S. health environment - Affordable Care Act reform has been stalled and pricing concerns are being managed carefully from all sides. Like others, we were encouraged with the appointment of Dr. Scott Gottlieb as Commissioner of the FDA and we are not disturbed by the recent resignation of Gottlieb's boss, Tom Price as HHS Secretary. The FDA has already approved more new drugs so far in 2017 than in all of 2016.
Portfolio events reported in Q3
Alnylam, with its partner Sanofi, announced that Patisiran met all the clinical endpoints in the trial and is planning to file a new drug application for the US in late 2017 and a market authorization application in Europe in early 2018.
Vertex reported positive data from Phase I and Phase II studies of three investigational triple combination regimes for cystic fibrosis patients with one F508del mutation and one minimal function mutation.
By contrast, Sage Therapeutics reported failure of brexanolone in super refractory status epilepticus. After the news, we reacquired Sage shares at a lower price given our belief in the ultimate potential for brexanolone in post-partum depression.
Celgene, and partner Agios, won US market approval for enasidenib. The approval was granted based on an extended Phase I/II study which not only validated the efficacy and safety, but also demonstrates the FDA's increasing willingness to accelerate the approval of drugs for highly unmet medical needs.
Gilead's Vosevi, was approved by the FDA for treatment of adult chronic hepatitis C. This builds further on Gilead's leading franchise.
Novo Nordisk's Fiasp was also approved by the FDA. If approved in 2017, Semaglutide will extend Novo Nordisk's GLP-1 franchise and allow them to compete more effectively against Eli Lilly's Trulicity.
More M&A to come
Merger and acquisition activity in the biotechnology sector has been subdued so far in 2017. So Gilead's announced acquisition of Kite for USD 12bn came as a pleasant surprise to equity markets and has encouraged the belief that there's more to come.
We sold our entire holding in Kite into the announced transaction - generating approximately USD 124 mn in cash and an overall profit of USD 75 mn from the investment. Stocks of several other midcap oncology companies rallied on the news. Juno, the closest competitor to Kite, rose significantly, adding to our NAV performance in the third quarter.
Outlook: there's more to come in 2017
For the remainder of 2017 we are expecting FDA approval for for Semaglutide from Novo Nordisk for treating type 2 diabetes patients and for Axicabtagene Ciloleucel from Gilead/Kite for lymphoma patients.
On the clinical side we wait for Phase III data from Sage Therapeutics for Brexanolone for treating postpartum depression, Phase III data for Revlimid from Celgene in lymphoma patients and Phase I / II data from Agios for data Ivosidenib for relapse refractory AML patients
In addition, investors are focused on important, ongoing commercial launches. Revenue growth of these drugs will drive profit forecasts and share price valuations for these companies.
Overall, we believe that the encouraging progress in biotechnology during the first nine months should continue in 2017 and into 2018. We look forward to more progress with exciting drug development programs, new approvals and commercial progress of marketed products.
For more information, please contact:
Claude Mikkelsen
[email protected], +44 203 326 29 83
BB Biotech
Disclaimer
Bellevue Advisors LLP is an appointed representative of Mirabella Advisers LLP, which is authorised and regulated by the Financial Conduct Authority. This advertisement is directed at professional clients and eligible counterparties as defined by the FCA in the UK only. Past performance is not indicative of future results.
