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The Readout Damian Garde & Meghana Keshavan

Gilead’s $5 billion bet goes up in flames

Back in 2019, at the dawn of Daniel O’Day’s tenure as CEO of Gilead Sciences, the company paid $5 billion to deepen its relationship with Galapagos NV, a Belgian drug developer. Two years and as many failed drugs later, the deal looks like a costly misstep.

As STAT’s Matthew Herper reports, yesterday Galapagos halted the development of the Gilead-partnered zirataxestat, for the lung disease idiopathic pulmonary fibrosis, because an independent data monitoring committee said the drug’s potential benefits were unlikely to outweigh its risks. That news follows the failure of filgotinib, a treatment for rheumatoid arthritis, to reach the market.

There are still four other Galapagos drugs in clinical development and a dozen or so more in the early stages of research, but going 0-for-2 on the first big tests of a multibillion-dollar agreement doesn’t manifest much confidence. It also doesn’t bode well for Gilead’s yearslong quest to meaningfully expand beyond its core business of selling treatments for infectious diseases.

Read more.

SoftBank’s timing remains impeccable

SoftBank, the Japanese tech conglomerate famous for paying questionable sums to invest in startups, has paid a questionable sum to invest in the genome sequencing company Pacific Biosciences.

It’s a $900 million investment in the form of convertible debt, meaning SoftBank can exchange the money for stock at a price of $43.50 per share. That price is a 10% premium to PacBio’s most recent closing price, but perhaps more relevant is the fact that it’s a 540% premium to the price Illumina planned to pay for the entire company as recently as 2020.

That merger fell apart over antitrust concerns, and, in the 13 months since, PacBio’s share price has risen more than tenfold, as a new management team has promised a brighter future in which the company can carve out a larger share of the sequencing market Illumina currently dominates. That ambition hasn’t yet translated to the balance sheet: PacBio’s fourth-quarter revenue was just $27 million, a 3% decline from the same period last year.

But the stock keeps going up. The news of SoftBank’s investment sent PacBio’s share price up another 22% yesterday, to an all-time high of $48. That means SoftBank’s stake is in the money, at least on paper. But the bet is that PacBio’s remarkable runup is merely the beginning of a massive growth story, one that will line SoftBank’s over the next seven years, when the debt fully matures. Similar top-of-the-market investments in WeWork, Wag, and Boston Dynamics did not play out as SoftBank hoped.

Pharma wants to help with Covid-19 vaccines, but how much can it do?

Merck and Teva Pharmaceutical, each on the outside looking in on Covid-19 vaccine development, have been in talks to assist the companies racing to manufacture enough doses for the world, but it’s unclear just how much either could help in what is a markedly specialized process.

The news is that Teva has had discussions about “contributing by manufacturing some of those vaccines that either have been approved or are just about to be approved,” CEO Kare Schultz told Reuters. And Merck is looking to do the same through “regular conversations” with governments and health authorities, as Chief Marketing Officer Michael Nally told the New York Times.

But making those approved vaccines, messenger RNA products from Moderna and partners Pfizer and BioNTech, involves technology other drug makers are unlikely to have lying around. As medicinal chemist and blogger Derek Lowe wrote last week, the rate-limiting step in the manufacturing process is getting strands of mRNA into the nanoparticle envelopes through which they’re delivered, something done with bespoke machines found at a small number of facilities. Merck and Teva are certainly equipped to put finished vaccines in vials and ship them out, as Sanofi has already signed on to do, but it might be impossible for them to pitch in on the vital process of actually making the in-demand material.

Biotech stocks really do pop more nowadays

Throughout biotech’s record run of stock performance in 2020, it consistently felt like good news for drug developers was not only more frequent but also more lucrative. Evaluate Vantage ran the actual numbers, and it turns out to have been more than feeling.

Looking at first-day share price reactions to data announcements, Evaluate found that 2020’s mean and median increases were larger than in any of the previous five years. On average, good news sent a biotech company’s stock up about 42% in 2020, beating 2019’s 32% and more than doubling 2016’s average. Notably, the analysis excluded outliers, including Greenwich Lifesciences 1,000% single-day gain, meaning the figures better represent actual market trends.

The early returns for 2021 suggest the inflation of biotech stock pops is only increasing. A handful of companies have already doubled their valuations in one day.

More reads

  • Drug maker will slash prices on cancer medicines to end price gouging probe in Europe. (STAT+)
  • Equip, a startup providing virtual therapy for eating disorders, raises $13 million. (STAT)
  • After ditching Editas, AbbVie taps Caribou for new CRISPR, CAR-T pact. (FierceBiotech)
  • Eli Casdin and Icahn protégé find a home for their $450M SPAC, merging with Sema4. (Endpoints)

Thanks for reading! Until tomorrow,

Thursday, February 11, 2021


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