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Monday, January 29, 2018

The Readout by Damian Garde & Meghana Keshavan

Welcome to The Readout, where we keep you on top of the latest in biotech. For more in-depth coverage of biopharma, subscribe to STAT Plus. On Twitter: @damiangarde@megkesh, and @statnews.

That escalated quickly

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Biotech is having something of a moment. How do we know? Three reasons: 

  • Solid Biosciences not only pulled off a $125 million IPO the other day, despite what you might call credibility concerns, but traded massively up on its debut.
  • AbbVie added $23 billion in market cap on Friday. That’s an entire Mylan. Since the beginning of the year, Abbvie’s market cap has increased by $42 billion, or one Regeneron Pharmaceuticals.
  • The XBI, which tracks biotech companies in the S&P 500, has hit an all-time high, as you can see in the chart above.

But the thing about objects that go up is that they pretty much always come down, and thus this thrush of market exuberance has more than a few investors concerned. If you’re a fund manager, you can’t just, like, not invest in a bubble. And yet predicting when — and how painfully — a bubble will burst is famously difficult. That makes picking biotech stocks a frightful prospect in the current moment, investors said.

An unlikely crusader fights the generic-drug industry

Meet Dan Liljenquist, a free-market Republican from Utah who's plotting to use some old-fashioned collective action to break up what he says is monopolistic pricing in the generics business.

Liljenquist works for Intermountain Healthcare and, as STAT's Casey Ross reports, his phone has been ringing virtually incessantly since Intermountain proposed a plan to create a nonprofit drug company that would undercut makers of generics. That would mean taking on a multibillion-dollar industry, but Liljenquist won't be doing it alone — three Catholic hospital chains have joined the effort, and the U.S. Department of Veterans Affairs has signed on as a future customer.

“By and large, the drugs we’re talking about were developed in the ’50s, ’60s, and ’70s — really the core foundational drugs of health care,” he said. “We really feel like this is a societal necessity. So we are starting up a societally owned not-for-profit company that will act somewhat like a public utility.”

Read more.

Sponsor content by MilliporeSigma

Genome editing's exciting future

The race is on in the field of genome editing — not only to develop treatments for a wide range of diseases, but also to decide crucial questions regarding ownership of individual genome sequences. "It's an exciting future ahead of us," one researcher said. Read more here.

The SEC's not wasting any time

Fans of biotech insider trading news usually have to wait months or even years to find out what sordid schemes went down during some big buyout or clinical failure. But this time, with the ink still dry on the sector’s most recent megadeal, the SEC says it smells fraud.

In the week before Sanofi agreed to buy Bioverativ for $105 per share, a bunch of investors purchased call options that would allow them to pick up shares of the latter company for between $65 and $75. That was weird, because Bioverativ had never closed above $64.11, and furthermore the call options expired in mid-February, meaning the company would have to do something pretty dramatic and pretty fast for these people to make so much as a dime.

A little too weird, says the SEC, which is now bringing charges against these traders, alleging that they knew the Sanofi deal was going to happen and that the $4.9 million they made selling those call options should be seized at once.

Consider the short seller

Is shorting stocks “icky” and “un-American,” as the guy who runs the New York Stock Exchange said? Or is profiting from corporate misfortune “not about making money” but rather “holding companies accountable,” as short-selling star Fahmi Quadir says in a new Netflix documentary?

Somehow this debate refuses to go away, especially in biopharma. (Quadir made her name, and, one assumes, a lot of money, by shorting Valeant Pharmaceuticals). Neil Woodford, a famed investor on the spin, just tore into biotech shorts, and last year, none other than BIO went before Congress to demand short-sellers be forced to show their faces when they bet big against companies, arguing that progress in biopharma has been uniquely imperiled by predatory naysayers exploiting anonymity.

Each was pretty roundly mocked, but so too are the frequent lionizations of shorts as white knights standing tall against the tyranny of misleading press releases. “There are easier ways to make money in finance than to be a short,” goes this representative tweet, and while that’s probably true, there are also less lucrative ways of holding companies accountable. We’re told there’s a whole commission devoted to securities and exchange, for instance. Also, there's journalism

More reads

  • This scientist is creating tiny versions of one of neuroscience’s most notorious opponents: the blood-brain barrier. (STAT)
  • AbbVie says tax overhaul will slash 2018 effective tax rate to 9 percent. (Wall Street Journal)
  • Video: At Davos, industry leaders discuss the promise and pitfalls of precision  medicine. (STAT)
  • Why insurers haven't — and won't — push back on rare disease drugs. (Investor's Business Daily)

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Thanks for reading! Until tomorrow,

Damian

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