| |   | Hello, all. Damian here with a look at Illumina's regulatory quagmire, a curious biotech stock offering, and good news for fans of moth cells. | | | Should Illumina just walk away from Grail? It has been nearly two years since Illumina signed a roughly $8 billion deal to acquire Grail, a former subsidiary focused on cancer-detecting blood tests. And thanks to repeated roadblocks from U.S. and EU regulators, it might take three more years for the merger to actually go through, raising the possibility that this is all more trouble than it’s worth.
The latest news is from Europe, where Illumina lost an appeal that challenged whether the EU’s antitrust authority had jurisdiction over the Grail deal. That means the European Commission’s review will continue, with results expected in the third quarter. In parallel, a U.S. review is ongoing, and analysts expect it will not go Illumina’s way.
The whole protracted process threatens to extend the merger to at least 2025, which is an expensive proposition for Illumina, which is effectively running Grail as a separate business to satisfy regulators. Meanwhile, Grail’s 2022 revenue is trending behind the company’s projections, suggesting it might take longer than expected to evolve into a sustainable business. At some point, between regulatory uncertainty and financial pressure, it might make sense for Illumina to just walk way from the deal. | Time to test the Novavax hypothesis It finally happened. The FDA authorized Novavax’s vaccine for Covid-19 yesterday, ending nearly two years of deferral and delay.
As STAT’s Matthew Herper reports, the decision follows a nearly unanimous recommendation from the FDA’s advisers. Next, a CDC committee will make recommendations on the best use of Novavax’s vaccine, after which it will likely be available to anyone who hasn’t already received vaccines from Moderna, Johnson & Johnson, or Pfizer-BioNTech.
Novavax’s authorization will test the hypothesis that some number of the millions of unvaccinated Americans were holding out for a more familiar vaccine. Unlike currently available shots, Novavax’s vaccine uses an older technology already employed in commonplace flu vaccines, which might make it more palatable to skeptics.
Read more. | Join us as we host silo-breaking discussions on the most important topics in health care. Over two days this November, you’ll hear from some of the leading minds in the industry. Don’t miss out, and enjoy early-bird pricing on your pass until July 22. | When selling shares makes a stock go up In general, companies’ stock prices tend to go down when they sell shares into the market because it dilutes existing shareholders by increasing the supply of stock. That’s why biotech companies usually sell stock in the days — or sometimes minutes — after good news that increases the share price, thereby raising necessary cash while limiting the downside of doing an offering.
All of which makes yesterday’s news from Gossamer Bio interesting. The company signed a deal to sell nearly 17 million shares at $7.21 each, and it did so despite not yet knowing the results of a closely watched clinical trial and despite previously reporting enough cash to keep the doors open into 2024. And then, Gossamer’s share price actually went up after it disclosed the offering, rising 32% by the end of the day.
The likely reason, according to analysts at Evercore ISI, is that the investors who bought the offering got to look at blinded data from the aforementioned trial. And while they wouldn’t know which patients were on placebo and which were on Gossamer’s drug, they must have seen something they liked if they wanted in. This will all seem silly if the study turns out to be a failure when it reads out in the fourth quarter of this year, but at least for now, Gossamer has accomplished the rare feat of a stock sale that increases a share price. | A test of whether health care really is recession-proof The saving grace of downtrodden biotech stocks could be growing malaise that the rest of the market is only going to get worse.
As Reuters reports, strategists and fund managers are looking fondly upon health care stocks — insurers, major pharmaceutical companies, and biotech firms — as the broader economy tips ever downward. Back in the global financial crisis, while earnings for the S&P 500 fell for nine straight quarters, the health care sector posted earnings growth for the same period. That gave rise to the axiom that health care is recession-proof. As one UBS analyst put it to Reuters, “If they have healthcare needs, that is usually one of the last places that people will ration."
And unlike some other market sectors, biotech and pharma were already deeply discounted heading into the broader downturn, making them look like cheap places to park money. The risk, however, is that this time will be different. Long-delayed legislation on drug prices could finally materialize in the U.S., and there’s no guarantee biotech sentiment won’t worsen as the year progresses. | More reads - Value-based drug pricing: When does it work best? STAT+
- Few biopharma risers stand out at the half year. Evaluate Vantage
- Sanofi, still on CEO Paul Hudson's quest to slim down, offloads 17 drugs to Neuraxpharm. FiercePharma
| Thanks for reading! Until tomorrow,  | | | |
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