April 25, 2023

The need-to-know this morning

Morphic Therapeutic shares are trading higher on the blockbuster promise of a pill for ulcerative colitis.
Novartis reported first-quarter adjusted earnings of $1.71 per share on total revenue of $12.95 billion, beating consensus expectations for both the top and bottom lines. The drugmaker also slightly raised revenue guidance for the remainder of the year.
More earnings: Biogen reported adjusted earnings of $3.40 per share on total revenue of $2.5 billion, topping (modestly) consensus estimates. There was no change to financial guidance for the remainder of the year. Drug development programs in stroke, gene therapy, and ophthalmology were axed as part of a pipeline prioritization plan. Biogen also said it is making further, unspecified expense cuts to "align our cost base with expected revenue while also investing for growth."
Vedanta Biosciences, a privately held biotech developing microbiome-based treatments, raised $106.5 million to fund new clinical trials, including a Phase 3 study in recurrent c. difficile infection.

Biotech

Can a pill tame inflamed bowels?

Morphic Therapeutic is developing a pill for ulcerative colitis that it has billed as an "oral Entyvio." If true, that would be a very big deal because Entyvio, an infused antibody marketed by Takeda, delivered $5.5 billion in sales last year.

This morning, Morphic offered early evidence to justify the buzz: In a small mid-stage study, 26% of participants with ulcerative colitis reached complete remission after 12 weeks of treatment with its twice-daily pill, called MORF-057. There were no serious side effects reported.

MORF-057 has years of clinical studies ahead, but just the prospect of an "oral Entyvio" could transform Morphic into an attractive takeover target for large pharmaceutical companies eager to acquire smaller developers of medicines for immune-based diseases.

Markets

Activists are thriving

A sustained downturn in drug company valuations has empowered activist investors, who have deposed the CEOs of Bayer and Amarin this year alone. Now another agitated shareholder is pressuring for change at Aurinia Pharmaceuticals, a biotech buyout candidate whose stock price has lagged.

MKT Capital, which holds a roughly 4% stake in the company, wrote an open letter demanding Aurinia start the process of selling itself, arguing that the company could go for nearly three times its current share price. MKT has promised to withhold its support for three of Aurinia's board members at next month's annual meeting and is urging its fellow shareholders to do the same.

Aurinia has been the subject of buyout speculation since 2019, when Lupkynis, its treatment for lupus, succeeded in a Phase 3 trial. Bristol Myers Squibb reportedly approached the company in 2021, and Biogen had Aurinia on a list of potential acquisition targets as recently as last year. But no deal has materialized, and Aurinia has lost about half of its value since trying to commercialize Lupkynis on its own.

Pharma

Pascal Soriot was right

Nearly 10 years after AstraZeneca promised outsized financial success in hopes of escaping a hostile takeover by Pfizer, the British drugmaker has become more valuable than its would-be acquirer.

As the Guardian points out, AstraZeneca's share price has more than doubled in the last five years alone, and its roughly $230 billion market value now outstrips Pfizer's $225 billion. (In fairness to Pfizer, the company has spun out its animal health and generics businesses since first bidding for AstraZeneca, and those companies have grown considerably on their own.)

AstraZeneca's growth is a testament to Pascal Soriot, who said in 2014 that if Pfizer would simply go away, AstraZeneca could grow its sales by about 75% by 2023. It was a startlingly rosy projection that relied on a host of unproven medicines not only working but becoming blockbuster products. And it appears to be coming true: Last year's $43 billion in annual revenue is a roughly 70% increase over 2013, setting the stage for Soriot to keep his improbable promise.

chart of the day

A gradual biotech comeback

D3 vis exported to PNG (51)

Back in August, shares of Ideaya Biosciences fell 45% in a day after GSK cut ties with one of the company's cancer drugs, leading analysts to downgrade its stock and clouding the company's future as it pressed forward with a high-risk effort to treat melanoma in the eye.

Yesterday, Ideaya said the FDA had agreed on a path to potential approval for its melanoma treatment, sending its share price up 35%. The company immediately moved to raise $150 million in a stock sale, angling to extend its cash runway beyond 2026.

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