Biotech hit a two-year high — on its own merits

Things haven't been this good for biotech since January 2022. The closely watched XBI biotech index crossed $100 yesterday, a roughly 6% one-day increase that completes a roughly two-year round trip for the sector.

The proximate causes are Viking Therapeutics, which about doubled on positive data for its obesity treatment, and the previously obscure Janux Therapeutics, which more than tripled on news its treatment for prostate cancer led to promising results in an early-stage study.

What's arguably most encouraging is that biotech's recent surge, up about 15% in February alone, appears to be its first major recent move, positive or otherwise, that has less to do with macroeconomic factors than with companies managing to invent new medicines people might want to use.

Biotech

Psychiatry is having a moment

After making billions of dollars on blockbuster psychiatry medicines like Prozac, Zoloft, and Abilify, the world's largest pharmaceutical firms gradually lost interest in the field, leaving the work to an entrepreneurial class of biotech companies that have advanced in fits and starts over the last two decades.

Now, through a combination of scientific discovery and a little serendipity, the field has finally come up with a spate of promising new medicines. And 2024 is slated to be a big year for the resurgent field, with pivotal data expected from Neumora, Acadia Pharmaceuticals, Intra-Cellular Therapies, and others.

"This is a renaissance in neuroscience," said Marc Goodman, a securities analyst at Leerink Partners. "Everything has come together really nicely. And once Big Pharma takes an interest and M&A happens, that just wakes everybody up."

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M&A

Cytokinetics is not for sale

Not now, at least. Addressing a few months worth of feverish M&A speculation on an earnings call yesterday evening, Cytokinetics CEO Robert Blum said the developer of a closely followed drug for heart failure did not initiate a sale process, nor is one currently underway. If an inbound offer is eventually made, the board will consider it, of course, Blum added.

Cytokinetics traded as as high as $108 in early January on speculation that a Big Pharma takeout was practically a done deal. Alas, as weeks rolled by without a deal actually materializing, the stock settled back into the $80s.

On last night's call, Blum said the company was very interested in partnering deals for its lead drug, called aficamten, with active discussions underway for a licensing deal in Japan.

Aficamten will be submitted to the FDA in the third quarter, but for now, it looks like Cytokinetics is content to market the drug on its own, or with partners.

Genome editing

Beam is trading like it's 2021

Shares of Beam Therapeutics, a genome editing company, rose more than 25% yesterday after the company provided a corporate update that included nothing it hadn't already said.

The last time this happened, in early 2021, Beam seized the moment by raising $260 million by selling shares at six times their value in the company's 2020 IPO. A month later, Beam bought a delivery-focused firm called Guide Therapeutics for $120 million in stock, again using those surging shares to bring in something valuable.

Beam has enough cash to fund its operations into 2027 and thus doesn't really need money. But considering 2021's boom was followed by a two-year, 80% decline, the company might be wise to again strike while the market is hot on genome editing.

Markets

'L(earning)' about 'TechBio'

Typically, research-focused biotech companies use their quarterly earnings calls to explain the progress of their in-development medicines and take questions from the analysts who cover them. Recursion, a Utah-headquartered firm working with artificial intelligence to "industrialize drug discovery," is decidedly atypical.

Yesterday, Recursion hosted not an earnings call but a "L(earnings) Call," live streamed on social media. Also Recursion is not a biotech company but a "TechBio company," as its accompanying press release explained.

Neither the call nor the release disclosed any delays for Recursion's ongoing drug candidates, which includes a pair of Phase 2 readouts later this year. And yet the company's share price fell 15% after hours on a day that was otherwise accretive for biotech, suggesting the market is still coming to grips with all this linguistic disruption.

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