Good riddance 2016: CEOs and investors looking for a prosperous 2017
"Thank goodness 2016 is over," the Cowen and Co. biotechnology analyst team wrote in its monthly biotech thermometer report to clients.
But rather than dwelling on a bleak year where the Nasdaq Biotech Index ended down 21.7 percent, analysts, CEOs and bankers, speaking on the eve of the 35th J.P. Morgan Healthcare Conference, reported generally upbeat outlooks for the year ahead.
Of course, part of the reasoning may be because it can't get worse. "Given this apathy, interest levels [from investors] can probably only move in one direction," Cowen's note concluded.
Plenty of catalysts
As with any year, part of the New Year hope lies in advancing drugs through development, increasing value along the way.
This year, Watertown, Mass.-based Tarveda Therapeutics Inc. plans to complete a phase I trial for PEN-221, its Pentarin drug candidate designed to treat patients with neuroendocrine cancers and small-cell lung cancer that overexpress the somatostatin receptor. Pentarins are targeting-drug conjugates that are smaller than antibody-drug conjugates, designed to deliver cell-killing payloads deep into solid tumor tissue.
Tarveda expects to file an IND for its second Pentarin PEN-866 this year, Drew Fromkin, Tarveda's president and CEO, told BioWorld Insight, which could allow it to enter the clinic later this year or in early 2018.
This year, Scynexis Inc., of Research Triangle Park, N.C., is starting clinical trials for its fungicidal SCY-078 for treating invasive candida infections in patients with severely compromised immune systems.
"The fungal infection is often the tipping-point cause of death," Marco Taglietti, Scynexis' president and CEO, told BioWorld Insight. Given the severity of the infection in those patients, the data could be used to gain approval for patients refractory to other treatment options.
Versartis Inc., of Menlo Park, Calif., is expecting phase III data from the VELOCITY trial testing its long-acting growth hormone somavaratan in pediatric patients in the third quarter of this year. Last year, Versartis licensed rights to the drug in Japan to Tokyo-based Teijin Pharma Ltd. and in Europe the company is "evaluating options," according to Versartis' president and CEO, Jay Shepard, who told BioWorld Insight that "there's significant interest." (See BioWorld Today, Aug. 11, 2016.)
At the far end of the drug development spectrum, Mark Sirgo, CEO of Raleigh, N.C.-based BioDelivery Sciences International Inc., is looking forward to marketing the chronic pain medication Belbuca (buprenorphine) buccal film, which it reacquired from Endo Pharmaceuticals plc, of Dublin, last month.
"It's an exciting opportunity for us to really enhance the efficiency of our sales force that was just detailing Bunavail for the treatment of opioid dependence," Sirgo told BioWorld Insight, noting that there's a 25 percent overlap in prescribers of Belbuca and Bunavail (buprenorphine and naloxone) buccal film.
The number of IPOs on U.S. exchanges dropped significantly from 54 companies in 2015 to just 30 in 2016, but Rick Werner, partner and co-chair at Haynes and Boone's Capital Markets and Securities Practice Group, said he thinks it may be a little easier for companies to raise capital from the public markets in 2017, "I'm cautiously optimistic given the surge in the stock price following the election," he told BioWorld Insight.
In addition to traditional IPOs, there's also the option of reverse mergers into public companies with cash but no viable drug candidates. "There needs to be a path to liquidity and sometime reverse mergers are the alternative," Werner said, adding that the "stigma of a reverse merger is better than it used to be."
For companies already public, the markets offer an opportunity to raise capital through secondary offerings. "I think most people are expecting a better climate for raising capital in 2017," BioDelivery's Sirgo said, although he noted that currently "a lot of share prices are beaten up, so the equity markets aren't quite as attractive as they would have been otherwise."
As an alternative, Sirgo said that the debt markets are still attractive and companies can also raise capital through selling rights to their drugs, which BioDelivery is considering for the ex-U.S. rights to Belbuca.
On the private company side of biotech, investments in U.S. companies dropped to $5.39 billion in 2016, compared to $7.63 billion in the prior year. (See BioWorld Today, Jan. 4, 2017.)
"There is clearly an increased level of rigor and discipline that's needed to acquire capital in this environment," Tarveda's Fromkin said. Nevertheless, Fromkin is optimistic: "I'm sensing that good companies will get funded and there are good opportunities in 2017 and 2018."
New administration a big unknown
Across the board, biotech industry professionals weren't sure what to make of the Trump presidency. "Until he's in office, it's hard to gauge with any certainty," Haynes and Boone's Werner said when asked about how Trump would affect the biotech sector.
And the uncertainty abounds. "Now we live in a world where we may be a tweet away from success or disaster," Scynexis' Taglietti quipped.
Jefferies analyst Jeffrey Holford sees that uncertainty as a negative for the sector, especially with what will happen for rebates for patients that are eligible for both Medicare and Medicaid. "We continue to see a political overhang, with potential dual eligible rebate reform the most significant risk," he wrote in a note to clients.
Despite the uncertainty, CEOs were generally upbeat about how the new administration will handle drug pricing. "I think what they'll find out ultimately is that there are a couple of bad apples that are creating the problem, and it's not a pervasive issue across our industry," BioDelivery's Sirgo said.
Versartis' Shepard had a similar take, "I would hope that they'll look favorably at companies that have unique products that are innovative." Versartis plans to price its drug at parity to current once-daily growth hormones.
"I'm hopeful [Trump] will find ways to use the free market to create incentives," Tarveda's Fromkin said. "If we don't see that, we're going to see a pinch on investment in biotech innovation."
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