Stockwatch: Teva, Biogen, Ionis, Sage And The Art Of Strategic News Placement

Teva Pharmaceutical Industries Ltd. recently pre-announced its second-quarter results along with rosy long-term financial guidance that extended to the end of the decade. (Also see "Teva’s Rosy View For A Happy Union With Allergan Generics" - Scrip, 13 Jul, 2016.) Teva's forecasts incorporated a number of assumptions that included the acquisition of Allergan PLC 's generics business with associated cost savings, and the announcement resulted in about a 4% jump in Teva's share price. The analysts from Mizuho suggested that Teva's investors were "reassured with above-consensus longer term guidance and a bullish stance on the Allergan deal."

When Teva officially announced its second-quarter report on August 4, the results were "roughly in line with expectations" according to the analysts from JP Morgan but the US generics business was below expectations. Increasing the US generic footprint was the raison d'être for the Allergan transaction so it was just lucky that Teva's $15bn debt issue came a few days after its rosy advertisement for its future and before last week's earnings report.

Adding to Teva's commentary on US generic drug price deflation were the pre-announced sales and profits warning from Hikma Pharmaceuticals PLC as the lowered profitability of its US generics business resulted in a full-year guidance cut.

With last week's raised tempo on the utilization of biosimilars by companies where their use will generate more profits than the originator molecule – pharmacy benefit managers such as CVS Health Corp. (SC097953) and dialysis clinics like Fresenius Medical Care AG – a strategic focus on US generic small molecules rather than biosimilars now looks less than strategically optimal. No wonder Allergan retained its biosimilar business.

Biogen Acquisition Speculation

Early access to the results of a positive interim analysis of Ionis Pharmaceuticals Inc.'s intrathecally-administered antisense drug nusinersen in the phase III infantile-onset spinal muscular atrophy ENDEAR study enabled partner Biogen Inc. to announce the exercise of its $75m option to acquire the commercialization and development rights for nusinersen. Despite no public disclosure on the detail of the safety, efficacy, how many patients had been treated before the study had been stopped or the status of the other primary or secondary endpoints, the share prices of both companies were propelled up about 30% and 8%, respectively. (Also see "Filings Soon As Biogen Snaps Up Ionis' Antisense Treatment" - Scrip, 2 Aug, 2016.) The analysts from Leerink assigned $2bn in sales by 2022 for nusinersen while those from Citigroup described the result as "good news comes early". However, without a single p-value in sight I was left wondering about the real purpose of all the enthusiasm.

Later in that same week, press reports of Allergan's and Merck & Co. Inc.'s. interest in acquiring Biogen prompted a further 10% share price spike and I started to wonder whether the nusinersen interim analysis announcement had been stage managed in order to push up the price for Biogen. (Also see "Merck, Allergan Suggested As Suitors But Biogen's Attractiveness Under Question" - Scrip, 3 Aug, 2016.)

Both the interim ENDEAR analysis and any M&A interest would have been known by Biogen well before any of last week's announcements. In the event, a ticker-tape parade of sell-side analyst notes fluttered down from the internet assigning take-out valuations for Biogen – that now included nusinersen – as high as $414 per share (compared to the $316 where they finished the week). Within 18 hours, these must have felt like the black flies in Alanis Morrisette's Chardonnay as firstly Allergan was suggested not to be interested and then Biogen itself was reported as not receiving any formal expressions of interest.

SAGE Data

With a p-value of 0.008 for the primary endpoint, there appeared to be no scope for ambiguity in the announcement of SAGE Therapeutics Inc.'s Phase II trial results for SAGE-547 in post-partum depression (PPD).

Almost immediately after the announcement there were questions from social media commentators on why, when the study was designed to enrol 32 patients, only ten were enrolled on SAGE-547 and 11 on placebo. In addition, since the drug is parenterally administered and has limited patent protection, there were further doubts on the commercial potential for SAGE-547. With such a small number of patients but data on the mean reductions from baseline for SAGE-547 and placebo in the primary endpoint of Hamilton Rating Scale for Depression (HAM-D) at 60 hours, the number of patients in each arm achieving remission (HAM-D <7) and the percentage remission in each arm, a simulated dataset can be constructed that fits all Sage's reported averages and results in the same p-value.

Analysts described Sage's study as having "very robust positive results", which of course they are not, while Sage suggested that a Phase III study may not be required, which of course it will be.

I created this dummy data set that matched the reported results firstly to provide it to Sage for their comment (none was received) and secondly to determine how many patients in each arm would be needed for the trial results not to be significant. The answer is between one and two patients (depending on their HAM-D scores) – in addition to either the one responding in the placebo group, or the three not responding in the SAGE-547 group – are needed for the results not to be significant. The analysts from Cowen described Sage's study, as having "very robust positive results" which of course they are not, while Sage suggested that a Phase III study may not be required, which of course it will be.

Dummy Dataset For SAGE-547

Source: Andy Smith

In the cool light of retrospect, recent pre-announced earnings and clinical trial results seemed to have the real purpose of either raising money, or helping to sell the company involved. Is it too cynical to wonder if many announcements of this type are really intended just to result in a transaction rather than to disclose material events?

The Magna Biopharma Income fund holdings include Allergan and Fresenius.

Andy Smith is chief investment officer of Mann Bioinvest. Mann Bioinvest is the investment adviser for the Magna BioPharma Income fund which has no position in the stocks mentioned, unless stated above. Dr Smith gives an investment fund manager's view on life science companies. He has been lead fund manager for four life science–specific funds, including International Biotechnology Trust and the AXA Framlington Biotech Fund, and was awarded the Technology Fund Manager of the year for 2007.