Health sector’s biggest winners & losers as of March 17, 2017

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Seres Therapeutics Inc. (Nasdaq: MCRB) led advancing issues, soaring $2.71, or 29% for the week, to $12.04. The small microbiome-therapeutics platform company released its fourth-quarter results earlier Thursday (March 16, 2017), which detailed substantial progress in many of its clinical studies.

As an early stage company, Seres posted a loss, receiving only minimal revenue during the quarter. Yet the best news was that it intends to start a new clinical study for its SER-109 treatment for Clostridium difficile infection. In mid-2016, Seres had released study results showing that the treatment didn’t show significant reductions in infection recurrence rates, dampening interest in its stock.

Yet the U.S. Food and Drug Administration worked with the Cambridge, MA-based company, and it agreed to start a new, expanded Phase 2 study which involves larger doses of SER-109.

All of which means the FDA is giving Seres an extra shot to prove itself in the market for infection-fighting drugs. Especially C. diff, the 17th leading cause of death for people aged 65 years and older. Has momentum now and looks like an eventually winner.

Elsewhere, NantHealth Inc. (Nasdaq:NH) surged $1.18, or 27%, to $5.51 in the wake of the biotech announcing it had responded to allegations of tax avoidance raised by a media report earlier this month. The report had suggested that founder Patrick Soon-Shiong had allegedly made charitable donations to a the University of Utah that then later turned around and paid a portion of those donations back to NantHealth for genetic sequencing work.

The response stated that Soon-Shiong didn’t claim a charitable deduction for the gift, and that NantHealth didn’t make a profit on the work that the university had asked it to do. Soon-Shiong is still the majority owner and CEO of NantHealth. He’s also the second largest shareholder in Tronc, the national newspaper chain that owns the Los Angeles Times.

With detailed point-by-point answers to the allegations made in the article, the biotech company and its founder have sought to restore their reputations. Despite the rebound in price, however, something’s still not smelling quite right with this story. I’d stay away from this one for now.

And Arbutus Biopharma Corp. (Nasdaq:ABUS) leaped 26% to $3.40 after the company licensed lipid nanoparticle technology to Alexion Pharmaceuticals Inc. Under terms of the deal, Alexion will pay Burnaby, BC-based Arbutus $7.5 million upfront, and payments of up to $75 million for achievement of development, regulatory, and commercial milestones, as well as single digit royalties. In addition, Arbutus will conduct technology development and provide manufacturing and regulatory support for the rapid advancement of Alexion’s mRNA product candidate.

“This transaction with Alexion illustrates the value of our LNP platform, which has broad potential to deliver mRNA and gene editing therapeutics. We are receiving significant interest from companies that require access to our LNP platform to enable their own development programs,” said Dr. Mark J. Murray, Arbutus’s President and CEO.

I agree with Murray that Alexion–trading at around $120–gives instant credibility to Arbutus, a $3-$4 trading-range issue. Could be legs to this move.

But Aralez Pharmaceuticals Inc. (Nasdaq:ARLZ) plunged $1.28, or 36%, to $2.25 after it announced disappointing fourth-quarter earnings and lackluster guidance for the year ahead. Revenue was up substantially from $6 million in the year ago quarter, to $20 million in the recently completed quarter, but that’s still lower than investors were expecting.

In February 2016, Pozen merged with Tribute Pharmaceuticals Canada to create Vancouver, BC-based Aralez, which added about a dozen drugs from Tribute to Pozen’s Yosprala. Within the last year, Aralez also acquired two other drugs, Zontivity and Toprol-XL, the latter of which included an authorized generic.

Sales of the additional meds didn’t live up to expectations. Tribute added $6.4 million during the quarter; Toprol-XL, the AG of Troprol-XL, and Zontivity added $8.6 million combined. Sales of Yosprala, which was launched in October, weren’t broken out in the press release, suggesting they are likely low.

Just how low is the question. I’d wait a bit to buy on this particular dip.

And Esperion Therapeutics Inc. (Nasdaq:ESPR) tumbled $7.43, or 24%, to $23.67, being dragged down by poor results from cholesterol drug testing that had a major negative impact on related stocks in the sector.

The primary catalyst for the biotech bashing was Amgen’s nosedive when results for its Repatha didn’t meet Wall Street expectations. But one analyst said the beating to Esperion stock in light of Amgen’s heart study results was unwarranted, arguing that Esperion’s drug will likely be priced much lower.

Needham analyst Chad Messer said in a note to clients that Ann Arbor, MI-based Esperion’s drug, bempedoic acid, has a different method of reducing “bad” LDL cholesterol. And it will be offered at a much cheaper price than Amgen’s Repatha, at $14,100 per year, as well as Praluent, an alternative jointly developed by Regeneron and Sanofi that sells for $14,600.

“We see a negative read through to Esperion as counterintuitive,” Messer added.

He’s right, and this one should bounce back when people come to their senses. That could happen momentarilty, so…

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. has a disclosure policy.

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