Q4 2018: Taking Stock

Q4 2018: Taking Stock

San Diego’s biotech industry took a beating as part of a larger fourth quarter stock retreat.

Locally, public life sciences companies lost on average 27 percent from Oct. 1 to Dec. 31, according to a San Diego Business Journal analysis of 39 stocks during the period.

Looking at the wider market, the Nasdaq Biotechnology Index fell 11.2 percent in December, finishing 2018 down 9.3 percent.

“If there was anything good about December it was only that it ended. Stock performance wasn’t just poor, but horrible by historical proportions,” said Cowen Equity Research’s Jan. 2 biotech thermometer.

“Investors are shell-shocked by the depreciation that was so quick, so dramatic, and so close to the end of the year,” said Cowen. “Sentiment is worse than we can remember over the last five years, and in fact many investors have developed a bear market mindset.”

Analysts also commented that investors have become more selective in small- and mid-cap biotech, which makes up much of San Diego life sciences. Overall, the local sector enjoyed strong gains through much of 2018, including public biotechs posting 9.33 percent stock growth in quarter three. Then came October.

Along with a broader selloff, bad news befell some San Diego biotechs during the fourth quarter. Here’s more on a few notable stock drops.

Troubling Times

Ligand Pharmaceuticals

Market Cap: $2.89 billion

Stock symbol and exchange: LGND on Nasdaq

Change during the quarter: -50%

Ligand’s slide began in late September when Amgen’s drug, kyprolis, failed to outperform a rival drug in a late-stage clinical trial.

Kyprolis generates royalties for Ligand, which focuses on licensing its technologies that help pharmaceutical companies discover and develop medicines. On a positive note, Ligand in November reported third quarter net income of $67.4 million, versus $8.4 million during the same period in 2017.

Ligand said third quarter revenue came to $45.7 million, a 36.8 percent year-over-year increase, and royalties were $36.1 million.

“Despite the recent turbulence in the financial markets, Ligand continues to execute on its business model, and we will remain focused and will work to capitalize on opportunities the economic cycle brings us,” CEO John Higgins said in a news release accompanying the financial results.

Neurocrine Biosciences

Market Cap: $6.21 billion

Stock symbol and exchange: NBIX on Nasdaq

Change during the quarter: -43%

Neurocrine was swept up in the larger selloff, but that wasn’t the only factor in the decline. Neurocrine’s drug for Tourette syndrome failed to meet its primary goal in a mid-stage study, the company said Dec. 12.

The phase 2b trial of the drug valbenazine did not meet an endpoint of significantly reducing motor and speech tics in children and adolescents with moderate to severe Tourette syndrome.

But like Ligand, Neurocrine put out positive financials during the period. The company reported $151.8 million in quarter three revenue, a 150 percent year-over-year increase.

Neurocrine’s drug Ingrezza — the first treatment for the nervous system disorder tardive dyskinesia — brought in $111.3 million in sales. Released last year, Ingrezza sales keep increasing.

The company during the period also recorded a $40.5 million milestone payment from pharmaceutical partner AbbVie. This follows Neurocrine’s drug orilissa winning regulatory approval.

Tocagen

Market Cap: $182.48 million

Stock symbol and exchange: TOCA on Nasdaq

Change during the quarter: -48%

Likely fearing dilution, investors didn’t take kindly to Tocagen’s public stock offering in mid-December. The company announced plans to raise $30 million, with 3 million shares of its common stock priced to the public at $10 per share.

Tocagen’s lead program, Toca 511 & Toca FC, is in a late-stage trial for recurrent high grade glioma, a group of deadly brain tumors.

In 2017, Tocagen raised $97.8 million in an up-sized initial public offering.