Text size
Shares of Biogen fell sharply after the FDA granted full approval of its new Alzheimer’s drug Leqembi.
Adam Glanzman/Bloomberg
New approvals from the Food and Drug Administration keep tanking the share prices of drug developers. It’s a sign that investors are increasingly wary of the biopharma sector.
It happened in late June, when
Sarepta Therapeutics
(ticker: SRPT) dropped 16% over the course of a few days after the FDA approved its new gene therapy for Duchenne muscular dystrophy. On June 29, the FDA approved another gene therapy, this one a hemophilia A treatment from
BioMarin Pharmaceutical
(BMRN); BioMarin shares fell 3.6% that day and 2.5% the following day.
Then it happened again last week when shares of both
Biogen
(BIIB) and
Eisai
(ESAIY) fell following the FDA’s granting of full approval of Leqembi, their new Alzheimer’s disease treatment that was previously approved on a conditional basis through the agency’s accelerated approval pathway. Biogen shares were down 3.5% on Friday, while Eisai’s American depositary receipt fell 3.3%.
It’s an epidemic of selling the news, and it points to an enduring weakness in investor interest in the large-cap biopharma stocks
“To see this sort of decline is testament to the fact that sentiment across Large-Cap Biotech and Pharma remains [weak] as the Street finds little reason to invest behind the space,” Mizuho healthcare equity strategist Jared Holz wrote in an email to investors on Friday, citing the BioMarin and Biogen selloffs.
Lingering doubts shadow the commercialization of each of the newly approved drugs, and could be responsible for damping investor enthusiasm. The Sarepta approval was narrower than expected, and came with a warning that the agency could change its mind if a trial expected to finish later this year has disappointing results. Sales of the BioMarin drug could take years to ramp up. And the launch of the Biogen and Eisai drug will be challenging for a number of reasons.
Still, the trend points to broader investor uncertainty for the sector. The
S&P 500 Pharmaceuticals index
is down 5.1% this year, while the broader
S&P 500
has climbed about 15%. That comes after a year in which large-cap pharmaceutical and biotech names generally outperformed the broader market as investors sought safety in the sector’s higher dividends.
Now, the logic of that defensive play is expiring. As Holz noted in his email, the higher interest rate environment makes the pharma sector’s dividends less compelling. Holz also pointed to concerns about the impact of Medicare drug price negotiations and the Federal Trade Commission’s scrutiny of mergers as souring investors on large-cap biotech and pharmaceutical stocks.
On Monday, some of the worry seemed to be easing. Biogen shares were up 2.5%, while Sarepta shares were up 0.8% and BioMarin shares were up 0.2%. The S&P 500 Pharmaceuticals Industry index was up 0.3%, while the
SPDR S&P Biotech ETF (XBI),
which tracks the biotech sector, was up 2.8%.
Write to Josh Nathan-Kazis at [email protected]
Source: https://www.barrons.com/articles/biotech-stocks-biogen-sarepta-sector-drug-approvals-fa5bb9b?siteid=yhoof2&yptr=yahoo