Biotech's Crash Follows Cancer-Drug Failure

"Nektar Therapeutics was one of biotech's highfliers, enjoying a generous, multibillion-dollar partnership with cancer powerhouse Bristol-Myers Squibb Co. Then Nektar's promise cratered.

After a series of disappointing study results, Bristol and Nektar terminated their partnership, Nektar's market value is down 96% from its peak in 2018 and the biotech was forced last month to slash $120 million in spending and 70% of its workforce. The company is also shedding office and lab space.

"It will take some time to build the company back," Nektar Chief Executive Howard Robin said. "It is a tough industry, and you're not going to get a success on everything you work on."

The company's ups and, now, downs are an example of how investor enthusiasm for biotechnology has soured in recent months, spurred in part by a series of setbacks such as Nektar's cancer-drug failure.

The biotech boom of recent years, when venture-capital investment, initial public offerings and stock-market valuations reached new highs, has turned into a bear market.

Amid rising interest rates and consumer-price inflation, investors have been moving their money out of risky stocks such as biotech companies. The SPDR S&P Biotech ETF, an equal-weighted index of biotech stocks, is down 40% so far this year, compared with a 16% decline in the S&P 500.

"It's the slump of all slumps, no [investors] want to buy anything, and there's a ton of selling pressure," said Brian Skorney, an R.W. Baird analyst.

For biotechs that hit study setbacks or are still years away from bringing drugs on the market, the squeeze has meant dwindling cash reserves and then, painful cost cuts.

Bluebird Bio Inc., which is developing gene-replacement therapies for rare diseases, said in April that it would slash its spending by as much as 40% and cut its workforce by 30% so that it could survive into the first half of next year.

Several years ago, multiple pharmaceutical companies were clamoring to forge partnerships with Nektar on its anticancer drug bempegaldesleukin, a modified version of a natural protein that helps stimulate the growth of immune cells that can attack tumors.

Researchers thought that the drug, known as bempeg, could help boost the effectiveness of another type of cancer treatment known as checkpoint inhibitors that unleash immune cells to fight cancer.

In February 2018, Bristol Myers agreed to pay $1.85 billion, with a combination of cash and Nektar share purchases, to develop bempeg with Bristol's checkpoint inhibitor Opdivo.

The deal was unusually favorable to Nektar, allowing the biotech to keep 65% of the drug's profits.

An early study produced such encouraging results that Bristol and Nektar decided to skip doing the kind of midstage, or Phase 2, study normally pursued to gain more confidence a drug works.

Instead, the partners started a large Phase 3 trial, the last phase of testing needed for regulatory approval, testing a combination of bempeg and Bristol's blockbuster immunotherapy Opdivo to treat melanoma.

Nektar was shocked when the Phase 3 study failed in March, Mr. Robin said. The study found that combining bempeg and Opdivo was no better than Opdivo alone in treating metastatic melanoma.

In April, the companies said the combination had also failed in studies of kidney and bladder cancers.

Bristol declined to comment.

Nektar's market value fell from about $2 billion to $775 million, after the melanoma study's failure. Through Wednesday's close, Nektar's value was $721 million, down from its high of $17.5 billion in March 2018." [1]

1.  Biotech's Crash Follows Cancer-Drug Failure
Walker, Joseph. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 12 May 2022: B.2.