The ASCO abstracts came out last night and a review of the massive data dump has revealed a few nuggets and one new recommendation from us. Importantly, the ASCO abstracts show that the battle against cancer continues to progress. In addition, while our focus is investing in cancer companies, the progress is far and away more important for current and future cancer patients. The data was mostly dominated by Big Pharma as they have stepped up their cancer drug development after witnessing biotech companies like Genentech and Celgene develop block buster cancer drugs. Bristol-Myers, Merck, Johnson & Johnson, Glaxo, Pfizer, etc., all had lots data. We are looking primarily at the smaller biotech companies for exciting investment opportunities and our readers were provided with that opportunity this morning. Biotech companies with interesting data included; Ariad, ArQule, Aveo, Exelixis, Onyx, and Seattle Genetics among others. MTSL recommended companies with interesting data are; Celgene, ImmunoGen, Incyte, Nektar, OncoGenex, and Pharmacyclics. Today’s market weakness was so overwhelming that it prevented companies with surprisingly good data from moving up in price. This means that the “ASCO effect” where stocks run up in anticipation of ASCO has been stalled for a day or more. We believe that we have identified the best company for the “ASCO effect” this morning. We will reveal the investment opportunity on facebook before ASCO occurs in June - it's available to MTSL subscribers now.

Two of the big winners in the biotech world today were MTSL recommendations; PCYC closed up at $29.31 (7.21%) and INCY closed up at $23.69 (4.13%). PCYC was up in anticipation of ASCO data and INCY was up from recent upgrades because of upgrades from both Wall Street and from MTSL on Monday. ASCO abstracts will be released this afternoon at 3PM ET. Historically, there have been some big price moves in individual biotech stocks that are developing cancer drugs as Wall Street reads through the new information and trades them up going into ASCO. We do not believe that there is a lot of game changing data that will emerge this evening in the abstracts as there are less pivotal trials being reported than normal. In addition, a lot of data is coming from Big Pharma where cancer drug development news has much less impact on stock prices. Nevertheless, we will be combing through the data abstracts and will have additional information to report on tomorrow.

Glaxo announced today that it is buying 80.02% shares of a U.K. and Germany-based, privately-owned company, Cellzome, for a cash payment of £61 million (U.S. $99 million). Glaxo already owns 19.98% shares of Cellzome and after the completion of this deal will own the full company. Glaxo will get full rights to Cellzome’s proteomics (study of proteins) technologies. These technologies allow for better analysis of a drug’s efficacy and safety profile, thus reducing the number of discontinued candidates in development phases. Glaxo is clearly in M&A mode as they also recently launched a hostile bid to acquire the outstanding shares of Human Genome Sciences for a cash payment of $13 per share. Interestingly, Cellzome’s proteomics technology would be synergistic with Human Genomes vast library of genes that regulate protein function.

Amylin’s stock was up over 6% today as Blooomberg reported that there are seven Big Pharmas that have signed confidentiality agreements to conduct further due diligence on acquiring Amylin.  The potential suitors is a who’s who of Big Pharma; Pfizer, AstraZeneca, Sanofi, Merck, Takeda, Roche (our guess), and Bristol-Myers.  According to sources close to the process, first round bids are due in the next two weeks. 

Amylin spurned an offer of $22 a share from Bristol-Myers in February.  Then billionaire investor Carl Icahn came into the picture and threatened Amylin and proceeded to file a lawsuit against the company.  It was subsequently dropped last month following a meeting with Amylin CEO Daniel Bradbury.  Icahn owned about 8.8 percent of Amylin as of April.  Clearly Ichan has had an influence on the process as his desire from the start was to have an open bidding war for the company. 

“Any of the companies listed would fit the characteristics of having a ‘strong’ R&D commitment to diabetes,” the Leerink Swann analysts wrote. “Amylin could be deemed highly strategic for any of the companies cited.”  We continue to believe that Roche which tried to expand in the GLP-1 market once before, with no luck, may end up with wining bid.  It returned rights to the experimental GLP-1 diabetes drug development candidate taspoglutide to developer Ipsen last year, after it displayed major side effects in late stage clinical development. 

Vertex and Arena were the big winners today in the biotech sector.  Vertex followed up yesterday’s monster day with another 10% pop today as some Wall Street analysts upgraded after yesterday’s cystic fibrosis news.  Arena (up 25%) is an old friend to MTSL subscribers as we successfully shorted the stock in 2010 before they blew up at an FDA advisory panel.  The stock was up today on FDA briefing documents for Arena’s next FDA advisory meeting on Thursday.  While, there is a decent chance that Arena receives FDA approval, it could come with some significant restrictions or a requirement for a post-approval outcomes trial.  Tomorrow, Pfizer goes in front of an FDA panel as their JAK inhibitor for the treatment of rheumatoid arthritis (RA) is up for approval.  Our read of the briefing documents leads us to believe that Pfizer will get the nod.  This is important for Incyte as their JAK inhibitor is finishing up a Phase IIb trial and is slated to stat Phase III by year end.  A positive nod for Pfizer should make Wall Street add value to INCY as their RA program also looks very promising. 

The BTK (3.40%) and the NBI (2.25%) were both up nicely today as the broad markets rebounded modestly from the market’s sell-off late last week. The big winner in the biotech sector today was Vertex which was up over 50% on positive combination Phase II data using its cystic fibrosis drug, Kalydeco, and its cystic fibrosis (CF) drug development candidate, VX-809. The trial showed that the combination significantly improved lung function in a broad CF patient population and could work in up to 50% of CF patients. This is very important for Vertex as Klaydeco, as a mono-therapy, only treats about 4% of the CF patient population. The big price move in VRTX’ stock was probably helped by a bit of short squeeze as many biotech fund managers have large short positions spread across the biotech sector.

The biotech indices (BTK and NBI) were basically flat coming into today’s broad based sell-off in the markets.  Thus, both indices were down for the week.  Despite increased visibility and outstanding performance year to date, the biotech sector needs a positive broad market as a foundation for any sustained moves.  We continue to expect May to a good month for biotech investors as we should see some good price moves in specific biotechs with interesting cancer drugs in development as we anticipate the American Society of Oncology (ASCO) meeting in early June.  ASCO is the world’s largest cancer conference and with so many biotech companies focused on cancer drug development there is potential for some strong moves up and into the conference.  After ASCO all bets are off, as the sector quite often sells off as investors take profits and go to the beach for the summer.