US healthcare stocks sank Friday (January 3, 2020) as investors worried that an escalation in Middle East tensions could dent global growth and ultimately implicate the biotech and other medical sectors. The S&P 500 Index posted its biggest loss in a month after a US airstrike killed a top Iranian commander and the Middle Eastern country vowed “severe retaliation.”

To get a sense of the first week’s action, out of 47 health companies in our basket of specific names (see chart below), just 9, or 19%, moved up while 38, or ~81% gave ground. Here are the top three winners and two victims to start off the new year.

1) Cassava Sciences Inc. (Nasdaq: SAVA) led advancing issues, rocketing 139% over the week to $9.65. Austin, TX-based Cassava is a clinical-stage biotechnology company developing PTI-125, a novel drug treatment for Alzheimer’s disease, and PTI-125Dx, an investigational diagnostic to detect Alzheimer’s with a simple blood test. The lead drug candidate PTI-125 has a novel mechanism of action designed to restore the normal shape/function of Filamin A (FLNA), a scaffolding protein that misfolds in the brain with Alzheimer’s.

In a Phase 2a study funded by the National Institutes of Health, the results of which were announced early in September of this year, treatment with PTI-125 for 28 days significantly reduced key biomarkers of neuroinflammation and neurodegeneration in all 13 patients. Based on the Phase 2a results that demonstrated a 100% response rate, Cassava Sciences initiated a Phase 2b study of PTI-125 in Alzheimer’s patients the same month (September 2019). This study is designed to enroll about 60 patients with mild-to-moderate Alzheimer’s disease who will be dosed with PTI-125 100 mg, 50 mg, or matching placebo, twice daily for 28 continuous days. Shares were trading down 7% late in Monday’s session.

2) Elsewhere, West Lake Hills, TX-based Savara Inc. (Nasdaq: SVRA), an orphan lung disease company, soared 131% to $4.07 after announcing that the FDA has granted Breakthrough Therapy designation for Molgradex, an inhaled formulation of recombinant human granulocyte-macrophage colony-stimulating factor (GM-CSF), for the treatment of autoimmune pulmonary alveolar proteinosis (aPAP).

Breakthrough Therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). The Molgradex Breakthrough Therapy designation is based on data from IMPALA, a pivotal Phase 3 clinical study evaluating Molgradex for the treatment of aPAP. Data from the study were recently presented in an oral session at the 2019 European Respiratory Society (ERS) International Congress in Madrid, Spain. Shares were trading down 15% late Monday.

3) And BioXcel Therapeutics Inc. (Nasdaq: BTAI) surged 68% to $16.71 following the company’s announcement that it had started its Sub-Lingual Dexmedetomidine in Agitation Associated with Schizophrenia and Bipolar disorder study (SERENITY) program. The two-phase studies are for treating acute agitation in patients with schizophrenia and bipolar using the New Haven, CT-based company’s treatment called BXCL501. The company expects to receive data from these trials in mid-2020.

Commenting on the progress, CEO Vimal Mehta stated that the start of SERENITY trials was a major step towards their goal of offering an effective and safe treatment for people dealing with agitation that comes with schizophrenia and bi-polar. He added that, handling agitation in people suffering from these disorders is a big challenge to all involved, including physicians and the patient’s caregivers. He further stated that BXCL501 was designed in a way that it is non-invasive, acts quickly, and may overcome the challenges that come with the existing standards of care. Shares were trading down 6% on Monday.

4) But data from a Phase 1b/2a trial have raised doubts about whether Wave Life Sciences Ltd.’s (Nasdaq: WVE) Huntington’s disease drug can compete with Roche Holding AG and Ionis Inc.’s rival candidate. The results sent share prices down 53% to $7.60, adding to losses it suffered when it dumped a Duchenne muscular dystrophy (DMD) program earlier in December.

Singapore-based Wave’s Huntington’s asset, WVE-120102, is an antisense oligonucleotide designed to stop the body from making a mutant huntingtin protein linked to the disease. Roche and its partner Ionis also have an experimental asset designed to reduce production of the protein. Data on Roche and Ionis’s asset, RG6042, set the bar Wave needed to clear to show WVE-120102 is a viable contender for the Huntington’s market. Wave’s Phase 1b/2a trial failed to clear that bar. Shares were up 7% on Monday.

5) And Spectrum Pharmaceuticals Inc. (Nasdaq: SPPI) plunged 63% to $3.32. The Henderson, NV-based company had been talking up its chances of getting an accelerated approval for their EGFR TKI poziotinib for non-small cell lung cancer off of positive data from the first cohort in Phase 2. Instead, they’re trying to convince investors they still have a shot at a mid-stage approval now that the drug failed in the first–and perhaps most important–of 7 cohorts. It’s not working.

The key figure that triggered the fallout on Wall Street: A meager 14.8% overall response rate. The company is targeting a specific niche of patients with EGFR exon 20 insertion mutations. Takeda’s data indicate their rival therapy started out with a 43% response rate, which some of the sell-side has been picking apart. But that hasn’t stopped Japan-based Takeda from tapping this drug as a top contender in the pipeline. And as of now, it’s looking much better than the Spectrum drug. Shares were down another 6% Monday.

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Weekly Stock Performance (as of Jan. 3, 2020). P/E multiples based on predicted next annual earnings period. NM = Not meaningful

GROUP                 CLOSE     CHG     %CHG     P/E

Providers/HMOs

Amedisys             167.41    +1.54    +0.93    34.6

Community Hlth         2.66    -0.11    -3.97    NM

Encompass HC          69.17    -0.58    -0.83    18.8

Fresenius             36.52    -0.91    -2.43    13.8

HCA                  147.94    -1.32    -0.88    12.8

Hlthpeak              34.33    +0.34    +0.10    69.8

Tenet Health          37.97    -0.30    -0.78    12.7

Universal Hlth       141.97    -1.38    -0.96    13.2

Anthem               296.88    -9.54    -3.11    13.1

Cigna                203.18    -0.82    -0.40    10.9

Humana               364.86    -6.14    -1.66    19.6

UnitedHealth         289.54    -6.43    -2.17    17.6

Pharma/PBMs

AstraZeneca           50.09    -0.35    -0.69    24.3

BristolMyers          62.78    -1.36    -2.12    10.3

GlaxoSmithKline       46.48    -0.81    -1.71    15.0

Johnson&Johnson      144.28    -1.47    -1.01    15.9

Eli Lilly            131.77    +0.25    +0.19    19.5

Merck                 91.25    -0.25    -0.27    16.3

Mylan                 20.20    +0.48    +2.43     4.5

Novartis              94.79    -0.58    -0.61    16.5

Pfizer                38.93    -0.39    -0.99    13.5

Sanofi                50.76    -0.10    -0.20    14.6

CVS Health            73.57    -0.83    -1.12    10.3

Walgreens             59.08    +0.06    +0.10     9.6

Medical Supplies

Abbott Labs           85.89    -1.51    -1.73    23.9

AbbVie                88.70    -0.50    -0.56     9.1

Amerisource           84.01    -0.90    -1.06    10.4

Baxter                85.50    +1.45    +1.73    22.9

Becton Dickinsn      269.59    -3.26    -1.20    19.4

Cardinal              49.36    -2.14    -4.16     9.4

McKesson             136.72    -2.72    -1.95     8.8

Biotech

Amgen                238.47    -3.06    -1.27    14.8

Biogen               290.85    -9.24    -3.08     8.9

Biomarin              84.00    -1.59    -1.86    NM

Emergent Bio          54.24    +0.24    +0.44    15.0

Gilead                65.07    -0.88    -1.71     9.4

Illumina             322.73    -9.56    -2.88    45.7

Incyte                77.90   -10.49   -11.87    25.3

Regeneron            369.16    -4.16    -1.11    14.2

Vertex               217.98    -2.99    -1.35    32.6

Medical Devices

Boston Sci            44.98    -0.24    -0.53    25.1

Intuitve Srg         593.34    -4.54    -0.76    42.3

Medtronic            113.88    +0.53    +0.47    18.9

Stryker              209.59    -0.96    -0.46    23.2

Thermo Fisher        322.82    -3.73    -1.14    23.7

Varian               144.93    +2.69    +1.89    23.6

Zimmer               148.81    -1.20    -0.80    18.0

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