Biotechs Coming Off One Of The Busiest Weeks In Recent Memory

• JMP analysts said in a note on Monday that last week's biotech sector was "one of the busiest we can recall in quite some time."
• The biotech sector is "as, or more attractive" than it was in April.
• The sector remains "reasonable" on a PE and PEG basis.

In a report published Monday, JMP Securities analyst Michael King, Jr. recapped key events last week within the biotechnology sector, noting it was one of the busiest weeks in recent memory. King noted that investors got "lots of ideas for alpha generation" heading into the end of the year and "we really like what we saw last week." Specifically, the analyst singled out Gilead Sciences, Inc. GILD $11 billion raise and Biogen Inc BIIB's $6 billion raise, suggesting that the two firms, along with other megacaps "appear to be generating a shopping list." Meanwhile, Akebia Therapeutics Inc AKBA posted positive Phase II data for vadadustat for the maintenance of hemoglobin in patients undergoing renal dialysis previously on erythropoietin while Vitae Pharmaceuticals Inc VTAE reported positive data from a Phase I SAD trial of VTP-43742, which "vaulted" the shares higher by nearly 90 percent on the week. The analyst also highlighted the strength in small-to-midcap biotech was "even more impressive" considering the near-80 percent loss in shares of Tetraphase Pharmaceuticals Inc TTPH and the "disappointment" coming from Flexion Therapeutics Inc FLXN's FX006 for the treatment of osteoarthritis knee pain. King continued that investors heard "continued good news" from Bristol-Myers Squibb Co BMY's data from the CheckMate-012 study which suggested activity in the combination of Opdivo (nivolumab) and Yervoy (ipilimumab) in first-line NSCLC, with a much improved side-effect profile compared to the same combination in melanoma. Investors who are bullish on Clovis Oncology Inc CLVS "took heart" from the AstraZeneca plc (ADR) AZN AURA study of AZD9291 (which competes directly with Clovis' rocelitinib) in the thought that the 8.6 months PFS seen in AURA was not so much different vs. the 8 months data produced by rocelitinib that the AZD compound has much of an advantage. As if this wasn't enough, biotech companies were busy on the M&A front with reports suggesting Actelion Ltd is interested in acquiring ZS Pharma Inc ZSPH for $2.5 billion. Also, Carl Icahn placed a bid to acquire VIVUS, Inc. VVUS's outstanding debt at a cost of $680 per $1,000 face value, prompting the analyst to suggest that Icahn "will likely wind up with not only control of the debt, but of the entire company." Finally, King stated that the biotech sector remains "as, or more attractive" today than it was in April. As such, the recent selloff is merely a "head fake" and "should be taken advantage of" by lng-term focused investors.