#aclaris

Once again, we’ve had a busy start the week in biotech. A number of companies are up and down on a host of release types, and with earnings season in full swing, there’s plenty to drive volatility in the sector. With this in mind, here are two of the week’s biggest movers – Aclaris Therapeutics Inc (NASDAQ:ACRS) and XenoPort, Inc. (NASDAQ:XNPT), alongside  a look at what’s behind the action.

So, let’s start with Aclaris.

The action seen in Aclaris is more of a collateral impact from another development in the biotech space than anything to do with the company itself. Specifically, the recent announcement that Pfizer Inc. (NYSE:PFE) is set to acquire Anacor Pharmaceuticals Inc (NASDAQ:ANAC). The latter’s primary focus, and the justification behind the former’s acquisition of the latter, is a specialty dermatologic product called Crisaborole. It is set for FDA review in January next year, and Pfizer’s acquisition of the product (by way of its acquisition of the company) has drawn attention to the specialty dermatology space. And therein lies the driver behind the recent movement seen in Aclaris. The company’s lead product is both a topical treatment for seborrheic keratosis and for common warts – specifically, it’s A-101 candidate. So why is Aclaris moving purely based on increased dermatologic attention? Well, the Pfizer buyout hints at further acquisition activity in this specific subsector of biotechnology. A number of rumored suitors are being banded around the space at present, and markets are bullish on companies like Aclaris based on their buyout potential, and in turn, the potential for a short term premium price gain. The company is up nearly 19% across the last week and a half, and despite having a slightly weakened start to this week, looks set for further gains as time passes. Whether any entity will actually come forward with an offer remains to be seen (and for now, at least, looks unlikely) but this is development stage biotech, and sentiment is often far more important than fact. One to keep an eye on, but a risky allocation purely based on collateral speculation.

Moving on to XenoPort, this company kicked off the week at a little over $4.4 a share. By Monday close, XenoPort traded for $6.88 – a 56.36% gain across a single session. Why the gains? Again, this one is rooted in a takeover. Pre market open on Monday, news hit that the company had accepted a takeover bid from Arbor Pharmaceuticals, a privately held company, that will see the latter acquire the former for $467 million – valuing its shares at a little over $7 per unit. The revaluation, therefore, came as a result of markets bringing XenoPort’s open market price in line with the acquisition valuation. So why does Arbor want XenoPort? XenoPort has only one approved treatment, gabapentin, in a restless leg syndrome indication. The drug generates between $40 and $60 million a year, and as things stand, is pretty much the only asset Arbor is set to pick up as a result of the acquisition. At its current price, and the price that Arbor is paying to acquire the assets (and the company) it doesn’t look like too bad a deal. With $65 million forecast at a high-end for the drug’s sales during 2016, Arbor is getting XenoPort at a relatively low multiple of its revenues. XenoPort shareholders will likely be relieved with the deal however, as the company has pretty much collapsed across the last half decade. With some big Pharma names pulling out of partnerships on the aforementioned restless leg syndrome drug, a failed development pipeline across a host of indications including psoriasis and multiple sclerosis, and some major management and leadership reshuffles, not to mention the close to 95% decline in market capitalization since 2008, it’s been a tough stock to hold. The premium paid by Arbor  offers up little reprieve, but some nonetheless.

It remains to be seen how the company will fit into Arbor’s framework. Its pipeline is pretty thin on the ground as things stand, so chances are Arbor is looking at XenoPort as just the restless leg syndrome asset, and will fold the rest of the company’s development efforts going forward.

It’s been a busy week for biotech updates, and there’s plenty to discuss (look forward to) throughout the remainder of 2016. Here are a few of the update highlights, and a look at what impact they might have on the companies in question.

Click Here For More Market Exclusive Updates & Analysis

Aclaris Therapeutics Inc (NASDAQ:ACRS)

First up, Aclaris. Aclaris has a primary focus on dermatology, and its lead candidate is A-101. The company is investigating it in two separate indications, seborrheic keratosis and common warts. For those not familiar with the former indication, it’s a pretty common non-cancerous growth that forms on the skin, with a waxy, brown appearance. The treatment is a topical gel formulation of hydrogen peroxide, intended for clinician issue but designed for domestic administration. Aclaris reported its 2015 FY and 4Q financials at market close on Wednesday, and alongside the report, gave us an update as to the progress of both drugs along the clinical development pathway.

The common wart indication is farther along than the SK – currently in a phase III – and is expected to complete during the third quarter of this year. In line with this completion, topline (also set to be released during 3Q) is a near term milestone and potential upside catalyst. We’re looking at an identical timeframe for the SR indication, but this time in a phase II trial, scheduled for completion mid 3Q and topline across the same three-month period.

Inotek Pharmaceuticals Corp (NASDAQ:ITEK)

Inotek also just gave us an update detailing its FY 2015 and Q4 financials, and alongside the numbers, offered up a timeframe on its lead clinical candidate, Trabodenoson. The drug is an open-angle glaucoma indication, and is currently under investigation as part of a phase III that Inotek kicked off in October last year. The drug is designed to treat the intraocular pressure associated with glaucoma, while avoiding the current safety and tolerability issues that are come as part of the currently available SOC, which is a topical formulation of an old, established compound.

Top line is scheduled for release during the fourth quarter of 2016, and if previous data is anything to go by, Inotek has a decent chance of getting this one through to an NDA submission. The company has had a pretty rough start to the year (not necessarily attributable to its own performance – more likely as a result of wider market weakness), and market s will be looking to the topline release from this glaucoma trial as a potential reversal catalyst. Keep an eye out for a mid stage update, likely set for the beginning of the third quarter.

Otonomy Inc (NASDAQ:OTIC)

Finally. Otonomy. We’ve covered this company a few times before at Market Exclusive, so some readers might already be familiar with its pipeline. For those not yet so, its primary focus is an inner ear disorder called Ménière’s disease. It primarily affects men and women aged 45 and over, and involves symptoms that include vertigo, dizziness and – eventually – hearing loss. Otonomy just updated us as to the state of development of its lead candidate in the Ménière’s indication, reporting the initiation of two concurrent phase IIIs in numerous centers across the US. If the company can replicate phase II data in these expanded trials, it could get an NDA with the FDA before the end of next year. Before then, however, we’ve got two major milestones that could potentially inject some upside momentum into Otonomy’s market capitalization. First, an interim data dump that should hit before the end of this year. The data will offer mid-stage insight into how the company’s candidate – OTO-104 – is performing in the pivotals. Post interim, topline is scheduled for mid to late 2017.

Just as with Inotek, Otonomy has had a pretty rough start to 2016. The company is down 50% on its 2016 open, and shareholders will be looking to the aforementioned releases to offer up some reprieve going forward. One to watch.