Why did Reata’s share price triple days after 81% revenue slump?

ImmunityBio’s share price fell 10.6% following widening revenue in early March, while Sutro Biopharma’s gained slightly on an earnings beat late in the month. Reata initially fell in February after news that its revenue fell 81% year-over-year, before tripling in a single day as the FDA approved its Skyclarys drug.

- Clinical phase biotech companies report FY 2023 results.

- Reata’s shares slump on 81% revenue fall before surging on FDA approval.

- Virtus LifeSci Biotech Clinical Trials ETF down 14% year-to-date.

Sutro Biopharma [STRO] missed revenue estimates when it reported its annual results on 30 March, but losses per share were narrower than analysts had forecast. Sutro shares gained 2.2% the day after the results were published, but have fallen 22.6% over the past month and 46.7% year-to-date.

ImmunityBio [IBRX] filed its Form 10-K on 1 March. The filing revealed a steep 74% year-over-year decline in annual revenue and widening losses. The stock fell 10.6% the following session; it is down 4.5% over the past month and 66.9% year-to-date.

Reata [RETA] announced its annual results on 24 February. Both revenue and earnings missed analyst estimates, with revenue falling 81% year-over-year. Reata’s share price fell 30.69% in the following session.

However, two days later the stock gained 202% on news that the US Food and Drug Administration (FDA) had approved Skyclarys, the company’s treatment for a rare genetic disorder. Skyclarys is the first of Reata’s products to gain approval, and Jefferies analyst Maury Raycroft predicts the drug could reach $400m sales by 2030. Reata shares are up 8.2% in the past month and 152.2% year-to-date.

Sutro misses revenue expectations

Sutro Biopharma’s fiscal year (FY) 2023 revenue increased 9.5% year-over-year to $67.8m, 8.8% below the $74.3m that analysts polled by Refinitiv had expected. While the company didn’t report quarterly sales figures, subtracting its total for the nine months to September from the total it posted for the year yields a fourth quarter (Q4) revenue total of $8.6m, 40.4% below analyst expectations of $14.5m.

Sutro’s annual losses per share widened by 2.6% year-over-year to $2.35, a slight improvement on the $2.41 loss per share that analysts had expected. The earnings figures combined with those for the preceding quarter imply a quarterly loss of $0.68 per share, 9.7% worse than analysts had expected.

ImmunityBio’s 10-K filing revealed a 74% year-over-year fall in full-year revenue, to $240,000. Q4 revenue of $73,000 was nearly triple the $25,000 that Refinitiv analysts had expected.

Full-year losses widened 16.9% to $1.04 per share, missing analyst expectations by 4%. The implied Q4 loss of $0.27 per share missed analysts’ expected $0.22 loss per share.

Reata’s annual report, filed 24 February, revealed full-year revenue of $2.22m, down 81% year-over-year. This figure matches that previously reported for the nine months to September, implying that Reata made no revenue during Q4.

Losses for the year widened 4.27% year-over-year to $8.54 per share, missing analysts’ expected $8.41. This implies Q4 losses of $2.33 per share, missing analyst expectations of $2.21 losses per share.

Novo sparks conflict of interest fears

While neither company has announced news as momentous as the Skyclarys decision over the past quarter, both Sutro and ImmunityBio have issued progress updates on their treatments in trial phases.

ImmunityBio announced in January that its QUILT-88 phase 2 immunotherapy trials have shown a doubling in median survival time of third line and greater metastatic pancreatic cancer patients compared to historic averages. The company held talks with the FDA in December to discuss the findings, as well as a pathway towards registration for the treatment.

Sutro’s partnership with BioNova Pharma saw the first patient dosed in its China-based phase 1 clinical study of BN301 (STRO-001), an advanced B-cell non-Hodgkin’s Lymphoma treatment.

“We are very pleased with the Sutro collaboration and very excited about this important milestone for BN301 global development,” said Ye Hua, founder and CEO of BioNova.

Elsewhere in the pharmaceuticals industry, fears of a conflict of interest have emerged as a Guardian investigation revealed on 2 April that Novo Nordisk [NOVO-B.CO] has been funding the expansion of weight loss services in the UK National Health Service. Novo manufactures Wegovy, a weight loss treatment based on the Type 2 diabetes treatment semaglutide.

Funds in focus: Virtus LifeSci Biotech Clinical Trials ETF

Investors seeking exposure to biotech companies with drugs in clinical trials can select the Virtus LifeSci Biotech Clinical Trials ETF [BBC].

Reata is BBC’s second-largest holding, with a 2.42% weighting as of Tuesday. ImmunityBio is its smallest holding, with a 0.24% weighting. The fund doesn’t currently hold Sutro Pharma.

BBC is down 12.8% in the past month and down 13.8% year-to-date.

For exposure to Sutro, investors can select the Simplify Propel Opportunities ETF [SURI] which “seeks to provide long-term growth of capital by providing investors with exposure to biotech, pharma, health care technology, and life science companies that are believed to be overlooked by investors.”

SURI has a 0.96% weighting in Sutro. It doesn’t currently hold ImmunityBio or Reata. SURI is down 11.6% in the past month and down 20% since launching in mid-February.