Biotech's blue chip companies have been on a tear so far this month. Driven by strong second quarter earnings, with strong earnings expected to continue through to the end of the year, and new drug approvals, the sector has provided plenty of positive news so far this quarter to keep investors engaged despite the uncertain geopolitical climate.

During this period, the BioWorld Biotech Blue Chip index, a price-weighted index that includes 20 of the top biotech companies by market cap, has gained a healthy 7 percent compared to a 4 percent increase in the Nasdaq Composite Index and a 3 percent jump in the Dow Jones Industrial average over the same period. (See BioWorld Blue Chip Index, below)

The hike has pushed the year-to-date index value up almost 15 percent and it now sits close to its previous high recorded at the end of February just before biotech headed south on an almost four-month slide. For the same period, the Dow has increased just 3 percent and the Nasdaq Composite is up 9 percent.

MILESTONE

Also in August an important milestone was reached. Thousand Oaks, Calif.-based Amgen Inc. joined Gilead Sciences Inc. in the very exclusive $100 billion market cap "club," thanks to a 4 percent jump in its share price (NASDAQ:AMGN) so far this month. At market close Thursday, the company's shares were valued at $132.53, which computed to a market cap of $100.67 billon. Gilead's shares (NASDAQ:GILD) have vaulted almost 12 percent, pushing the company's market cap to $154.6 billion. Shares of Gilead hit a 52-week high of $102.57 last week.

It has been almost a decade since the industry last boasted it had two companies with $100 billion market caps. Back then it was Amgen Inc. and Genentech Inc., prior to that firm's acquisition by Basel, Switzerland-based Roche AG, that both vied for top spot in terms of market capitalization. At that time, both briefly commanded impressive $100 billion market caps and their collective valuation represented a significant portion of the whole sector's worth. (See Market Capitalization, below)

Amgen began the month on a positive note, impressing investors with exceptionally strong second quarter financial results, increasing total revenues by 11 percent to $5.18 billion. In addition, it also revealed its plans for significant corporate changes with the laying off of approximately 12 percent to 15 percent of its global work force. That equates to a reduction of about 2,400 to 2,900 employees who are predominantly based in the U.S. (See BioWorld Insight, Aug 4, 2014.)

Now that the second quarter earnings season has drawn to a close, investors have returned their focus to regulatory developments and products development in the biotech space.

Amgen has not disappointed in those areas, either. It reported that a second placebo-controlled phase III study evaluating AMG 416 for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease receiving hemodialysis met its primary and all secondary endpoints. The primary endpoint was the proportion of patients with a greater than 30 percent reduction from baseline in parathyroid hormone (PTH) levels during an efficacy assessment phase. (See BioWorld Today, Aug. 20, 2014.)

Those results follow positive data from a prior placebo-controlled phase III study of AMG 416, which was similar in design and size. In the AMG 416 group, 74 percent of patients achieved a greater than 30 percent reduction from baseline in PTH compared with 8.3 percent in the placebo arm, a statistically significant result.

Investors also were forgiving when the company and its subsidiary, Onyx Pharmaceuticals Inc., reported that the phase III FOCUS trial (CarFilzOmib for AdvanCed Refractory MUltiple Myeloma European Study) did not meet its primary endpoint of improving overall survival.The 315-patient study evaluated single-agent Kyprolis (carfilzomib) for injection compared to an active control regimen of low-dose dexamethasone, or equivalent corticosteroids, plus optional cyclophosphamide in patients with relapsed and advanced refractory multiple myeloma. Nearly all patients in the control arm received cyclophosphamide. Patients were heavily pretreated and had received a median of five therapeutic regimens prior to study entry.

Robyn Karnauskas, of Deutsche Bank, in a briefing to investors on the results, wrote that "we see little impact of FOCUS failure in the U.S. as in our view ASPIRE alone will likely be sufficient for approval and reimbursement in the U.S." It was a view reflected by Onyx Pharmaceuticals' president, Pablo Cagnoni, who said the company believed the results from "the recent positive Aspire phase III trial will be sufficient to support regulatory submissions around the world."

Also pushing the index needle was Salix Pharmaceuticals Ltd., whose shares have jumped 20 percent this month on reported rumors that Allergan Inc. was looking at possibly acquiring the specialty pharma firm.

GROWTH INDEX

The BioWorld Biotech Growth Index, which includes companies with market caps in the range of $1 billion to $3 billion, also rode the biotech wave, growing 6 percent. (See BioWorld Biotech Growth Index, below)

Helping boost the group's fortunes was Nektar Therapeutics Inc.'s 26 percent rise in share price this month. Last week, Baxter International Inc. unveiled favorable phase III data from the pivotal trial with BAX 855, an extended half-life recombinant factor VIII (rFVIII) antagonist for hemophilia A. The follow-on for Baxter's gold standard Advate (octocog alfa) is partnered with Nektar, and analysts said the latest results put the companies on solid footing in the space. (See BioWorld Today, Aug. 22, 2014.)

The BioWorld Emerging Biotech Index also has recorded a credible 5 percent increase so far this month, reflecting the upward fortunes of biotech companies of all stripes. (See BioWorld Emerging Biotech Index, below)

Leading the gainers was Newark, Calif.-based Depomed Inc., whose shares have skyrocketed 48 percent on the strength of news that the U.S. District Court for the District of New Jersey ruled in favor of Depomed in the company's patent litigation lawsuit against Actavis Inc. related to Actavis's abbreviated new drug application for generic versions of Depomed's Gralise (gabapentin) tablets for the management of postherpetic neuralgia. The ruling finds that Actavis infringes all seven Depomed patents asserted and upholds the validity of the patents. The latest expiration of the infringed patents is February 2024.

MARKET CAPITALIZATION

The difference between the Amgen/Genentech era and the situation currently is the fact that the gap between the valuations of Gilead/Amgen and other "blue chip" biotechs is not as wide as it was back then when Amgen/Genentech represented almost 50 percent of the total sector's value.

The capital market performances that many blue chip companies have been exhibiting has had a significant impact on their market capitalizations (See Table, right)

According to our ongoing analysis, 57 biotech companies developing therapeutics currently sport market caps greater than $1 billion. That represents approximately 20 percent of the 290 public biotechnology companies that are developing biotherapeutics and tracked by the BioWorld Stock Report. However, the 57 companies command 90 percent of the market capitalization of the sector.

With a predicted strong second half of the year, the billion-dollar market cap biotech companies will continue to drive their valuations and, as a result, push up the performance of the industry as a whole.