With New Data, Highs and Lows For Akebia, Flexion, Tetraphase

Xconomy Boston — 

Want to invest in biotech? Data released this afternoon from three Boston-area biotechs—Tetraphase Pharmaceuticals, Flexion Therapeutics, and Akebia Therapeutics—show just how big the risks and rewards can be.

First, the bad news. Tetraphase (NASDAQ: TTPH) and Flexion (NASDAQ: FLXN) both reported that their experimental drugs failed clinical trials, and both were punished by public investors.

It’s an especially tough blow for Watertown, MA-based Tetraphase, which said that its antibiotic, eravacycline, failed the second of two Phase 3 studies. The company had been riding high after reporting positive results in December from its first late-stage trial, which was for patients with complicated intra-abdominal infections.

Rumors began floating last year that the company was up for sale, and shares closed today at $44.76, more than six times Tetraphase’s $7 IPO price in 2013.

Yet that value was wiped out in just a few minutes of trading after the market closed, after investors learned that eravacycline failed its second Phase 3 test, a non-inferiority study in patients with complicated urinary tract infections. To succeed, eravacycline had only to match or come in slightly inferior to the antibiotic levofloxacin. Investors were clearly stunned by the results, sending shares spiraling down almost 80 percent, to $9.50, as of this writing.

The news also wasn’t good for Flexion’s FX-006, a long-lasting form of the steroid triamcinolone. The drug failed its primary goal. It didn’t best a placebo at reducing pain in osteoarthritis patients with moderate to severe knee pain in a Phase 2b study. Though Flexion CEO Michael Clayman said in a statement that the company is “pleased with the safety profile” of the drug, is “proceeding with confidence” with FX006 and will meet with the FDA about the data, several investors aren’t sticking around to see what happens. Shares fell around 40 percent—from $29 apiece to $17.77—in post-market trading. Flexion went public in February 2014 at $13 a share.

The one biotech to report good news today is Akebia (NASDAQ: AKBA). I profiled the company after it went public at $17 a share in March 2014. CEO John Butler told me at the time that the company’s investors had decided to take Akebia public rather than sell it, and Akebia has since been through ups and downs.

Shares plummeted last year, for instance, when early data in a mid-stage study tied the company’s oral anemia drug to some serious side effects, even possibly a patient death. Akebia’s management has been adamant that its drug is safe, however, and this time around, the drug, known as vadadustat (formerly AKB-6548), fared better. The drug succeeded in a Phase 2 open-label study in dialysis patients with anemia related to kidney disease. It maintained patients’ hemoglobin levels over 16 weeks of treatment, and didn’t lead to any drug-related serious side effects or deaths. Shares soared more than 60 percent late Tuesday afternoon to $12.85 apiece, which remains well short of the company’s $17 IPO price.

It’s tough to know for sure which investors are taking the hits or reaping the rewards from today’s results, but based on the biotech companies’ most recent proxy filings with the Securities and Exchange Commission, here are some of the largest stakeholders.

—As of April 30, Fidelity (10 percent stake), Wellington Management (5.3 percent), and Blackrock Advisors (5.2 percent) held the largest stakes in Tetraphase.

—As of April 29, some of Flexion’s most significant stockholders were Versant Ventures (14.95 percent), Gilder, Hagnon, Howe & Co. (10.69 percent), Novo A/S (10.64 percent), and Sofinnova Partners (9.61 percent).

—Novartis Bioventures (16.6 percent) held the biggest stake in Akebia as of April 30. Novo A/S (7.4 percent) owned a large position as well, as did Eagle Asset Management (6.0 percent) and Triathlon Medical Ventures (5.4 percent), among others.