Biotech Week in Review

Last week was a busy one in the biotech sector, with a number of public offerings, regulatory milestones, and clinical trial data read outs coming to pass. With that in mind, here are some of the key developments.

Avanir's drug for neuropathic pain fails
Avanir Pharmaceuticals announced last Tuesday that its drug AVP-923, indicated as a potential treatment for chronic neuropathic pain, failed to provide symptom relief in a mid-stage trial. Specifically, the drug failed to show a statistical difference in terms of pain scores compared to patients receiving a placebo. Avanir plans to review the drug's clinical trial results prior to deciding whether to mothball its development altogether.

Avanir also announced in its earnings release that net losses increased to $15.4 million for the quarter, compared to $11.7 million a year ago, despite strong sales of its flagship drug Nuedexta for pseudobulbar affect. As a result, Avanir shares ended the week down more than 30%. Personally, I find this drop a bit overdone, and think the stock will rebound soon. So you may want to keep Avanir on your radar.

Merrimack's breast cancer drug shows promise
Merrimack Pharmaceuticals announced Friday morning that its experimental therapy, MM-302, for the treatment of advanced HER2-positive breast cancer was well tolerated and showed signs of effectiveness in an early stage trial. Namely, the study showed that patients treated with MM-302 had an estimated progression-free survival of 5.6 months.

The company didn't release any information on its plans to further development the therapy, however. While these early stage results are encouraging, all eyes are on Merrimack's late-stage pancreatic cancer drug MM-398 that is set to read out topline results in the second half of next year. Until those results are known, the company's risk-reward ratio appears slanted toward the risk side.

Orexigen refiles Contrave's application with the FDA
Orexigen Therapeutics officially resubmitted its new drug application, or NDA, for Contrave to the U.S. Food and Drug Administration last week. As a refresher, the FDA rejected Contrave in 2011, citing the drug's potential risk for adverse cardiovascular events. Following the rejection, the FDA informed Orexigen that it would reconsider the drug for approval if it performed a large cardiovascular outcomes trial to clarify Contrave's safety profile. And Orexigen has now met the FDA's request after releasing interim results from the LIGHT study.

As my Fool colleague Brian Orelli aptly points out, it's a tad unusual for the FDA to accept interim results from a safety study for a NDA. As such, I echo his sentiment that it appears that the FDA is going to give Contrave the green light this time around, and approval may come quicker than expected. I am of the belief, however, that 2014 is going to be a good year for obesity drugs in general. With Arena Pharmaceuticals and its marketing partner Eisai laying the necessary groundwork this year, I think the stage is finally set for obesity drugs to live up to their hype.

XOMA makes a public offering
XOMA put the brakes on its astounding year-long rally last Friday after announcing a public offering of 9 million shares at $5.25 per share. Per the release, the offering should net the company around $43 million in proceeds after fees. My take is that these funds will go toward financing XOMA's two late stage clinical trials for gevokizumab to be initiated next year.

As a reminder, gevokizumab showed encouraging results as a potential treatment for both a rare type of skin ulcer and erosive osteoarthritis of the hand. With the EYEGUARD trials expected to release results next year, XOMA is growing its lead clinical candidate at a breakneck pace. As such, I believe this offering is only a temporary setback for the stock before it pushes even higher. So Foolish investors should definitely keep a watch on this one.