The biotech sector is an interesting one to follow. With today’s corporations coming up with solutions to some of the toughest medical problems, investor interest in the space is climbing.
The biotechnology space can be a very dangerous as well. Early-stage biotech players are considered to be highly speculative, but the prospect of a large reward from a top-selling drug to come leads to some investors taking chances. Any news from a biotech stock has the potential to drastically move the needle in one direction or another.
Nonetheless, for more experienced investors who want to give it a go, picking the right stocks in the space can prove to be pretty lucrative. Here are the top five biotech stocks investors should watch throughout 2019.
Don’t get me wrong, any stock can fall at any time for any number of unforeseen reasons. However, Celgene takes the cake as number one on my watch list because it is in the middle of a win-win proposition.
There has been quite a bit of chatter recently surrounding the potential acquisition of the company by Bristol-Myers Squibb (BMY). In a press release issued in early January, Bristol-Myers announced it would be acquiring the company in a deal worth more than $70 billion.
Since then, two shareholders, including Starboard Value, and other large Bristol-Myers Squibb shareholders have spoken out against the deal. If it goes through, it will be great for Celgene shareholders. While it looks like the deal will close, the risk of it falling apart is something to consider.
Even if the deal were to fall apart, I believe Celgene still represents a strong market opportunity. At the moment, the stock is trading at what I believe to be a discount due to fears surrounding the drug that generates the lion’s share of its revenue, Revlimid, as its patents are being challenged.
Celgene is up for the challenge, however,with strong intellectual property that protects its product. As a result, the company should be able to stand its ground in the face of potential generic competition for at least a few years.
In the meantime, the company's pipeline is nothing to shake a stick at. With multiple assets already approved and several potential blockbusters currently in late-stage development, Celgene offers a compelling long-term growth opportunity, with or without the Bristol-Myers Squibb takeover.
Vertex Pharmaceuticals is a very real contender in the biotechnology space. First and foremost, if you want the quick on the story, just look at the company’s earnings. The company has produced compelling earnings growth for several consecutive quarters.
With successful products on the market that are well protected, Vertex is a solid bet. Moreover, the growth doesn’t seem to be coming to an end anytime soon. In fact, the company has an impressive pipeline with several key catalysts coming.
Most recently, Vertex Pharmaceuticals announced positive outcomes from two Phase 3 clinical trials of a combination drug. The drug combined the company’s next-generation corrector VX-445 with tezacaftor and ivacaftor in cystic fibrosis patients.
The trial showed patients with two F508del mutations saw an improvement of 10% in ppFEV1 at week four when compared to control. The treatment also proved to be safe and well tolerated.
Considering this, the company plans on assessing the data through week 24 to get a better understanding of the drug and how to market it, but seems confident the treatment will make it to the New Drug Application stage at the very least.
This means the drug will likely lead to several catalysts ahead and, if approved, could become the company’s next blockbuster treatment option, making this a long-term play to watch.
In the clinical-stage biotech space, speculation is common. Everyone thinks they have found the next big thing. Unfortunately, it doesn’t always pan out that way. Nonetheless, it’s not uncommon to find a diamond among all of the coal if you look hard enough. That’s where CVR Medical comes in.
While the company is small and in the clinical stage, it has several catalysts ahead that could prove to pay off, one of which may be market approval. CVR Medical is a company that’s focused on the development of technology to solve some of the toughest challenges in the medical space.
The company’s claim to fame is its Carotid Stenotic Scan, a piece of technology that will be used to assess Carotid Arterial health in a way that is currently unavailable in today’s medical system.
On Jan. 3, the company announced it had submitted its De Novo Medical Device Application to the Food and Drug Administration. Should the application be approved, the device will hit the market in the United States, pushing the company to commercial stages.
The company has also made moves to prepare for the commercial stage. In fact, a recent manufacturing partnership with Canon Virginia (CVI) gives Canon control over the supply chain, logistics, “White Glove” inventory, service and warranty, customer support, management of subsuppliers and the manufacturing of the device. Through this partnership, a large player is pretty much going to take the commercialization of the product over, creating a greater opportunity for it to be a hit. I believe this makes CVR Medical a compelling investment option.
Exelixis is another biotech giant that has quite a bit to offer to investors. For those of you who haven’t been following the company, its claim to fame is Cabometyx.
Cabometyx is a second-line treatment for renal cell carcinoma, also known as RCC. The treatment has been shown in clinical and real-world cases to improve objective response rates, progression-free survival rates and overall survival rates in RCC patients. It has also proven to be more effective than Opdivo, the most popular second-line RCC therapy on the market currently.
As a result of the strong results behind the treatment, it has seen exceptional growth in sales. In fact, the drug generated $619 million in sales in 2018. That’s a 77% increase over 2017.
It’s also worth mentioning Cabometyx isn’t a one-trick pony. In fact, Exelixis recently announced the FDA expanded the label of the drug to include second-line advanced hepatocellular carcinoma (HCC) as an approved indication. This could greatly expand sales.
The company also recently submitted several Investigational New Drug applications to the FDA with the goal of developing XL092 as an option for various types of cancer. While this asset is still in its early stages, promising preclinical data and the success the company has had with cabometyx makes this a treatment worth watching.
All in all, the company has proven its ability to get a treatment approved by the FDA. Moreover, it has proven it has the capability to effectively commercialize a high-value drug. With more innovation taking place as we speak and a popular drug on the market, this stock is one I believe will outpace others in biotech.
Finally, we have Genprex, a company that is targeting lung cancer. With a market cap of around $25 million, I believe it is highly undervalued.
The company’s claim to fame is its lead candidate, Oncoprex. The drug is designed to be administered with erlotinib as a treatment for patients with non-small cell lung cancer. The company is also in pre-clinical research surrounding Oncoprex in combination with targeted therapies in other solid tumor types.
The market for this type of treatment is tremendous. According to a recent study, the NSCLC treatment market is expected to be valued at $14.7 billion by 2023 with a compelling compound annual growth rate. In fact, this is the largest sector in the lung cancer market with more than 80% of lung cancers featuring a non-small cell histology.
Genprex's patent protection is also worth mentioning. The company currently holds a portfolio of 30 patents exclusively licensed from MD Anderson Cancer Center, where its gene therapy platform was developed.
With multiple ongoing clinical trials, the company has several catalysts that are likely around the corner. Moreover, at its current market cap, the stock is already highly undervalued. All in all, I believe Genprex offers a compelling opportunity for growth ahead.