3 Biotech Stocks to Withstand the Presidential Race

3 Biotech Stocks to Withstand The Presidential Race
April 20, 2016
By Mark Terry, BioSpace.com Breaking News Staff

With a presidential election runoff ongoing (seemingly forever), and drug pricing being one of the topics of contention, some analysts blame the current downturn of biotech stocks on Hillary Clinton’s statements regarding her approach to drug pricing if elected president. To be fair, the stock market responds to a lot of different things, including rumors, hints, which way the wind blows and the phases of the moon.

Keeping in mind the adage that the one thing the stock market will do is fluctuate, here are three biotech stocks that would likely stay strong regardless of who becomes president and what they may or may not do about capping drug prices.

Gilead Sciences

Foster City, Calif.-based Gilead Sciences ’s dominance in the Hepatitis C market, with Harvoni and Sovaldi, is likely to provide a cushion against drug pricing issues. It’s done well against AbbVie ’s Viekira Pak, and although there are rumors that Merck & Co. 's Zepatier might be safer than Harvoni and Sovaldi, Craig Adeyanju, writing for InvestorPlace, points out that the Advera Health Analytics report making those claims has some serious holes in it.

“Three things,” Adeyanju writes. “First, the report actually states patients that have never received HCV treatment responded better to Harvoni, indicating that Harvoni could be more efficient. Second, according to the National AIDS Treatment Advocacy Project, NS5A resistance testing has to take place prior to treatment to determine the recommended duration. Third, according to Hepatitis C Society, Harvoni, which is approved for genotype 1 and 4, has the potential for off label use in genotype 3, 5 and 6. This further solidifies that Harvoni is more efficient than Zepatier.”

He also likes the company’s valuation, arguing that the market hasn’t really taken into consider its free cash flow.

Also, at the end of this month the company is scheduled to release data from a Phase I trial for a treatment for non-alcoholic steatohepatitis.

Regeneron Pharmaceuticals

Regeneron Pharmaceuticals , headquartered in Tarrytown, NY, is another safe bet. Yes, it’s lost value, quite a bit, with a 31 percent drop from its high. In addition to the concerns about potential pricing regulations, the company’s somewhat disappointing sales of its eye medication, Eylea, have contributed to its stock weakness.

“Still,” writes Adeyanju, “the growth opportunity that Regeneron holds is mouthwatering.”

Despite Eylea sales slowing, it still has the potential to bring in $1 billion-plus yearly by 2017, and the company is projecting a 20 percent growth this year.

Writing recently for The Motley Fool, Brian Feroldi was high on Regeneron as well. The company recently announced excellent data for dupilumab for eczema, and will be submitted for regulatory approval by the end of this year. And the company’s sarilumab for rheumatoid arthritis is currently being evaluated by regulators. “Regeneron,” Feroldi wrote, “could potentially have four blockbuster drugs on the market by the end of 2017.”

Emergent BioSolutions

Emergent BioSolutions , headquartered in Lansing, Mich., is a global specialty drug company perhaps best known for its biodefense business, which includes vaccines for anthrax and botulin toxin. The company has a contract with the U.S. government for anthrax vaccine worth $1.5 billion. The stability of these government contracts are a significant component of why the company’s stock may be a safe bet.

In March, Emergent signed a worldwide license agreement with La Jolla, Calif.-based Ligand Pharmaceuticals . Emergent will use Ligand’s OmniRat, OmniMouse and MoniFlic technologies to discover human mono- and bispecific antibodies.

Adeyanju notes that Emergent “is one of those biotech stocks that could always stay underground, but is worthy of attention.”

Although Adeyanju squarely places the biotech drop on Hillary Clinton, that’s probably a gross oversimplification. Note that some analysts have also blamed it on the economic slowdown in China.

Writing for The Motley Fool in February, George Budwell pointed out that the worst-performing biotech stocks were usually clinical-stage companies, often falling after their pipeline products bombed out of clinical trials. In addition, some of the most stable biotech companies, the so-called “blue chip” biotechs, such as Celgene and Gilead, gave pretty pessimistic views on the year, and their stock values responded in kind.

“While numerous pundits have been laying the blame for biotech’s blood bath on the U.S. presidential election and/or the economic slowdown in China,” wrote Budwell, “I think the industry’s problems are mostly homegrown. Because of the stunning success of numerous clinical-stage companies of late, investors seemingly forgot that experimental drugs more often than not fail to reach the commercialization stage of their life cycle. The point is that these multibillion-dollar market caps that have been commonplace among clinical-stage companies in years past probably weren’t entirely warranted—especially in light of recent events.”

He also went on to note that the sell-off created a buying opportunity, that the main drivers for biotech stocks still exist, such as the aging U.S. population, expanded insurance coverage under Obamacare, and the astonishing rate of biotech innovation. “That’s why I think investors that grab shares of blue chips like Celgene and Gilead,” he wrote, “or perhaps the iShares Nasdaq Biotechnology ETF, at these depressed levels will ultimately turn out to be happy campers.”

Back to news