The stock market has been volatile so far this year, and biotech stocks are right there in the middle of things. Still, there are a few stocks that have taken a beating but will probably recover, and others that appear to be on their way up with every indication of continuing.
The stock market has been volatile so far this year, and biotech stocks are right there in the middle of things. The iShares Nasdaq Biotechnology Index is down more than 4 percent and summer is a notoriously slow period for biotech. Still, there are a few stocks that have taken a beating but will probably recover, and others that appear to be on their way up with every indication of continuing.
#1. Acadia Pharmaceuticals. Headquartered in San Diego, Acadia focuses on therapeutics for central nervous system disorders. Its Nuplazid (pimavanserin) is the first and only drug approved by the U.S. Food and Drug Administration (FDA) to treat hallucinations and delusions associated with Parkinson’s disease psychosis. The drug’s hype probably forced the stock up higher than expected, but a bigger issue has been the opposite—stocks dropped 22 percent in one day after FDA commissioner Scott Gottlieb told Congress the agency would investigation the drug over 244 deaths reported between June 2016 and March 2017.
It’s unlikely the FDA will pull the drug, although any investigation is likely to have some fallout. Unfortunately, the drug is Acadia’s only product on the market, but it is still insisting that its 2018 sales guidance for the drug is $255 to $270 million. George Budwell, with The Motley Fool, wrote, “The core problem here, though, is that Acadia’s valuation is still way out of line with its peers—even after this year’s downward move.” Invest at your own risk.
#2. Celgene Corporation. In February, Celgene took a hit when the FDA issued a Refusal to File letter over its New Drug Application (NDA) for Ozanimod for multiple sclerosis. But recently, the company seemed to bounce back when it indicated it planned to resubmit in the first quarter of 2019, earlier than expected. The FDA did not require additional human trials. There would be some non-clinical bridging studies, but that would not delay another application for too long.
The company acquired Juno Therapeutics and Impact Biomedicines, and they have lead products that have potential, although are not without their own issues. Budwell writes, “Overall, the picture that’s emerging with Celgene is a company that’s losing its way to some degree. The ozanimod fiasco triggered a change in key leadership positions, and the biotech’s acquisitions of Juno and Impact appear, in hindsight, to be questionable moves at best. Valued at a mere 8.55 times forward earnings, though, Celgene stock is probably worth the risk at these levels.”
#3. Seres Therapeutics. Headquartered in Cambridge, Massachusetts, Seres is focused on developing therapies using live bacteria to treat diseases resulting from functional deficiencies in the microbiome. Analysts think its lead product candidate, SER-109, could revolutionize treatment of diseases such as inflammatory bowel disease. Mark Breidenbach, an analyst with Oppenheimer, wrote on March 8, “We rate Seres Outperform with an $18 12- to 18-month price target, based on our conviction that multiple programs in the company’s pipeline can achieve regulatory and commercial success.” In addition to inflammatory bowel disease, it is looking at ulcerative colitis (UC), and pushing into immuno-oncology with SER-401.
#4. Zynerba Pharmaceuticals. Located in Devon, Pennsylvania, Zynerba is devleoping therapies for severe rare and near-rare neuropsychiatric disorders such as Fragile X syndrome, refractory epilepsies, and Tourette Syndrome. The company recently initiated a Phase II trial of ZYN002 in patients with developmental and epileptic encephalopathies and expect to launch a pivotal trial for Fragile X syndrome.
Arlinda Lee, an analyst with Canaccord Genuity, wrote recently, “The announcement sets ZYN002 on track for topline Fragile X data next year and potential FDA approval in 2020, consistent with our published model. We reiterate our BUY rating.”
The average analyst price target is $19.21.
#5. Strongbridge Biopharma. Based in Trevose, Pennsylvania, Strongbridge is working to develop therapies for rare diseases, such as Primary Periodic Paralysis (PPP), Adult Growth Hormone Deficiency (AGHD), Cushing’s syndrome, and acromegaly. In April, the company announced that the first four patients had been dosed in its second Phase III trial of Recorlev (levoketoconazole) for the treatment of endogenous Cushing’s syndrome. The company already has two commercial products, Keveyis for PPP and Macrilen for AGHD. Andrew Fein, an analyst with HC Wainwright, wrote, “We continue to believe that the strong revenue guidance of Keveyis ($16 to $19 million) for full year 2018 versus $7 million record in 2017 (nine months since launch), signals management’s high confidence level around Keveyis’ market growth.”
