October 25, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Although biotech stocks have had a tough year, with the SPDR S&P Biotech ETF and Van Eck Vectors Pharmaceutical ETF down 15 and 16 percent, respectively, this has created an opportunity for long-term investors interested in strong stocks that are currently undervalued. Sean Williams, writing for The Motley Fool, takes a look at four of them.
1. Teva Pharmaceutical Industries
Israel-based Teva Pharmaceutical Industries has two business divisions, branded drugs and generic drugs. So far this year, its stock is down about 35 percent. The biggest news for the company has been its acquisition of Allergan ’s generic drug division, Actavis , for $40.5 billion in cash and stock. Williams writes, “Some analysts have been leery about how quickly Teva will realize benefits from this deal, and they’ve also been concerned with asset sales Teva has had to make in order to appease regulators in Europe. Ultimately, though, this could be a giant growth-driver for Teva, which now becomes the largest generic drug manufacturer in the world.”
Teva is currently trading for $43.48.
Gilead Sciences , headquartered in Foster City, California, has been the target of a lot of speculation lately on who it will buy, or who will buy it. Williams Abide Therapeutics argued in mid-September that Pfizer might acquire Gilead. Despite a very strong, even dominant presence in the hepatitis C (HCV) and HIV market, sales have sagged and the company’s HCV franchise is facing stiff competition.
Gilead’s stock price is down about 28 percent this year. Williams writes, “The good news for Gilead and its shareholders is that hepatitis C should remain a strong cash cow for many years to come. Though competition in HCV does exist, Gilead is likely to retain most HCV market share for a variety of reasons.”
Top of that list is the convenience and effectiveness of Gilead’s Harvoni and Epclusa.
Gilead is currently trading for $74.41.
New York-based Bristol-Myers Squibb shares are down about 28 percent so far this year and down 35 percent in the last three months. The reason behind this sag is a failed clinical trial of its immuno-oncology drug Opdivo for first-line non-small cell lung cancer (NSCLC) in patients who expressed 5 percent PD-L1 or more. The drug is still a great drug, but it’s facing competition from Merck ’s Keytruda, which is likely to replace Opdivo as a first-line treatment in NSCLC.
“Despite this disappointing result,” Williams writes, “investors should keep a couple of things in mind about Opdivo. For starters, it tends to work best as a combination therapy, and CheckMate-026 was a monotherapy study. Secondly, it’s not uncommon for cancer drugs to respond differently to separate types of cancer.”
And finally, Williams notes, Opdivo is still the standard therapy for second-line NSCLC and second-line renal cell carcinoma. The drug’s got a lot going for it and is still being evaluated in a number of combination trials.
Bristol-Myers Squibb is currently trading for $49.86.
4. Celgene
Celgene , based in Summit, New Jersey, is down about 18 percent so far this year. The company’s pancreatic cancer drug, Abraxane, has had slower growth this year, which is partly responsible for its sluggish stock price. But the company has been busy. In September, it bought Swiss-based EngMab for $600 million. EngMab focuses on bispecific antibodies covalent to BCMA and CD3, will give the company another angle to pursue immuno-oncology therapeutics.
And only a day earlier, on September 29, exercised an option with San Diego’s Abide Therapeutics for ABX-1431, a first-in-class endocannabinoid system modulator for multiple sclerosis.
Williams writes, “Celgene could also reap significant rewards from its M&A and collaboration strategies. Celgene acquired Receptos for $7.2 billion last year in order to gain hold of ozanimod, an experimental oral drug with a lot of promise to treat multiple sclerosis and ulcerative colitis. Celgene’s management team believes ozanimod could have the potential to eclipse $4 billion in annual peak sales.”
It also has more than 30 ongoing licensing partnerships.Celgene is currently trading for $97.77.
