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Companies to Watch as Biotech Makes a Comeback in 2017
This is a bull market, and some biotech stocks are the real raging bulls-especially when massive drug pipelines are at stake, and landmark FDA approvals shake things up with massive share price momentum. Biotechs in focus include: Novartis AG (NYSE: NVS), Celgene Corporation (NYSE: CELG), Calithera Biosciences, Inc. (NYSE: CALA), Gilead Sciences, Inc. (NASDAQ: GILD), Regeneron Pharmaceuticals, Inc.
The FDA's approval just over a week ago of giant Novartis' new class of cancer drug is a case in point. This was a landmark ruling, and Novartis now holds the status as the first company to win approval for a new class of cancer drug, its CAR-T Kymriah.
Nothing shakes up the biotech world like an FDA approval, or even hints that an approval may be forthcoming.
And these are indeed exciting times-enough so that 2017 could be the definitive year of biotech. For everything from the first new cancer drugs to be approved and a whole line-up of new treatments for every disease imaginable, to a medical device in the validation process that could help save millions of lives by providing a way to detect strokes before it's too late-biotech is back on our radar in a very big way.
For the past two years, biotech stocks have been a pretty scary investment, but not in 2017. Until recently-and pretty much since this market bottomed out in 2015-there's been a huge sell-off, but biotech is back in business now, and there's money to be made.
It's a risky business, but it's now among the most potentially rewarding segments for investors and traders. The cream of this crop continues to break past 52-week highs, so we're looking for short and long-term catalysts that will keep pushing them higher.
Here are our 5 top picks for the 2017 biotech comeback:
#1 Novartis (NYSE: NVS)
Market Cap: $196.3 billion
Giant Swiss drug maker Novartis won FDA approval on 30 August for Kymriah, the first gene therapy drug to be made available in the United Sates as a treatment for leukemia. It's one of the most exciting forward movements in biotech in a long time, and here's where it gets really interesting-and futuristic: Each dose of Kymriah is customized to a patient's T-cells through genetic modification. Essentially, this Novartis therapy harvests patients' white blood cells and rewires them to home in on tumors. They're like little genetic drones, personalized and customized.
It should also be a boon for other stocks offering up similar treatments to the FDA. The logical conclusion of investors at this point is that we should expect more approvals. At the end of the day, this approval bodes well for others, and the general consensus is that we're standing on the edge of a sea-change in the treatment of aggressive blood cancers.
Then on Monday, 2 September, Novartis announced that it will be replacing current CEO Joe Jimenez with Harvard doctor Vas Narasimhan as of February, as the Swiss giant rolls out the oncology treatments.
Novartis is a stable growth play in a turbulent biotech sea. It is an 'aristocrat' of dividends in Europe, so if you're looking for something solid, this is it. This is a consistent growth and product development stock, and this year should be one of its best.
This is one of the most exciting biotech development stories we've seen in a long time, partly because it's been done quietly over 10 years, and stayed off the radar until validation was nearing the end-game. But even more so because it tackles one of the leading causes of death globally-strokes.
In the U.S. alone someone dies of a stroke every 4 minutes; 15 million people suffer stroke every year, globally; and of those, some 6 million are killed, while 5 million are rendered permanently disabled, according to the World Heart Foundation.
These statistics are dire. Yet, prior to the development of CVR's Carotid Stenotic Scan (CSS) there was no cost-effective way to screen for Ischemia, the leading indicator of stroke.
We have been watching CVR for months, and the news flow is now gaining real momentum. This week, the company released updated preliminary clinical trial results from the Thomas Jefferson University that showed forward progress for the CSS. This is a huge milestone in the biotech industry.
Another major catalyst is a new manufacturing deal, which should be a game-changer for CVR's credibility and scalability. CVR's deal with Canon Virginia, Inc (CVI), means that the CSS will be manufactured in Canon's state-of-art facilities. It also follows another deal made in May for the manufacture of CSS circuit boards.
The CSS is designed to detect stenosis within arteries, or Ischemia, which is the leading indicator of strokes. It makes a connection between fluid flow and subsonic frequencies to detect arterial disease or blockage. Blood flowing through the carotid arteries produces wave patterns which are shaped and altered by the presence of irregularities on the inner artery walls. The CSS captures the wave patterns and analyses them with patented algorithms.
We like CVR because it's had two catalysts in a row that make major progress towards final validation. We also like it because it's being doing all of this without the hype, quietly developing and validating instead of trying to convince investors to go all in in the early phase. Everyone should like it because it aims to help prevent one of the deadliest diseases in the world, and it aims to do so at a price that makes brilliant sense in the market, and aims to be accessible to anyone.
CT scan equipment can cost up to $2.5 million per machine and remains the most common method of diagnosing a stroke-but usually after it's already happened, and even then, stroke is not always seen on CT scans. Coming in at $49,000 per unit, CSS could be very disruptive.
We expect a continual news flow as CVR brings CSS through clinical trials and into the realm of the FDA. If it manages to get FDA market clearance, manufacturing is already sealed and it should burst out of the gates and into the market.
#3 Celgene Corp. (NYSE: CELG)
Market Cap: $109.01 billion
Celgene focuses on cancer and inflammatory diseases, and collaborates with huge drug makers to bring it all to market. We're looking at the fundamentals here, because revenues were higher in Q2, and operating income has steadily increased. This is one of those stable bets in a risky biotech world.
2017 has so far been a great year for Celgene, which saw its share price rise until the end of April, when there was some pullback, and then rebound again in June-and it's still climbing.
But what we really like is Revlimid-Celgene's blockbuster drug that is currently the king of the blood cancer treatment playing field. Sales in the first half of this year have already hit $3.9 billion, and counting.
It's also expecting to win approval for 10 drug candidates in its pipeline by 2022. Just four of those could net the company $2 billion on the low end, according to Celgene's own estimates.
#4 Calithera Biosciences Inc. (NYSE: CALA)
Market Cap: $581.49 million
This clinical-stage cancer-fighting pharmaceutical company focuses on small-molecule drugs for tumors and immune cells targets. It's got two key product candidates in the pipeline, and results from Phase-1 clinical trials should see significant stock movement (one way or the other).
- CB-839 is the company's leading product candidate. It is a critical enzyme in tumor cells. More specifically, it's a selective, reversible, orally bioavailable inhibitor of glutaminase.
- CB-1158 is another orally bioavailable inhibitor, this time of the enzyme arginase.
#5 Gilead Sciences, Inc. (NASDAQ: GILD)
Market Cap: $109.38 billion
Gilead has seen growth of an impressive 30 percent for five years straight, and it's a leader in HIV and Hepatitis C treatments. Fundamentally, Gilead looks great, with four consecutive years of increasing operating income. Revenues have been on the consistent upswing, and forecasted earnings growth from this year through 2019 look solid.
Share prices spiked in late July, and are now at around $82, closing in on their 52-week high.
But there has just been another major catalyst: In the first week of September, Gilead finally puts its cash to bigger use, scooping up Kite Pharmaceuticals (NASDAQ: KITE) for $11.9 billion. There's good reason to be excited about this acquisition, too. Kite is waiting for regulatory approval for its CAR-T Axi-Cel cancer drug in November. And in the meantime, giant Novartis (NYSE: NVS) has just won FDA approval for its own CAR-T drug, Kymriah. So, investors are now hedging their bets that Kite-now under Gilead's umbrella-will win big in November.
Honorable Mentions
Regeneron Pharmaceuticals (NYSE: REGN): This biopharmaceutical company's shares are at over $490 as of 3 September 2017. And while they haven't broken past their 52-week high of $543.55, and are trading just above their 52-week-low, technical indicators show an uptrend. Regeneron discovers, invents, develops and brings to market drugs for a number of diseases already, and they have a huge pipeline of medicines for everything from rheumatoid arthritis and asthma to pain, cancer and infectious diseases. Right now, they've got 16 products in clinical development.
Dynavax Technologies Corporation: With shares at $18.22 as of 3 September, DVAX is trending upwards with its clinical-stage immunotherapy pipeline. Products candidates include a vaccine for the prevention of Hepatitis B, a disease modifying therapy for asthma, and drugs for use in multiple cancer indications.
By. Meredith Taylor
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FORWARD LOOKING STATEMENTS . Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward-looking statements in this press release include that CVR's technology can successfully be deployed for early detection of stroke; that CVR's technology may have a major impact on the medical device industry; that CVR can sign a definitive manufacturing agreement to give it state-of-the-art manufacturing capabilities with Canon Virginia, Inc and immediate scalability; that the CSS device can be sold profitably at $49,000 per unit; and that CVR is moving to pivotal trials and with that will be closer to FDA approval. Actual events or results may differ materially from those projected in any of such statements due to various factors, including the risks and uncertainties inherent in medical device development, which include, without limitation, the potential failure of device candidates to advance through clinical studies or demonstrate safety and efficacy in clinical testing; CVR's ability to retain key employees; its ability to finance development; and its ability to satisfy the rigorous regulatory requirements for new medical devices. Costs may be higher than expected and CVR may need to increase the expected sales price of its device. Competitors may develop better or cheaper alternatives to CVR's products. CVR may not be able to come to final agreements with expected contract partners, it may not be able to commercialize its products and even if it does, it may not realize any profit. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update this information to reflect events or circumstances after today's date. Readers should also refer to the risk factors disclosure outlined in CVR's periodic reports filed from time-to-time with the securities regulators.
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