You might think that biotech stocks are risky and volatile. And they often are. But biotech stocks overall have handily beaten the S&P 500 index over the last 10 years. With exciting new drugs potentially on the way, the next decade could be just as profitable for biotech investors.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals is counting down the days until March 19, 2020. That’s the magic date for when the U.S. Food and Drug Administration (FDA) is scheduled to announce its approval decision for a triple-drug combo featuring VX-445 (elexacaftor) in treating cystic fibrosis (CF). EvaluatePharma picked this combo as its No. 1 most valuable pipeline program with estimated sales of $4.3 billion by 2024.
The biotech’s three currently approved CF drugs, Kalydeco, Orkambi, and Symdeko, combined for sales totaling a little over $3 billion last year. Approval for the VX-445 combo would dramatically expand the number of patients eligible for Vertex’s therapies — and almost certainly turbocharge Vertex’s revenue growth.
Although I think the CF opportunity alone is a good reason to buy Vertex, the biotech has other avenues for growth as well. Vertex has early-stage clinical programs focused on other rare genetic diseases including alpha-1 antitrypsin deficiency (AATD), beta-thalassemia, Duchenne muscular dystrophy, and sickle cell disease. It’s also close to advancing an experimental drug to late-stage testing targeting pain management.
Investors who buy Vertex also get a lottery ticket of sorts on another front that could be a game changer if successful. Vertex recently announced that it’s acquiring privately held Semma Therapeutics for $950 million. Semma has a promising therapy in development that would cure type 1 diabetes. There’s a long way to go, with Semma’s experimental drug only in preclinical testing at this point. But if Vertex manages to cure type 1 diabetes, its previous achievements in CF will pale in comparison.
Amarin is anxiously awaiting a major FDA decision as well. The company expects the FDA will render its verdict before the end of this year on approval of an expanded label for Vascepa in reducing cardiovascular risk.
Originally, the FDA had set a date of Sept. 28, 2019, to conduct a priority review of the expanded label for Vascepa, which is already approved for lowering triglyceride levels. However, the agency decided to convene an advisory committee meeting to review Amarin’s regulatory filing, a move that extended the timeline for a final decision.
I expect that Amarin will win the expanded label for its drug. The only question is what the company will actually be able to say on the label. Amarin found that Vascepa reduced cardiovascular risk by 25% compared to placebo in a large cardiovascular outcomes study. However, the company used mineral oil as the placebo, and there’s some concern that the mineral oil wasn’t inert and could have skewed the results somewhat.
My view is that Amarin remains a top acquisition candidate. Vascepa would be a great addition to the lineups of several big drugmakers. With Amarin’s market cap currently only at around $5.4 billion, I suspect this biotech could be gobbled up in 2020…
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