It has been a roller-coaster ride for the volatile biotech sector in 2019 after a disappointing run in 2018. The year started with a bang for this sector, with the announcement of the mega-merger of bigwigs Bristol-Myers BMY and Celgene. This significantly perked up the prices of quite a few stocks. However, these were partially offset by the overall weakness in the global market. Nevertheless, the sector has again picked up in the past couple of months, primarily owing to the recent spree of mergers and acquisitions, and positive pipeline readouts.
Overall, the Nasdaq Biotechnology Index has seen 23.2% growth in the past year.
Relatively, the biotech sector continued being riskier than the more stable large cap pharmaceuticals industry or the overall medical sector, as investors are mostly banking on companies with very few approved drugs in the portfolios.
A slowdown in mature products due to increasing competition and the rise of biosimilars forced most pharma/biotech behemoths to target lucrative buyouts in the biotech space to bolster their portfolios. In particular, biotechs (both small and big), which have a dominant position in the lesser competitive arena of rare diseases, gene therapy and NASH, and are well-equipped with path-breaking technologies, are significant acquisition targets.
A slew of licensing and buyout deals was struck by most companies eyeing smaller entities with impressive pipelines. Novartis NVS recently announced that it will acquire The Medicines Company MDCO and add a potentially transformational investigational cholesterol-lowering therapy to its portfolio.
Roche is finally set to acquire Spark Therapeutics after a prolonged delay, while Japanese company Astellas Pharma is taking over gene therapy company Audentes Therapeutics, Inc and has already acquired privately-held, development-stage biotechnology company Xyphos Biosciences, Inc to boost its immuno-oncology pipeline.
Meanwhile, new drug approvals and label expansions of blockbuster drugs boosted investor sentiment. Key approvals include Vyondys 53, Oxbryta, Givlaari, Reblozyl, Trikafta, Inrebic, Vyleesi and Evenity, among others.
Choosing a biotech stock for investment can be tricky as smaller biotechs carry a risk with their product pipelines being several years away from commercialization. Nevertheless, here we zero in a few biotech companies, which have a market capitalization of more than $500 million. With a favorable Zacks Rank #2 (Buy), these companies are likely to perform well in 2020. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Moreover, the Zacks Biomedical and Genetics industry is placed within the top 22% of the 252 Zacks-ranked industries.
Alexion Pharmaceuticals, Inc. ALXN is a biopharmaceutical company, focused on developing and commercializing life-transforming drugs for the treatment of patients with ultra-rare disorders. Its blockbuster drug Soliris — approved for paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS) — continues to perform well. The drug’s label expansion for the generalized myasthenia gravis indication has boosted sales further. The company received a significant boost with the FDA approval of its long-acting C5 complement inhibitor Ultomiris for the treatment of adult patients with PNH. The approval has strengthened Alexion’s PNH franchise and reduced its dependence on Soliris for growth. The company is working on the label expansion of Ultomiris and taking steps to further diversify its pipeline, which should reap returns in the long run.
Shares of Alexion have gained 10.2% in the past year.
Amarin Corporation plc. AMRN focuses on developing and commercializing therapeutics to cost-effectively improve cardiovascular health. The company recently obtained FDA approval for the label expansion of its key drug Vascepa. The drug is now approved as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction, stroke, coronary revascularization and unstable angina requiring hospitalization in adult patients with elevated triglyceride (TG) levels (≥150 mg/dL) and established cardiovascular disease or diabetes mellitus and two or more additional risk factors for cardiovascular disease. The label expansion should significantly boost Vascepa sales as, per estimates, millions of high-risk patients in the United States could benefit from this one-of-a-kind prescription therapy. We expect the initial uptake of the drug to be strong and boost the top line, given the market potential.
Amarin’s shares have…
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