The biotech industry has been on the comeback trail in 2017 after facing a number of challenges last year including pricing pressure, rising competition, pipeline setbacks, pricing pressure, slowdown in growth of mature products and generic competition for certain key drugs.
Frequent FDA approvals, new product sales ramp up, R&D success and innovation, strong clinical study results and continued strength in some legacy products have changed the scenario for the better this year.
In fact, the NASDAQ Biotechnology Index has gained 21.1% so far this year in sharp contrast to last year’s decline of 22%.
Notably, the Medical - Biomed/Genetics sub-industry carries a Zacks Industry Rank of #115, which places it at the top 43% of the 250 plus Zacks industries. Our back-testing shows that the top 50% of the Zacks ranked industries outperforms the bottom 50% by a factor of more than two to one. Moreover, the Medical - Biomed/Genetics industry has increased 3% this year so far.
The positive factors are expected to continue contributing to the sector’s growth next year. Also, on Dec 20, 2017, the Senate Republicans passed the tax overhaul Bill, excluding the provisions. The Bill permanently slashes corporate tax rates from 35% to 21% which can boost profits of large drug/biotech companies.
Further, companies will be allowed to pay a 5% tax on reinvested earnings and 10% tax on deferred cash earnings. After the Senate passed the tax Bill, the House of Representatives re-voted 224-201 in favor of the Bill, complying with the Senate rules.
The approval of the bill is an advantage for the biotech companies as the companies will be left with with more cash on hand. This cash can be utilized for mergers/acquisitions, which have been relatively less this year than in 2016.
What has caught our attention in 2017 is that smaller biotech companies have done well and we saw a sharp rise in their share prices. These companies are continuously working on bringing innovative new treatments to market, and there could be significant catalysts in the coming quarters in the form of important new product approvals as well as major data read-outs.
Here we discuss four such companies whose prices have increased more than 100% this year.
Alnylam Pharmaceuticals, Inc. (ALNY - Free Report) : Alnylam has been in the news for the past few months based on impressive progress of its pipeline candidates. The company is making fast progress toward its goal of achieving having three marketed products by the end of 2020. During the past few weeks, the company completed regulatory submissions for patisiran in the United States and Europe.
The potential approval of patisiran in 2018 is likely to be a huge boost for Alnylam as it will be the first approved product for the company.
Alnylam also announced that in December, the FDA lifted clinical hold placed on all ongoing studies of its hemophilia candidate, fitusiran.
The continuous positive developments have led to a consistent rise in shares. The company carries a Zacks Rank #3 (Hold) and the shares of the company have soared 228% compared with the industry’s gain of 3%.
bluebird bio, Inc. (BLUE - Free Report) : Shares of the company have increased 200.4% this year so far compared with the industry’s gain of 3%. The company’s CAR-T candidate, bb2121, produced encouraging results in patients with a deadly blood cancer. The results were presented at ASH Annual Meeting held in December.
The representatives from Bluebird and bb2121 co-developer Celgene Corp. (CELG - Free Report) revealed that 94% of the patients with advanced forms of multiple myeloma exhibited positive responses to the therapy in a recent study. The two companies also reported that at least seven study participants were complete responders.
If the two companies can get bb2121 on the fast track to approval, they would become the third group to bring a CAR-T treatment to market. CAR-T is an emerging method of treating cancer that includes making genetic changes to a patient’s immune T-cells and reinjecting them into the body to attack cancer cells. The company carries a Zacks Rank #3.
Juno Therapeutics, Inc. : This Washington-based biopharmaceutical company focuses on the development of immuno-oncology treatments. It carries a Zacks Rank #3. The company’s shares have gained a significant 138.8% so far this year. Last week, the company reported additional data from a phase I study (TRANSCEND) on its lead pipeline CAR-T candidate, JCAR017, for treatment of patients with relapsed or refractory (r/r) aggressive non-Hodgkin lymphoma (“NHL”).
The study demonstrated that the percentage of people showing an overall response rate (ORR) and complete response (“CR”) rate at three months was more than what it had shown in the previous data presented in June.
The study also showed that the safety profile of JCAR017 remained impressive with only 1% of patients experiencing severe cytokine release syndrome and 15% experiencing severe neurotoxicity.
The company plans to bring JCAR017 to the market for NHL by the end of 2018 with a biologics license application expected to be filed in the second half of 2018.
Puma Biotechnology, Inc. (PBYI - Free Report) : Shares of the company have skyrocketed 216.5% compared with the industry’s increase of 3% during this period. The FDA approval of Puma’s cancer drug, Nerlynx (neratinib) in the United States this year coupled with strategic collaborations have led to consistent appreciation in share price.
The FDA approval of Nerlynx for breast cancer was a huge boost to Puma, given the immense commercial potential in the target market. The drug was made commercially available in the United States in August. It is also under review in the EU for the same indication with an opinion from the Committee for Medicinal Products for Human Use (CHMP) of the EMA expected in the first quarter of 2018. Puma believes that Nerlynx can also be developed for treating other cancers, including non-small cell lung cancer (NSCLC) and other tumor types that over-express or have a mutation in HER2.
Backed by positive regulatory and pipeline developments, XOMA Corp. (XOMA - Free Report) and Pieris Pharmaceuticals, Inc. (PIRS - Free Report) have also more than doubled this year. XOMA, sporting a Zacks Rank #1 (Strong Buy), skyrocketed 691.7% while Pieris, carrying a Zacks Rank #2 (Buy), surged 345.5%. It remains to be seen if these small biotech companies can maintain their bullish run in 2018. You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>