It has been a pretty ho-hum first-half of 2018 for the biotech sector. The NASDAQ Biotechnology Index (^NBI) has lost 1.2% so far in 2018.
The performance of biotech bigwigs has been affected by the slowdown in growth of key drugs. Competitive pressure will continue to impact sales. Nevertheless, new drug approvals boosted investor sentiment. Key approvals so far this year include Gilead Sciences’ (GILD - Free Report) HIV regimen, Biktarvy; Vertex Pharmaceuticals’ Symdeko (tezacaftor/ivacaftor and ivacaftor) for the treatment of cystic fibrosis (CF), Amgen’s Aimoviq for the treatment of migraine, and BioMarin’s Palynziq for the treatment of phenylketonuria, among others. The approval of these drugs should boost their respective companies’ top line as a few of them are struggling with decline in sales of legacy drugs.
Increase in M&A
Mergers and acquisitions picked up pace in the sector as the slowdown in mature products has forced companies like Celgene (CELG - Free Report) to eye lucrative acquisitions to bolster their pipeline. Celgene acquired Juno Therapeutics to gain traction in the promising CAR-T space. In February 2018, the company acquired Impact Biomedicines and added a late-stage candidate, fedratinib, a highly selective JAK2 kinase inhibitor, to its pipeline.
Alexion will acquire Sweden-based Wilson Therapeutics and add a late-stage candidate, WTX101, to its pipeline, which is currently in phase III for the treatment of Wilson disease, a rare genetic disorder. Most recently, Akebia Therapeutics, Inc. and Keryx Biopharmaceuticals, Inc. announced a merger agreement under which both the companies will combine in an all-stock merger. We expect many more such deals in the latter half as well.
What Lies Ahead?
The Medical - Biomed/Genetics sub-industry carries a Zacks Industry Rank of #153, which places it at the bottom 40% of the 255 plus Zacks industries. Although issues like drug pricing and threat of biosimilars loom large on the healthcare sector in large, we expect a better performance in the second half of 2018. New drug approvals, label expansion of existing high-profile drugs, pipeline progress, growing demand for drugs, especially for rare-to-treat diseases, an aging population and increased health care spending are some of the factors that should positively impact performance.
Here we list a few biotech stocks backed by a Zacks Rank #1 (Strong Buy) or #2 (Buy) and increase in share price, which look fairly placed for a good run in the second half of 2018:
Amgen, Inc. (AMGN - Free Report) is one of the leading biotech companies in the world. Amgen’s newer drugs – Prolia, Xgeva, Blincyto, Vectibix, Kyprolis – are performing well. The recent approval of migraine candidate, Aimovig was a huge boost. The biosimilars portfolio looks solid too with approved products like Amjevita, Mvasi, and a deep pipeline. While Amgen’s key drugs are facing biosimilar competition, we expect the newer drugs to offset the decline. The company has already undertaken a restructuring plan, which should lower costs and aid the bottom line. Amgen’s shares have gained 7% so far this year against a 8.6% decrease registered by the industry.
Amgen carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Athersys, Inc. (ATHX - Free Report) is primarily focused on regenerative medicine. The company’s patented and proprietary allogeneic stem cell product, MultiStem cell therapy, is its lead platform product. It is currently in advanced stages of clinical development for treating neurological conditions, cardiovascular disease, inflammatory and immune disorders, certain pulmonary conditions and other conditions in which the current standard of care is limited or inadequate for many patients, particularly in the critical care segment. Stem cell therapy has gained a lot of investor attention of late and companies with such candidates are in the spotlight.
Athersys carries a Zacks Rank #2. Shares of the company have gained 7.1% in the year so far against the industry decline of 8.6%.
Celsion Corporation (CLSN - Free Report) is another company whose prospects look good. The company is focused on developing a portfolio of innovative cancer treatments, including directed chemotherapies, immunotherapies and RNA- or DNA-based therapies. Its pipeline progress has been encouraging so far. ThermoDox, the company’s lead program, is a proprietary heat-activated liposomal encapsulation of doxorubicin, which is currently in phase III development for the treatment of primary liver cancer. Other candidates in the pipeline include, GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian and brain cancers. Celsion has two platform technologies for the development of novel nucleic acid-based immunotherapies and other anti-cancer DNA or RNA therapies. Immunotherapy holds a lot of potential as of now and the company’s impressive pipeline progress is a big positive for investors.
Celsion carries a Zacks Rank #2. Shares of the company have returned 15.7% in the year so far against the industry decline of 8.6%.
Aeglea BioTherapeutics, Inc. (AGLE - Free Report) is a clinical-stage biotechnology company, which focuses on innovative human enzyme therapeutics for patients suffering from rare genetic diseases and cancer. The lead experimental therapy, pegzilarginase, is being evaluated for the treatment of Arginase 1 deficiency, as monotherapy in arginine-dependent cancers and in combination with an immune checkpoint inhibitor, Keytruda, for small cell lung cancer. The company is also developing a pipeline of additional product candidates targeting key amino acids and other metabolites, including homocysteine (and the oxidized form homocystine), a target for another rare genetic disease as well as cysteine, and its oxidized form cystine, and methionine, for cancer indications.
Aeglea carries a Zacks Rank #2. Shares of the company have returned 93.5% in the year so far against the industry’s decline of 8.6%.
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