Written by: Joshua Rodriguez
As we near the halfway point in the year, investors are starting to look for opportunities to capitalize on in the second half.
Biotechnology stocks can generate strong opportunities, as they are riddled with catalytic events through the development, regulatory and commercial processes. While a tech or services company may want to keep its progress close to the vest, biotech companies provide updates each step of the way, often leading to tremendous movement in the values of their shares.
With that said, here are several biotech stocks to watch that are likely to have a compelling end to the year 2019…
Catalyst Pharmaceuticals (NASDAQ: CPRX)
Catalyst Pharmaceuticals CPRX[NSC] – $3.14 has had an incredibly strong start to the year. After receiving FDA approval for Firdapse back in November of 2018 for adults with Lambert-Eaton Myasthenic Syndrome (LEMS), Catalyst has pleased investors with its commercialization efforts and the potential revenue that the treatment would generate. LEMS is a rare autoimmune disease that affects approximately 1 in 100,000 people in the US. The most common symptoms are proximal muscle weakness and fatigue; these symptoms can be life threatening when the weakness involves respiratory muscles.
The stock took a hit on May 7, 2019, after a competitor’s drug was approved. Jacobus Pharmaceuticals received FDA approval for Ruzurgi. Interestingly, the treatment was approved for the pediatric patient population with LEMS, a population for which Firdapse is not approved. What can be used in children, however, can often be used in adults, and investors fear that Ruzurgi will dampen Firdapse sales. As a result, the stock fell as much as 40% during the trading session.
While the approval of the rival drug led to fear in many, I see it as an opportunity. First and foremost, the market tends to overreact. Considering that Ruzurgi was approved for children, any prescriptions to adults would be off-label. Also, Jacobus hasn’t announced what the price of Ruzurgi will be. While a price war will likely commence, Catalyst Pharmaceuticals may not have to come too far off its price line to remain competitive.
Another factor that investors seem to be ignoring here is that both of these treatments use the same active ingredient, Amifampridine. Currently, Catalyst Pharmaceuticals holds the patent for the use of this treatment in adult patients with LEMS.
While Ruzurgi is approved for use in children, LEMS is incredibly rare in children. In fact, there have been only 11 documented cases in children under 17 in medical literature. Considering this, it would be easy to argue that targeting this incredibly small patient population was done as a backdoor way to infringe upon Catalyst Pharmaceuticals’ intellectual property and sell the treatment to adult patients. So, should Ruzurgi impede sales of Firdapse too much, it will likely be met with litigation.
Finally, Catalyst Pharmaceuticals is expected to release the initial results of its commercialization efforts of Firdapse relatively soon. In my view, these results will likely be the catalyst that starts a strong recovery from the lows reached on May 7, 2019.
Catalyst Pharmaceuticals is far ahead of Jacobus, with more data, stronger IP, and a commercial entrance in the market that has already begun. Considering this, I’m expecting that recent declines are nothing more than an opportunity to get in on long-run gains at a discount.
Cellectar Biosciences (NASDAQ: CLRB)
Cellectar Biosciences CLRB[NSC] – $2.25 is a clinical-stage biotechnology company with a focus on oncology. While the company is a relatively small one, it could prove to be a large opportunity for investors.
Cellectar’s flagship candidate is CLR 131, a treatment currently under development in multiple clinical studies for various types of cancer.
The first of these is a Phase 2 study in multiple myeloma and other hematologic malignancies. The company is assessing progression free survival, overall survival and other markers of efficacy.
Initial top-line results have been promising. In a relapsed or refractory multiple myeloma cohort, the company achieved a 30% overall response rate in the first 10 evaluable patients. The fact that the average patient in this cohort had already received an average of seven lines of therapy only serves to make the data more impressive, as patients with a high number of prior lines of therapy are considered the most difficult to treat. Also impressive is the single 30-minute infusion of the drug that led to such results.
CLR 131 is also the subject of a Phase 1 clinical trial in relapsed or refractory multiple myeloma. Again, the company is targeting a very difficult to treat population with an average of five prior lines of therapy. We’ve already seen promising signs out of this trial as well.
In fact, during the first quarter, Cellectar Biosciences announced median overall survival of 22 months in the first four cohorts of the trial. This is significant considering that the median overall survival rate for patients in third line treatment is about 12 months. With the average patient in this cohort being on their fifth line of treatment, 22 months and ongoing is encouraging news.
With active Phase 1 and Phase 2 clinical trials that have shown early promise, Cellectar Biosciences has several catalysts ahead. I’m looking for interim analysis and trial completion announcements to push the stock.
GW Pharmaceuticals (NASDAQ: GWPH)
GW Pharmaceuticals GWPH[NSD] – $178.31 is a biotechnology play that also gives investors access to the booming cannabis/CBD space. The company made it to the big leagues in mid-2018 when the FDA approved its flagship product, Epidiolex. This is the first FDA-approved treatment with an active ingredient that is derived from the cannabis plant.
The approval was provided for two rare epilepsy indications known as Dravet syndrome and Lennox-Gastaut syndrome. Dravet syndrome affects approximately 0.0064% of the population in the United States. That relates to about 21,000 patients. Due to the limited treatment options and strong efficacy, safety, and tolerability seen in Epidiolex, the company could take a large share of this market.
Lennox-Gastaut syndrome has a similar patient population, affecting about 2 of every 100,000 children. The condition has a high unmet medical need, giving Epidiolex the potential to take the lion’s share of the market.
The company is also in the midst of evaluating Epidiolex in tuberous sclerosis complex, a genetic disease that is known to cause seizures. Many patients fail to respond to currently approved treatments, leaving a high unmet medical need in an indication with a larger patient population than both Dravet syndrome and Lennox-Gastaut syndrome.
Moving forward, there are several catalysts for GW Pharmaceuticals. With the ongoing clinical trial in tuberous sclerosis complex, we can look forward to a data readout relatively soon. The company also has a Marketing Authorization Application in with the European Medicines Agency to bring Epidiolexto patients in Europe.
Nektar Therapeutics (NASDAQ: NKTR)
Nektar Therapeutics NKTR[NGS] – $34.79 is a company that is focused on providing solutions to the opioid epidemic. With more than 2 million addicts and around 48,000 deaths a year attributed to painkiller abuse, there is a race to find a medication that can effectively reduce pain without the threat of addiction.
The company’s flagship candidate, NKTR-181, has the potential to be the solution to fill the unmet medical need. NKTR-181 is an opioid painkiller, but comes with far less addictive potential than traditional opioids.
During a Phase 3 clinical trial, NKTR-181 proved to result in long-lasting pain relief. Interestingly, drug likeability came in near that of the placebo, suggesting that patients did not experience euphoric effects generally associated with commonly used opioids of today.
The company has a New Drug Application with the FDA with a PDUFA date of May 29, 2019. That means that, by the end of this month, Nektar could have a product that provides an answer to the opioid epidemic, giving it a real opportunity to take a large share of a market that is expected to be worth around $30 billion annually by 2026.
Exelixis (NASDAQ: EXEL)
Finally, we have Exelixis EXEL[NGS] – $19.76. The company currently has four approved drugs, including Cabometyx, Cometriq, and Cotellic in the United States. The company also has received approval for a hypertension drug, Minnebro, in Japan.
The most important product for the company is Cabometyx, which is the reason that the stock made this list. During the 2018 year, Exelixis experienced revenue growth of 90%. The vast majority of this growth was driven by momentum in sales of Cabometyx.
Cabometyx is quickly gaining market share in the treatment of advanced renal cell carcinoma, the most common type of kidney cancer. The FDA also approved Cabometyx as an option for previously treated advanced hepatocellular carcinoma (HCC), the most common type of liver cancer. Cabometyx also received approval in Europe for this indication.
While the FDA’s 5-year market exclusivity period for Cabometyx began in 2016, a strong IP portfolio ensures that generic competition is a long way off. In fact, the company has a long line of United States patents, with the last one providing exclusivity through 2033.
With proven commercial abilities, expanded indications, strong growth and recent regulatory approvals, recent gains in Exelixis revenue could prove to be just the beginning. We could see a meaningful increase of value as more evidence of revenue growth is demonstrated.
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