5 Favorites for Biotech Stock Buyers
For those with a long-term horizon, here are some top picks.
Market volatility has risen sharply as investors react to short-term geopolitical news. In the biotech sector, however, investment experts tend to remain focused on long-term developments such as clinical drug trials. For those with a long-term horizon, here are some favorites from MoneyShow.com contributors.
Dr. Joe Duarte, In the Money Options
AstraZeneca (AZN) , an old school pharmaceutical stock whose most recent glory days were in the 1980s and 1990s, has been stealthily transforming into a biotech cancer powerhouse, while improving on its diabetes and cardiovascular franchises.
The company has been slowly building quite a cancer pipeline under the radar, especially in the area of difficult to treat advanced lung and prostate cancers. Moreover, the cancer drugs are starting to pay off, both in patient results, and on the firm’s top and bottom lines.
In fact, the company recently announced significant successes in late-stage clinical trials for Tagrisso in lung cancer and Lynparza in late-stage prostate cancer, which led to a chart breakout for the stock.
If these trials lead to FDA approvals, they will likely increase the company’s already growing marketplace footprint for its oncology division, which had $4 billion worth of sales in the first half of the company’s current fiscal year.
Meanwhile, the company is expecting big things, having signaled very positive guidance numbers for the second half of the year, powered by its new medicines along with rising pipeline expectations.
Furthermore, aside from a very positive and evolving story plus a great price chart, the internal technicals for the stock are very encouraging, as the stock is nearing a breakout of its On Balance Volume just as its Accumulation Distribution is starting to turn up.
These are both signs that money is moving into the shares. Moreover, as long as the stock can stay above $43 it has the potential to move the mid-$50s over the next six months barring a general market meltdown. Finally, the company just declared a $0.90 per share dividend. Overall, AstraZeneca is a dramatic turnaround story that I believe is in the early stages of a long-term advance.
Tom Bishop, BI Research
Aurinia Pharmaceuticals (AUPH) is a clinical-stage biopharmaceutical company focused on developing and commercializing therapies to treat targeted patient populations that are suffering from serious diseases with a high unmet need.
The company is currently developing voclosporin, an investigational drug, for the potential treatment of lupus nephritis, FSGS and dry eye syndrome. Aurinia has shifted from an early-stage company with one program to a late stage clinical company with multiple programs.
In terms of an update of the three ongoing clinical trials: Aurinia wrapped up enrollment of its pivotal Phase 3 lupus nephritis clinical trial back in September, earlier than expected, and also over-enrolled due to tremendous interest inasmuch as there is no FDA approved therapy today.
Given this is a 52-week trial, preliminary results are due by the end of 2019. If positive, and based on Phase 2 it should be, this will result in a regulatory filing for voclosporin (which has fast track designation) by the second quarter of 2020.
Management believes the efficacy and safety data supporting this drug to be substantial. If approved, voclosporin will be the first FDA approved therapy for the treatment of lupus nephritis.
Meanwhile, a successful Phase 2 trial for voclosporin demonstrated significant efficacy and superiority (and faster onset of relief) over industry leader Restasis, which is a very exciting development. Aurinia is still finalizing its plans to initiate a Phase 2b/3 clinical study in late 2019.
Aurinia is not an ocular company, so once they have definitive data it would ultimately out-license or sell the rights to voclosporin — or be acquired. The company is well set financially to fund its trials and submit an NDA for lupus nephritis and generally fund itself into 2020.
While there are never any guarantees I think the stars are aligning nicely here and I have a good feeling about this one. The current doldrums continue to afford a great buying opportunity.
David Fried, The Buyback Letter
Weston, Mass., biotech company Biogen Idec Inc. (BIIB) has been known for selling drugs and therapies to combat many degenerative nerve diseases, blood conditions and autoimmune diseases. It was founded by Nobel Prize winners in 1978 as one of the first global biotech companies.
The company has been innovative in its research to try to defeat neurological diseases like multiple sclerosis, Alzheimer’s disease, Parkinson’s disease and amyotrophic lateral sclerosis (ALS, aka Lou Gehrig’s disease). It has also entered the arms race in gene therapy, a promising therapeutic approach that corrects disease-causing genetic errors.
Earlier this year Biogen acquired Nightstar Therapeutics for $800 million. Nightstar is a clinical-stage gene therapy company focused on treatments for inherited retinal disorders. The purchase was part of a gene therapy acquisition trend among the world’s largest pharmaceutical companies.
The companies want not only to sell the corrective gene therapies, but also acquire gene therapy manufacturing expertise. Successful results in clinical trials won’t matter if a company doesn’t have a manufacturing process able to produce usable drug products.
Biogen had a rough start to the year partly due to the failure of the Alzheimer’s project aducanumab. At two late-stage trials it became clear that the monoclonal antibody, which Biogen believed would clear amyloid lesions, could not prevent the disease.
However, Biogen is not giving up on Alzheimer’s. It continues to partner with Japanese pharmaceutical company Eisai on several treatments that are in late-stage trial.
Biogen still has many ongoing medical trials. It is presently developing its next MS medicine Vumerity, whose approval might happen later this year. And there are in-the-pipeline investigations for inherited disease of the eye, pain management, and cardiovascular disease. In the last 12 months, management has reduced shares outstanding by 8.1%.
Crista Huff, Cabot Undervalued Stocks Advisor
Alexion Pharmaceuticals (ALXN) recently reported second-quarter EPS that were above the wide range of analysts’ estimates. Revenue of $1.20 billion beat the consensus estimate of $1.17 billion.
CEO Ludwig Hantson commented, “We are well positioned to continue our momentum in the second half of 2019, strengthening our four durable franchises in hematology and nephrology, neurology, metabolics and FcRn, advancing and expanding our pipeline, and serving more people living with rare diseases than ever before.”
The company raised full-year forecasts vs. previous guidance, reflecting higher revenues, lower R&D costs, higher operating margins and significantly higher EPS. Using the midpoint of Alexion’s new full-year 2019 EPS guidance, investors can now expect 23% EPS growth.
Wall Street is going cautious on the shares, pending September patent hearings in Europe. The concern seems to be overblown, especially considering the extremely successful ongoing business at Alexion.
Several investment firms lowered their price targets to a range of $150-$172. The two private reports that I read were bullish, with price targets of $169 and $177. Risk-tolerant growth investors should recognize the extreme disparity between the current price and the target prices. I rate the stock a strong buy.
John McCamant, Medical Technology Stock Letter
In a major coup for Ziopharm Oncology (ZIOP) , the company has attracted the services of Drew Deniger, Ph.D., from the National Cancer Institute (NCI) to lead the company’s program to genetically modify T-cells to express neoantigen-specific T-cell receptors (TCRs), effective July 29, 2019.
Since 2013, Dr. Deniger has worked at the NCI under Dr. Steven Rosenberg where he has served as Lead Investigator for the group’s efforts in three initiatives: Identifying “hotspot” neoantigens for T-cell therapy; targeting neoantigens in metastatic endometrial and ovarian cancers; and non-viral gene therapy using the Sleeping Beauty platform to generate TCR-modified T cells targeting neoantigens.
The company is clearly gaining momentum in their TCR program as it was just last month when announced that the investigational new drug (IND) application submitted by the NCI had received FDA clearance for a clinical trial in solid tumors to evaluate TCR-T utilizing Ziopharm’s Sleeping Beauty platform.
With this approach, T cells can be genetically modified to express multiple, neoantigen-specific TCRs, which Ziopharm believes will be foundational technology to successfully targeting and treating metastatic solid tumors. ZIOP and the NCI are partnered through January 2022 in a cooperative research and development agreement.
We expect the first NCI clinical trial using TCRs to be announced shortly, in days or weeks, with more to follow in the coming months as the platform may be able to treat many different types of solid tumors. Dr. Deniger will now lead ZIOP’s exciting technology platform from the preclinical stage into human clinical development.
In addition, the company has attracted Sath Shukla, a “big league” CFO with 20 years of strategic corporate and financial leadership experience. Shukla didn’t waste any time raising money as he immediately worked with a group of Ziopharm shareholders who exercised their existing warrants to purchase common stock.
This resulted in gross proceeds of approximately $45 million. The additional capital will be sufficient to fund operations into 2021 and provide visibility into important clinical data. In our view, this positions the company to deliver proof-of-concept milestones for the TCR-T, CAR-T and Controlled IL-12 programs before they raise cash again.
We rate the stock a buy under $5 with a target price of $12.