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Investors, rejoice: The biotech sector's been on a roll this year, and the Nasdaq Biotechnology Index hit an all-time high this week, with gains of 0.8% over the past five days. The index has gained more than 47% year to date, outstanding jumps that have far surpassed many leading indices and proved biotech's value to portfolios everywhere in 2013.
But a handful of select biotech stars made waves this week for their big gains. Here are three names you need to know -- and how they shook the markets over the past five days.
BioMarin's buyout that wasn't
BioMarin (NASDAQ: BMRN ) remains on buyout watch despite Roche's (NASDAQOTH: RHHBY ) denial that it's considering an acquisition of the company. BioMarin's shares have surged by 48% year to date, but the stock hit a particular high on Thursday on the Roche rumor before giving back its gains when Roche denied that it was bidding for the acquisition.
The company does have some attractive drug candidates for Big Pharma firms looking to restock their pipelines. BioMarin's Vimizim, a treatment for Morquio A syndrome (also known as MPS IVA), will be ruled on by the FDA in late February of next year. Europe's also reviewing Vimizim, and analysts have pegged peak sales of the drug at between $500 million and $600 million.
Roche could use those sales, but one thing's holding the Big Pharma giant back from taking this acquisition seriously: the price. BioMarin might have plenty to offer, but with a market cap of more than $10 billion, it'll be a pricey call for Roche. The $15 billion deal for BioMarin that Roche denied putting together would require the company to raise cash to afford it. Roche has denied the need to raise cash in the aftermath of the rumor, so expect this pharma giant to pursue less costly acquisitions if it does join the buyout game. For BioMarin, however, even a non-deal from Roche wasn't bad for investors, who thrived on the stock's jump this week, and analysts have given high marks to the company's pipeline, a great indication for the stock's long-term future.
Surging NPS Pharmaceuticals (UNKNOWN: NPSP.DL ) posted another strong week over the past five days, as this star stock in 2013 rose 11.4% since Monday's open. NPS has garnered praise from across Wall Street with the early success of short bowel syndrome drug Gattex, and promising hypoparathyroidism drug Natpara is on the way, with the company expected to file for regulatory approval this year. Natpara isn't expected to hit the potential blockbuster status that Gattex could reach, but the drug's an important cog in NPS's rise from unheralded biotech underdog to toast of the town this year.
NPS received another boost when J.P. Morgan initiated coverage of the stock at "Overweight," predicting more good things to come from this big riser. NPS's shares have blown up this year, rising more than 230% year to date, making investors wary about more gains to come. However, if Gattex can continue on its upward trajectory and Natpara moves ahead in the regulatory process, there's no reason to think the good times are over for this high-flying stock.
Sarepta Therapeutics (NASDAQ: SRPT ) received one of the biggest bounces in biotech this week. The stock jumped more than 16% over the past five days. Sarepta's developing eteplirsen, a drug for treating Duchenne muscular dystrophy, and a competing drug from Prosena Holding and GlaxoSmithKline (NYSE: GSK ) failed to meet the primary endpoints of a phase 3 trial this past week. Glaxo and Prosena's drug, drisapersen, failed to show a noticeable difference in motor function between the placebo group and the treatment group, and Prosena's shares tanked. It wasn't much better of a verdict for Glaxo, either, which scored the worldwide exclusive rights to market the drug, which obtained orphan drug status. Considering Glaxo's ongoing concerns in China that could threaten the company's sales, this was another unneeded headache for investors who watched the stock fall 2.5% over the past week.
For Sarepta, however, the drug's failure meant a much easier path forward for eteplirsen. Fellow analyst Keith Speights does show that eteplirsen works in a similar way as drisapersen, however, so an FDA victory for the drug and for Sarepta is nowhere near a forgone conclusion despite the competition removed from the picture. Investors should approach this stock's gain with a cautious hand.
Investors' long-term answers
Sarepta's big gains this week are only a tiny portion of the huge gains biotech stocks have won investors this year. However, if you're looking to maximize your portfolio's potential, the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.