It's been a rough year to be a biotech investor. The market-cap-weighted iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) is down about 25% so far this year.
However, if you're looking to buy in July, you'll be happy to learn the industry sell-off hit some companies much harder than it should have. That's created more than a few opportunities for smart investors willing to stick around for the long term.
So we pulled our team of our Motley Fool healthcare contributors in from the beaches to pick their brains about biotech stocks. Here's what they think is a great buy at the moment.
1. Alnylam Pharmaceuticals: Approaching success
Cory Renauer: I think now is a good time to pick up shares of Alnylam Pharmaceuticals (NASDAQ:ALNY). Its market cap of around $4.7 billion recently has been flirting with low points it hasn't seen in a couple of years, while its future looks brighter than ever.
The company finished the first quarter with about $1.2 billion in cash and marketable assets, and it expects to end the year with more than $1 billion. At this pace, it should have enough to see its Sanofi-partnered programs begin contributing significant revenue before it needs to sell more shares, if they're successful.
The partners' transthyretin (TTR) gene mutation-targeted program has two candidates in phase 3 -- patisiran and revusiran, for treatment of nerve and heart damage, respectively. Combined, they could treat a global population of about 50,000 patients who cannot produce properly functioning transthyretin proteins, which leads to a buildup of amyloid fibrils in nerves or the heart.
In May, a competing program from partners Ionis Pharmaceuticals and GlaxoSmithKline faced a massive setback that could boost the chances of a successful commercial launch for patisiran and revusiran. Of course, these drugs need to succeed in phase 3 and earn approval first.
Results from the first of the phase 3 trials won't be ready until the second half of next year, but you won't have to wait that long for hints of potential success. Alnylam intends to present results from phase 2 studies for both drugs at the International Symposium on Amyloidosis in early July.
2. Kite Pharma: CAR-T racer
Cheryl Swanson: The way I see it, the dog days of July may be the perfect time to pick up some shares of super-aggressive Kite Pharma, Inc. (NASDAQ: KITE). Because of its recent actions, the clinical-stage biotech looks set to blow past Novartis AG (NYSE: NVS) and Juno Therapeutics (NASDAQ: JUNO) in the hot race to launch the first CAR-T therapy.
While we're in uncharted territory, and all CAR-T therapies have that huge bridge of FDA approval still to cross, one of the key challenges is manufacturing. To tackle that obstacle, Kite just opened a state-of-the-art T-cell manufacturing facility capable of producing both clinical and commercial product.
Meanwhile, competitor Juno's Bothell, Washington, manufacturing facility can produce only clinical-trial quantities of its product this year. Third-place CAR-T contender Novartis has a facility in New Jersey, but the Big Pharma is well behind clinically, having recently let its timeline slip to 2017 to file for approval. By then, both Kite and Juno hope to have their commercial launches under way.
Many of Kite's CAR-T aspirations are already built into the stock, but it's well off its 52-week high of $89.84, and there's another big revenue opportunity on the way. Even while announcing the new plant, Kite also signed a new pact with the National Cancer Institute for TCR drugs directed against HPV-associated cancers. More than 33,000 cases of HPV cancers are diagnosed annually, and current therapies are mostly unsuccessful, so this is a significant unmet medical need.
Kite says its growing pipeline of TCR drugs will build on the work it's doing with CAR-T in blood cancers. It's working to become a world-class provider of a novel type of cancer therapy to which patients have shown unprecedented response rates. It's a risky bet, but Kite looks to have what it takes to deserve a spot in your biotech portfolio.
3. Neurocrine Biosciences: Multiple shots on goal
Like many clinical-stage biotech stocks, this company's shares have been taken to the woodshed over the past few months. However, unlike many other biotechs, Neurocrine is currently in phase 3 clinical trials with two compounds that target three different indications. That gives investors multiple shots at winning regulatory approval over the coming year, which greatly increases the chances of success.
Its first compound is called elagolix, being developed with the help of pharma giant AbbVie (NYSE: ABBV), which is responsible for all development, marketing, and commercialization costs. Elagolix is being researched as a treatment for endometriosis and uterine fibroids. If it's approved, some analysts believe that peak sales of elagolix could top more than $3 billion, which would entitle Neurocrine to around $750 million in royalties plus hundreds of millions in milestone payments.
Its second investigational drug is called NBI-98854, which is currently in phase 3 trials as a treatment for tardive dyskinesia, a disease of the central nervous system that causes involuntary movements of the extremities. Neurocrine has already announced plans to file a New Drug Application with the FDA this year, putting it on pace for an approval decision in early 2017. Peak sales estimates are currently running around $1 billion for this indication in the U.S. alone, and that number could grow much higher if it's shown to be effective at treating Tourette syndrome, too.
In addition, Neurocrine has more than $381 million in cash on its balance sheet. That treasure chest should help to ensure that the company won't be tapping shareholders for extra cash anytime soon.
Top it all off with shares that are down more than 25% from their 52-week high, and I see plenty of reasons to remain bullish on Neurocrine Biosciences' stock.