Biotech stocks were experiencing a downright dismal year. Then came the election surprise. Now, many biotech stocks are enjoying a big rebound. That doesn't mean that there still aren't great buying opportunities, though. Here's why Alexion Pharmaceuticals (ALXN), Juno Therapeutics (JUNO), and Kite Pharma (NASDAQ: KITE) are beaten-down biotech stocks that you can still buy right now.
Waiting for the clouds to clear
Alexion's stock has been absolutely pummeled in 2016, with shares sinking 37% year to date. There have been multiple factors behind this big drop. The most serious related to allegations from a former employee that Alexion used fraudulent sales practices. This led to the biotech delaying its required quarterly filing to the U.S. Securities and Exchange Commission (SEC).
Alexion's board of directors audit and finance committee is conducting an internal investigation into the sales fraud allegations. As of Nov. 9, this committee had not found any red flags, but the investigation is still in progress. Alexion hasn't said when it expects the internal review to wrap up, although the company did announce that it fully intends to be compliant with SEC rules that require it to file its quarterly report by Jan. 17, 2017, or submit a plan to regain compliance.
Once the uncertainty about these allegations is removed, Alexion's stock should rebound nicely. The fundamentals are in place for continued success. Sales for Soliris are growing, with another indication potentially on the way. Alexion also has several promising pipeline candidates. I expect this biotech stock to eventually come back in a major way regardless of what the internal investigation finds.
No holding back now
Shares of Juno Therapeutics have fallen around 30% in 2016. It was much worse, though. Just a few weeks ago, Juno's stock was down nearly 50%. Donald Trump's surprise presidential victory provided a spark for Juno, as it did for many other biotech stocks.
A major reason that Juno's shares had tanked earlier in 2016 stemmed from the U.S. Food and Drug Administration (FDA) placing a clinical hold on the biotech's mid-stage clinical study of JCAR015. However, that clinical hold was lifted in July, allowing Juno to resume enrollment in the study.
The potential for Juno's CD19 program, including JCAR015 and JCAR017, received a huge endorsement earlier this year when Celgene exercised its option to license the candidates outside North America and China. Juno received $50 million in return. Celgene also shares development costs for all candidates in the CD19 program.
If all goes well, Juno could possibly win regulatory approval for JCAR015 as a treatment for adult acute lymphoblastic leukemia and non-Hodgkin lymphoma in the first half of 2018. Should the experimental drug succeed, it could bode well for JCAR017's chances.
Ready to fly high
Kite Pharma's stock was down around 35% in October. Even though the election results kicked off a rebound for Kite, shares are still 13% below the their price at the beginning of 2016, and there should be plenty of opportunity for Kite to fly even higher.
The biotech plans to do a rolling submission for regulatory approval of chimeric antigen receptor (CAR) KTE-C19 in treating aggressive non-Hodgkin lymphoma by the end of this year. Kite expects this rolling submission to be completed by the end of the first quarter of 2017. Assuming no problems arise, KTE-C19 could be approved and launched later next year.
If the CAR candidate gains approval for non-Hodgkin lymphoma, that should be good news for Kite in potentially winning approval for other indications. KTE-C19 is being evaluated in three other clinical studies. One is a phase 2/3 study targeting treatment of mantle cell lymphoma. Results from the phase 2 portion of that study are expected to be announced in 2017. The other two studies are early-stage clinical trials, one for treatment of adult and pediatric acute lymphoblastic leukemia, and the other targeting treatment of diffuse large B-cell lymphoma.
While KTE-C19 is certainly the crown jewel for Kite right now, the biotech's pipeline isn't limited to the CAR therapy. Kite also has three early-stage studies in progress for T-cell receptor candidates. I wouldn't ne surprised if this clinical-stage biotech become an acquisition target next year due to its solid pipeline potential,.
Just because stocks are beaten-down doesn't mean they always rise back up. Investors definitely need to be aware of the risks.
For Alexion, the primary risk is that the investigation into the fraud allegations reveals damaging information that results in restatements of past financial results and legal charges against the biotech. For Juno and Kite, the major risks relate to stumbling in clinical studies and gaining regulatory approval for lead candidates.
However, I like the prospects for all three biotechs. For investors with a long-term perspective who aren't afraid of taking on significant risk, Alexion, Juno, and Kite should be biotech stocks to seriously considering buying while they're still down and out.