Biotech Stocks: What to Watch in 2017

This year has been a little rocky for biotech stocks. In fact, it's on pace to be the first decline for the sector in quite a few years. But despite this year's decline for the sector, there are plenty of individual biotech stocks with potential catalysts to help them rocket higher in 2017.

Data source: Google Finance.

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Expanding possibilities

A few cancer focused biotechs with drugs on the market, Seattle Genetics, Exelixis, and Clovis Oncology, are looking to expand sales by getting their drugs approved for different patient populations.

Seattle Genetics' Adcetris produced sales of $195 million in the U.S. and Canada through the first nine months of 2016, but that could pale in comparison to future sales if the biotech can expand the market for Adcetris by getting it approved for other indications. In the first half of 2017, Seattle Genetics plans to ask the Food and Drug Administration for approval to treat patients with cutaneous T-cell lymphoma, which should provide a small bump in sales.

And then later in the year, a phase 3 trial called ECHELON-1 in patients with newly diagnosed Hodgkin lymphoma will read out. Seattle Genetics hasn't given any time frame beyond "during 2017," but considering the previous guidance was for the "2017 to mid-2018 timenframe," investors should probably expect the data in the latter half of the year. It's also possible investors might get data from another Adcetris phase 3 trial called ECHELON-2 in newly diagnosed patients with mature T-cell lymphomas, although the data may not be available until 2018.

Exelixis' Cabometyx was approved earlier this year to treat kidney cancer, but the biotech could expand sales of the drug if a phase 3 clinical trial, CELESTIAL, testing Cabometyx in patients with a form of liver cancer, shows the drug keeps patients alive longer than a placebo. CELESTIAL is scheduled to read out "in the 2017 time frame."

Exelixis also has the potential to expand sales in kidney cancer patients next year. Cabometyx is only approved as a second-line treatment, but has positive data showing the drug works better than Pfizer's Sutent, the drug that's currently used first to treat kidney cancer patients. Exelixis is currently working on the application, so depending on the timing of submission and whether it's given a priority review, the FDA may make its decision about expanding into first-line kidney cancer next year.

Clovis Oncology gained FDA approval for Rubraca last week, but the drug is only indicated for advanced ovarian cancer patients who have been treated with two or more chemotherapies. Going after patients with few other options is a good way for a company to get on the market quickly -- Rubraca was approved based on phase 2 data -- but it limits the market size.

To expand the potential market, Clovis had already started a phase 3 trial called ARIEL3 that is testing Rubraca as a maintenance therapy, which will read out in the second half of 2017. Rather than being given after a patient has failed a therapy, in the AREIL3 trial, Rubraca is given after a patient responds to therapy to try and extend the response. Treating patients earlier will increase the number of eligible patients and potentially increase the time those patients take the drug relative to those that have already relapsed.

First approval?

Kite is currently using the rolling submission process that's available for diseases with high unmet needs to submit its application for axicabtagene ciloleucel, which used to go by the code name KTE-C19. The treatment is Kite's first immunotherapy that uses a new technology called chimeric antigen receptor (CAR) in which a patient's T cells are pulled out, trained to attack a tumor cell -- in this case, cells expressing CD19 -- and then put back into the patient.

In the phase 2 ZUMA-1 trial, axicabtagene ciloleucel produced a 76% response rate in patients with diffuse large B-cell lymphoma with 47% of the patients exhibiting a complete response and the remainder a partial response. The trial also enrolled some patients with primary mediastinal B-cell lymphoma or transformed follicular lymphoma, which had a combined response rate of 91% with 73% of patients experiencing a complete response. The trial didn't have an active comparator, but considering these are patients with few other options, the high response rates are outstanding.

Kite expects to complete its submission by the end of the first quarter of next year, and assuming it's given a priority review, axicabtagene ciloleucel should be approved by the end of the year.