Some spinoffs work really well while others don't. So far, Biogen's (BIIB 2.03%) spinoff of Bioverativ (BIVV) at the beginning of the year definitely seems to be working well. Bioverativ stock is up more than 25% year to date, well ahead of Biogen and many other biotech stocks.
Bioverativ's share price has retreated slightly from its high mark, but that doesn't mean the tremendous momentum is over. Here are three reasons why this sizzling-hot biotech stock can go even higher.
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1. Strong growth for Eloctate
Bioverativ makes more than 60% of its total revenue from hemophilia A drug Eloctate. In 2016, Biogen reported sales for the drug totaling $513 million. Based on its first-quarter performance, Eloctate is on pace to generate revenue in 2017 of more than $700 million.
Eloctate faces stiff competition. Several other bigger companies market hemophilia drugs. Shire's (NASDAQ: SHPG) hemophilia franchise, which includes one of the top drugs on the market, Advate, made more than $650 million in sales in the first quarter of this year. However, Bioverativ stated that Eloctate's strong growth is coming primarily from patients on short-acting drugs like Advate switching therapies.
Shire has a long-acting hemophilia drug, Adyvonate, on the market as well. So does Bayer with Kovaltry. But Eloctate is proving to be popular with patients and physicians. While the rate of sales growth for the drug will no doubt taper off somewhat, expect Eloctate's performance to continue driving Bioverativ shares higher.
2. Expansion beyond hemophilia
Even before the spinoff, Biogen was working with Sangamo Biosciences (SGMO 5.44%) on pre-clinical evaluation of gene-editing therapies for treating blood diseases other than hemophilia, specifically beta-thalassemia and sickle cell disease. Bioverativ inherited this collaboration with Sangamo.
Bioverativ clearly intends to move beyond hemophilia in a bigger way. On June 28, the biotech finalized its acquisition of privately held True North Therapeutics. True North's lead candidate, monoclonal antibody TNT009, is being evaluated in a phase 1 clinical study in treating cold agglutinin disease (CAgD). CAgD is an autoimmune blood disease that causes chronic anemia, severe fatigue, and potentially fatal blood clots.
True North was already in the process of planning for a late-stage clinical study of TNT009 that could serve as the basis for a regulatory filing. It will be a few years before Bioverativ will reach that stage. However, picking up TNT009 also could provide additional catalysts that could fuel investors' interest in Bioverativ stock.
3. More favorable political climate
A rising tide lifts all boats. A positive environment for biotech stocks should mean good news for Bioverativ. President Trump's past assertion that drugmakers were "getting away with murder" and his stated intentions to take steps to bring down drug prices cast a dark cloud over the biopharmaceutical industry for several months. That cloud appears to be not as dark now, however.
The Trump administration is reportedly working on an executive order that eases regulatory hurdles for the industry rather than placing restrictions on drug pricing. These reports have been partly behind solid gains for many biotech stocks over the last several weeks.
If the reports prove to be true, biotech stocks -- likely including Bioverativ -- should get a boost. And if the White House is successful in getting its proposed tax reforms enacted, that would probably push stock prices up even more.
Wild card
There's one other potential wild card that could really send Bioverativ stock soaring: The company could find itself an acquisition target. While Bioverativ's therapeutic focus wasn't what Biogen wanted in its portfolio, there are several other larger companies for which Bioverativ would be a great fit.
Buying Bioverativ -- or any other stock, for that matter -- based on the possibility of a buyout isn't really a good idea. However, it's a nice extra perk for investors who like Eloctate's growth prospects, Bioverativ's expansion beyond hemophilia, and opportunities presented from an improving political climate.
