It's been a good year for biotech stocks, the iShares Nasdaq Biotechnology index has risen about 26% this year but a handful of companies make the industry tracking index's success seem trivial. Investors that began the year with shares of Kite Pharma Inc. (NASDAQ:KITE), Sangamo Therapeutics Inc. (NASDAQ:SGMO), and Dynavax Technologies Corporation (NASDAQ:DVAX) have already seen the size of their positions quadruple or better in 2017, and they're wondering if there might be further gains ahead.
None of these clinical-stage biotechs have an approved product to sell yet, but that could change soon. Let's look at what's driven these stocks through the roof this year to see if we can expect more gains ahead.
If you're keeping score, you'll notice Kite Pharma's gain is just a hair under 300% this year. Unlike the other stocks on this chart, this one is almost certain to leave investors with a fourfold gain by year's end. Last month this developer of cell-based cancer therapies agreed to be bought by Gilead Sciences for $180 per share in an all cash deal expected to complete before the end of the year.
Although Kite stock probably won't tick over the proposed purchase price, there could be more gains ahead for the biotech giant that is soon to become its new owner. A single infusion of Kite's lead candidate, axi-cel, has been shown capable of driving aggressive lymphomas into complete remission for patients that had exhausted all available treatment options.
Axi-cel is under FDA review at the moment, and it's not the only reason Gilead snapped up Kite Pharma. Reprogramming patient immune cells to attack cancer is expected to play an important role in the years ahead. Gilead's new position as a leader in this field could make it one of tomorrow's best-performing biotech stocks.
While gene editing start-ups employing CRISPR to target specific sections of DNA were grabbing headlines, this pioneer of an older method that employs zinc-finger nucleases was quietly advancing a candidate to address rare bleeding disorders. The stock shot up in May after Pfizer agreed to pay $70 million upfront for rights to SB-525, a hemophilia candidate that earned a fast-track designation from the FDA which could lead to a speedy review if larger studies are successful enough to support an application.
Sangamo remains entitled to a double-digit royalty percentage on potential sales, and another $300 million in various payments that trigger if SB-525 passes specified milestones. Perhaps the most important milestone will be a success in a phase 1/2 study that dosed the first of up to 20 patients in August. If the results are positive enough to persuade Pfizer to commit to a larger phase 3 study, this stock could continue soaring.
Finalizing key details
Dynavax Technologies stock shot up this year after an FDA advisory committee breathed life into its troubled lead program, Heplisav-B. This experimental hepatitis B vaccine works with just two injections spaced out over one month. An estimated 850,000 Americans are infected with the virus, but a majority of adults never complete available vaccination regimens that require three doses over about six months.
If approved, Heplisav B could generate around $700 million in sales each year, but the stock had been depressed going into an independent advisory committee meeting this summer. The FDA wanted to know what other physicians thought about five out of 4,425 patients given Heplisav-B that suffered a pulmonary embolism during a 52-week observation period.
A 12-to-1 vote to recommend approval in spite of safety concerns set Dynavax stock on fire, and it could go even higher from here. According to the company, the FDA pushed back an action date it had set for last month in order to finalize key details concerning a long-term post-marketing study to address previously observed safety issues.
Communications with the FDA aren't subject to full disclosure, but it's hard to imagine the Agency hammering out post-marketing study details for a vaccine it doesn't intend to approve. If previously observed safety issues eventually fade, a successful launch for Heplisav-B could drive this stock much higher over the long run.
Each of these three biotechs has a lot going for them, but I'd say Dynavax has the best chance to deliver further gains from present levels. At recent prices, the company's market cap of just $1.08 billion doesn't appear to have much success for Heplisav-B priced in yet.