Billionaire George Soros is an iconic figure in the world of investing because of his unique ability to consistently beat the broader markets. As such, the quarterly 13F filings of his namesake fund, Soros Fund Management, are must-read material for any serious investor.
The latest 13F filings for the second-quarter of 2017, for example, reveal that the Soros Fund upped its stake in the antisense drugmaker Ionis Pharmaceuticals (NASDAQ:IONS), and initiated positions in the rare disease specialists Alnylam Pharmaceuticals (NASDAQ:ALNY) and BioMarin Pharmaceutical (NASDAQ:BMRN) over the three-month period. As the Soros Fund Management has a fairly strong track record of picking winning pharmaceutical stocks, I think it's worthwhile to consider if these three mid-cap biotech stocks might be particularly strong buys right now. Let's dig in to find out.
Ionis is improving on all fronts
After a murky period where Ionis' first commercial-stage drug Kynamro failed to live up to expectations and its RNA-targeted therapies appeared to be in deep trouble from a safety standpoint, the company has started to put these issues to rest following the FDA-approval of its spinal muscular atrophy medicine, Spinraza, last December. Developed in conjunction with biotech heavyweight Biogen (NASDAQ:BIIB), Spinraza has gotten off to a blistering start, hauling in a whopping $203 million in sales in the second quarter. Ionis, for its part, netted a healthy $27.6 million in royalties for the three month period from Spinraza as part of its agreement with Biogen.
Ionis, however, is anything but a one trick pony. Its vast antisense drug platform currently sports 37 ongoing clinical candidates, as well as multiple late stage drugs nearing pivotal top line readouts. The drugmaker's wholly owned subsidiary Akcea Therapeutics (NASDAQ:AKCA), for instance, recently filed for approval for the duo's high-value cardiovascular drug candidate, volanesorsen, with the U.S. Food and Drug Administration. Although there are some safety issues revolving around low platelet counts that could delay volanesorsen's approval, Ionis should eventually transform into a multi-product company based on the sheer depth of its pipeline.
Alnylam's moment of truth is close at hand
Like Ionis, Alnylam's development platform uses RNA as its main therapeutic target, allowing it to build out a diverse pipeline of high-value drug candidates. Unfortunately, the similarities don't end there. Alnylam's RNA therapies have also produced some disconcerting side effects that have slowed its progress toward becoming a cash flow positive operation. Earlier this month, for example, the company was forced to halt trials for its experimental hemophilia A and B therapy, fitusiran, due to a patient death, and its former lead product candidate revusiran was derailed as a result of its unappealing risk-to-reward ratio for patients.
The good news is that fitusiran's trials could resume shortly, and the company is racing toward a pivotal stage readout for its lead drug candidate, patisiran, in patients with hereditary ATTR (hATTR) amyloidosis. In fact, investors have been bidding Alnylam's stock up in a big way ahead of this binary event because patisiran could nearly triple the company's revenues next year if approved. Some analysts, though, have been far less bullish on patisiran's commercial potential due to their belief that the drug's late-stage clinical data won't live up to expectations -- especially in light of the company's recent safety woes across its pipeline.
BioMarin's sky-high valuation reflects its deeper value
The orphan drug specialist BioMarin is one of the most expensive mid-cap biotech stocks at the moment -- at least based on standard valuation metrics like price to sales or price to earnings ratios. However, the company's rich price tag shouldn't necessarily be a deal breaker for investors on the hunt for either value or growth opportunities. The reason being is that BioMarin has a strong track record at bringing important new medicines to market for so-called orphan indications -- or diseases with tiny patient populations, and quickly gobbling up market share thereafter.
At present, BioMarin already has six products on the market, and another four candidates currently in late-stage trials. As a result, the drugmaker is on track to grow its top-line by nearly 18% this year, and by another 15% in 2018. BioMarin's late-stage dwarfism candidate, vosoritide, also has the potential to become a true franchise-level drug that could transform this company into a cash cow in the coming decade. Long story short, investors have piled into this stock because of the company's rocketing top-line and outstanding clinical pipeline that offers tremendous levels of deep value.
Are any of these three stocks strong buys right now?
The bottom line is that a lot of things need to go according to plan to justify these lofty valuations across the orphan drug space, and clinical trials rarely progress without a hitch. But if you truly want to own an orphan drug stock, BioMarin is probably your best bet, given the company's track record in the clinic, and host of products already on the market. The RNA drugmakers Alnylam and Ionis, by contrast, are still in prove it mode -- even though the market has largely turned a blind eye to their safety issues. Alnylam and Ionis, after all, both sport valuations that are easily among the highest in all of pharma.
George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alnylam Pharmaceuticals, Biogen, and Ionis Pharmaceuticals. The Motley Fool recommends BioMarin Pharmaceutical. The Motley Fool has a disclosure policy.