For some stocks, racking up gains of 28% or more can take a couple of years or more. For others, it takes only a few days.
That's the case for three of the biggest biotech stocks this week. AnaptysBio (ANAB 0.43%), Sorrento Therapeutics (SRNE.Q -4.46%), and Ardelyx (ARDX 3.20%) were huge winners. Here's what happened to light a fire beneath these stocks -- and whether they're buys now.
Shares of AnaptysBio skyrocketed nearly 95% this week, with most of those gains coming on Tuesday. That's when AnaptyisBio announced positive topline proof-of-concept data from a phase 2a clinical study evaluating anti-IL-33 therapeutic antibody ANB020 in treating atopic dermatitis.
So just how good were those results? AnaptyisBio reported that 75% of patients experienced 50% or greater improvement in Eczema Area Severity Index (EASI) scores after just one dose of ANB020 at day 15. EASI is a test used to measure the extent and severity of atopic dermatitis, also known as eczema.
The company will continue to conduct the phase 2a study up to 140 days after treatment with ANB020. AnaptyisBio plans to kick off a larger phase 2b study in the first half of 2018. Results from that study are expected in 2019.
Sorrento Therapeutics stock soared more than 80% this week. The big news for the biotech was... well, actually, there wasn't any big news this week. So why did Sorrento stock take off so much?
Although Sorrento didn't have any news this week, the company did submit a filing to the SEC last week that seems to have made investors happy. Sorrento terminated an agreement for its subsidiary, Scintilla Pharmaceuticals, to buy Semnur Pharmaceuticals. Sorrento announced in August 2016 plans to buy privately held Semnur for $40 million upfront and $20 million in Sorrento stock.
With this deal now scrapped, Sorrento holds on to its cash. At the end of the second quarter, the company had cash, cash equivalents, and marketable securities totaling $54.3 million. The Semnur deal would have meant Sorrento would have probably needed to conduct a public stock offering to raise more cash.
Ardelyx shares jumped 36% this week. Those gains were even higher on Thursday, but investors apparently took some profits to close out the week.
The catalyst for Ardelyx was positive phase 3 results from a study of experimental drug tenapanor in treating irritable bowel syndrome with constipation (IBS-C). Ardelyx reported that a significantly greater proportion of patients taking tenapanor had a 30% or greater reduction in abdominal pain as well as an increase of one or more complete spontaneous bowel movements in the same week for at least six of the 12 weeks of the treatment period.
Ardelyx now plans to submit tenapanor for FDA approval in 2018. If approved, the drug would compete against existing IBS-C drug Linzess.
Are they buys?
All three of these are clinical-stage biotechs. That means they come with a lot more risks than most stocks do. Two of them enjoyed huge boosts because of phase 2 study results. Many drugs that perform well in phase 2 eventually flop in late-stage studies. It's also important to understand that AnaptysBio's positive phase 2a results were based on a grand total of 12 patients.
For both AnaptysBio and Sorrento, caution is warranted for most investors. I'm not saying that neither of these biotechs can't be big winners over the long run; they could. However, it's still too early, in my view, to make a big bet on these stocks.
It's a bit of a different situation for Ardelyx. The company appears to have a pretty good shot at winning FDA approval for tenapanor. Again, though, risks remain. Approval isn't a slam dunk. In addition, there are questions about how well tenapanor will perform commercially going against the much larger sales organization fielded by Allergan.
Of the three big biotech winners this week, Ardelyx is probably the best pick. However, I wouldn't unwaveringly recommend the stock. Uncertainties remain -- and Ardelyx stock could still move lower with the dilution from a recently announced stock offering.