It's stunning just how much healthcare stocks can move in only a matter of five days. For three healthcare stocks, the past week was especially fantastic thanks to major catalysts.
TransEnterix (ASXC -2.18%), uniQure (QURE 1.17%), and Spectrum Pharmaceuticals (SPPI) stocks soared by more than 40% this week, with two of the stocks enjoying much higher gains. Here's why each of these healthcare stocks took off -- and if they're smart picks for investors.
TransEnterix: Rise of a robot
TransEnterix stock skyrocketed more than 130% this week. Earlier in the week, shares of the surgical robotic systems company more than tripled before giving up some of the gains.
All of this exuberance stemmed from the U.S. Food and Drug Administration (FDA) approving 510(k) clearance for the Senhance surgical robotic system. The green light from the Food and Drug Administration (FDA) means that Senhance will become the first entrant to the abdominal surgical-robotics market since Intuitive Surgical (ISRG -0.86%) paved the way in 2000 with its da Vinci system.
Although TransEnterix has won approval in markets outside of the U.S., the path to success has been challenging. The company has sold two Senhance systems so far this year, one in Germany and another in Japan. Marketing approval for the U.S., though, presents TransEnterix with a much greater opportunity.
uniQure: A two-for-one deal
Shares of Dutch drugmaker uniQure zoomed nearly 80% higher this week. Like TransEnterix, uniQure received some great news from the FDA. In uniQure's case, great news also came simultaneously from the European Medicines Agency (EMA).
The two regulatory agencies agreed to allow uniQure to advance gene therapy AMT-061 into a late-stage study. What makes this remarkable is that the therapy hasn't been in any earlier studies. However, a similar gene therapy, AMT-060, is in an ongoing phase 1/2 study. The FDA is allowing AMT-061 to be tested under the same Breakthrough Therapy designation and Investigational New Drug (IND) granted for AMT-060, while the EMA agreed to include AMT-061 under the same PRIME (Priority Medicines) designation as AMT-060.
AMT-060 and AMT-061 are identical in structure except for two nucleotide changes made in AMT-061. Those two nucleotide alterations make AMT-061 more powerful than its predecessor, but otherwise, the therapies should be the same. UniQure now plans to move ahead with the late-stage study in 2018.
Spectrum Pharmaceuticals: Great results
Spectrum Pharmaceuticals stock jumped nearly 45% this week. For Spectrum, the big catalyst didn't come from a regulatory agency, but instead stemmed from presentation of impressive clinical results at a major conference in Japan.
Those results were from interim data for a phase 2 study of poziotinib in treating non-small-cell lung cancer (NSCLC). Although the study is a small one, all 11 patients receiving poziotinib experienced some level of tumor shrinkage. The interim results showed an objective response rate -- proportion of patients with tumor size reduction of a predefined amount -- of 73%.
Rajesh Shrotriya, Spectrum's CEO, said that the company now plans to pursue clinical development of poziotinib "expeditiously and aggressively." That translates to talking with the FDA soon about how to move forward with the drug in a pivotal study.
Are they buys?
Despite good news for all three of these healthcare companies, they all still face considerable risks. The obvious risks for uniQure and Spectrum are that late-stage studies of their respective products might fail. And while TransEnterix is now set to market Senhance in the U.S., selling a brand-new technology isn't always easy. TransEnterix CEO Todd Pope stated recently that the company won't compete head-to-head against Intuitive Surgical, but you can bet Intuitive sees Senhance as a rival to its da Vinci system.
The primary reason that I wouldn't put much money into these stocks at this point, though, is because of the companies' cash positions. TransEnterix only has enough cash and cash equivalents to fund operations for a couple of quarters. UniQure is in a little better shape, but probably can't go longer than four quarters with its current cash stockpile. Spectrum is in a similar position as TransEnterix, with enough cash to go perhaps a couple of quarters.
I think all three of these companies will soon be going to the well to raise cash by issuing more shares. That means dilution of existing shares is likely just around the corner. My view is that holding off on considering these stocks is the prudent move right now.