Some of the biggest moves week in and week out come from biotech stocks. Whether it's a financial surprise, a positive clinical-trial update, regulatory approval, or even just rumors of potentially good news, biotech stocks can rise quickly.
Three biotech stocks did just that this past week, with gains of 18% to nearly 40%. Nektar Therapeutics (NASDAQ:NKTR), Wave Life Sciences (NASDAQ:WVE), and Savara soared over the past few days. Here's what lit a fire beneath these biotech stocks -- and whether they're buys after their huge gains.
A week ago, Nektar Therapeutics ranked as one of the biggest biotech winners of the week, with its stock jumping more than 40%. Nektar repeated its fantastic performance this past week, again posting a gain of almost 40%.
Nektar had two catalysts a week ago, with solid third-quarter financial results and the announcement of plans to submit experimental pain drug NKTR-181 for U.S. approval by April 2018. NKTR-181 is a mu-opioid agonist that provides pain relief with significantly lower risk of addiction than traditional opioid drugs.
The good news for Nektar this past week stemmed from the first presentation of data on Nov. 11 from a phase 1/2 study evaluating a combination of Bristol-Myers Squibb's (NYSE:BMY) Opdivo with Nektar's immuno-oncology candidate NKTR-214 in treating melanoma, renal cell carcinoma and non-small-cell lung cancer. Although it's still early, the results for the Opdivo/NKTR-214 combo were encouraging.
Wave Life Sciences
Wave Life Sciences stock gained more than 38% this past week. However, the biotech didn't announce anything new over the past few days. What caused Wave stock to take off?
The company began to experience some positive momentum after providing its third-quarter update. Wave's financial results included a loss of over $26 million. However, investors were far more interested in the company's initiation of a clinical trial for experimental Duchenne muscular dystrophy (DMD) drug WVE-210201 and its overall pipeline progress.
Wave has two phase 1/2 clinical studies under way evaluating its experimental Huntington's disease drugs WVE-120101 and WVE-120102. The biotech expects to report top-line data from these studies in the first half of 2019. Wave is also partnering with Pfizer to develop genetically targeted therapies for treating metabolic diseases, including nonalcoholic steatohepatitis (NASH).
Over the past week, Savara's share price has soared nearly 18%. The pharma company's CEO, Rob Neville, presented at the Jefferies healthcare conference in London on Thursday, but Savara stock's jump began before then.
As was the case with Wave Life Sciences, Savara's catalyst appears to be its third-quarter update provided more than a week ago. And like Wave, it wasn't Savara's financial numbers that mattered. The company said that enrollment is going well for its late-stage study of experimental drug Molgradex in treating rare lung disease pulmonary alveolar proteinosis. Enrollment is expected to wrap up in the first quarter of 2018, with top-line data anticipated by the end of next year.
Savara also announced that it plans to start a phase 2a study of Mogradex in treating nontuberculous mycobacteria (NTM) in early 2018. In addition, the company expects results from its phase 2 study evaluating inhaled sodium nitrite in heart failure with preserved ejection fraction in the first half of next year.
Are they buys?
In October, I wrote about seven essential rules for investing in biotech stocks. No. 1 was being aware of the stage of the company. While Nektar has products on the market, both Wave Life Sciences and Savara are clinical-stage drugmakers. That makes their risk levels much higher. In my view, Wave and Savara remain speculative plays at this point and probably aren't suited for most investors.
What about Nektar? I'd point out my No. 7 rule: Check out the financials. Nektar is still losing a lot of money, even though its revenue is growing. The company has a market cap of over $7 billion, with sales probably on track to total close to $300 million this year. Clearly, high expectations for growth are baked into Nektar's stock price.
I think Nektar has a pretty good chance of winning approval for NKTR-181. The potential for NKTR-214 in combination with Opdivo is encouraging. Bristol-Myers Squibb, or another big pharma company, might even view Nektar as an acquisition opportunity. However, in my view, there are other biotech stocks that look better than Nektar -- and certainly better than Wave and Savara.