The stock market continues to put on a clinic about how to stomp all over expectations. The Dow Jones Industrial Average is up 25% this year and the S&P 500 is 20% higher, but stack them up next to Nektar Therapeutics (NKTR 11.94%), Esperion Therapeutics (ESPR 10.27%), and Sangamo Therapeutics (SGMO 0.89%), and the market index returns look quaint.
Let's look more closely at these three biotechs to see whether there's any more room to run after quadrupling so far in 2017.
Nektar rewards sweet patience
The grounds for Nektar Therapeutics' stratospheric launch, virtually all of which came in November, were set back in July, when pharmaceutical giant Eli Lilly (LLY -0.90%) agreed to collaborate with Nektar Therapeutics on NKTR-358, the biotech's therapy to boost T-cell production as a means of targeting immune system imbalances associated with various autoimmune diseases.
When Nektar reported third-quarter earnings in early November, revenue soared to $152.9 million from $36.3 million a year ago, and it posted net income of $60.9 million, a dramatic U-turn from its net loss of $43.2 million. The reason for both? Recording $127.6 million of a $150 million up-front cash payment from Lilly for the collaboration. Its stock is now up over 325% this year.
Coupled with thus-far positive last-stage clinical results for other therapies and the potential for as much as $250 million more from Lilly for further advances with NKTR-358, Nektar Therapeutics could have a very bright future.
Slow and steady wins the race
Esperion Therapeutics is more like the tortoise to Nektar's hare, steadily climbing in value over the past year or so, though it has yet to regain the heights it hit back in 2015. Yet the biotech, which focuses on developing drugs to combat cardiovascular disease, continues to climb as it notches consistent wins in top-line clinical trial results for its leading therapy, a bempedoic acid/ezetimibe combination pill. With it recently announcing it was initiating a phase 3 study of the pill, Esperion's shares have gained some 370% in 2017.
Favorable results for a a triple combination of bempedoic acid, Zetia, and Lipitor also helped push the biotech higher. In August Esperion reported results from a mid-stage study that saw LDL cholesterol levels fall 64% from baseline levels among patients treated for six weeks with its triple-drug combo, compared with patients given nothing but a placebo.
Esperion is expecting that the FDA will accept a New Drug Application for the treatment based on data from the trials it was conducting, with 2019 as the expected time it will cross the finish line.
Going with what works
The big winner this year has been Sangamo Therapeutics, whose shares have soared 377% so far this year with nearly another month to go, and like Esperion, this biotech has been steadily climbing across 2017. Like both of its peers, Sangamo has benefited greatly from positive clinical results from therapies it has under trial, early stage though they may be.
That's because Sangamo is using an older gene-editing tool, in which one inserts, deletes, or replaces DNA in a cell or organism. Sangamo's tool, called zinc finger nucleases, or ZFN, addresses rare bleeding disorders. While there are other more advanced gene-editing tools out there, Sangamo benefits because it has the most advanced pipeline of any of the biotechs focused on gene editing. Earlier this year, Pfizer (PFE -1.07%) agreed to pay Sangamo $70 million up front for rights to SB-525, a hemophilia candidate that earned a fast-track designation from the FDA.
Outsize stock gains like these inevitably appear in long bull markets, and each of the three biotechs has a lot going for it, but investors would be wise to remember biotech stocks are notoriously volatile. Still, as long as the favorable conditions that have spurred their respective gains remain in place, they could become much bigger companies in the future if a few things continue to go their way.