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3 Biotech Stocks That Soared This Week: Are They Buys?

By Keith Speights - Dec 30, 2017 at 10:37AM

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2017 ended with a bang for these biotech stocks. But can their momentum continue into the new year?

Call it a grand finale. 

Three biotech stocks saved their best for the last. In the final week of 2017, Ampio Pharmaceuticals (AMPE -6.20%), Insys Therapeutics (INSY), and Fate Therapeutics (FATE 0.00%) saw their share prices soar by 20% or more. 

But what drove these biotech stocks higher? And are they still buys after the nice runs at the end of the year? Here's what you need to know about Ampio, Insys, and Fate.

Businessman with wings drawn on him next to line going up

Image source: Getty Images.

Ampio Pharmaceuticals: Just what investors knee-ded 

Ampio Pharmaceuticals stock skyrocketed 47% over the last week. This increase capped off a remarkable 357% gain in 2017, with most of the stock's increase occurring in December. What's behind Ampio's tremendous performance? Great news from a late-stage study of the company's lead candidate Ampion in treating severe osteoarthritis of the knee.

On Dec. 14, Ampio announced that Ampion met the primary and secondary endpoints in a phase 3 clinical trial. The company reported that 71% of patients taking the drug met the OMERACT-OARSI responder criteria, which assesses three core symptoms of osteoarthritis of the knee (pain, function, and patient's global assessment) as a single variable. In addition, patients receiving Ampion achieved statistically significant improvement in a composite endpoint of pain and function, as well as an increase in quality of life as measured by a patient global assessment. 

These positive results were enough to send Ampio stock much higher immediately after the announcement, with the momentum continuing into the past week. The company's next steps are to present a more detailed analysis of the late-stage study results and submit Ampion for U.S. regulatory approval.

Insys Therapeutics: On the fast track now

Insys Therapeutics stock vaulted nearly 37% higher this week. It's been a huge comeback for the biotech. Insys stock was down more than 40% year to date at the beginning of December. Thanks to recent gains, Insys' share price actually finished up more than 4% for 2017.

The big news this week came from Insys' announcement that the U.S. Food and Drug Administration (FDA) had granted Fast Track designation to the company's cannabidiol (CBD) oral solution for treating rare genetic disorder Prader-Willi syndrome. But Insys is still in pre-clinical testing for its CBD product in the indication, with the company planning to begin an early stage study toward the end of the first quarter of 2018. I suspect there's more to the story for the biotech's big gains.

Insys has endured a lot of bad news in 2017. However, there's been nothing but good news for the company in the month of December. The FDA accepted Insys' New Drug Application (NDA) for buprenorphine sublingual spray on Dec. 6. Insys also initiated two studies in recent weeks -- a phase 1 clinical trial of epinephrine nasal spray for anaphylaxis and a phase 2 study of its CBD oral solution in treating refractory childhood absence epilepsy in pediatric patients. My view is that the string of good news is having a cumulative effect on restoring some level of confidence in Insys stock among investors.

Fate Therapeutics: A solution for dilution?

Fate Therapeutics stock jumped nearly 21% higher this week. What was the major announcement from Fate over the last five days? There wasn't one. In fact, the latest news release from the company came on Dec. 15 -- and it related to Fate's completion of a stock offering in which more than 1.4 million new shares were issued. 

For most stocks, the dilution from secondary stock offerings causes the share price to drop. That wasn't the case for Fate Therapeutics, though. Did the biopharmaceutical company discover a solution for dilution? Maybe so. The trick appears to be to have such good news that investors don't worry much about dilution from stock offerings.

In Fate's case, that good news stemmed from earlier this month. On Dec. 6, the company announced a collaboration with the University of California San Diego to develop chimeric antigen receptor (CAR)-targeted natural killer (NK) cell cancer immunotherapies. Two days later, Fate reported that the first patient had been dosed in an early-stage study of its donor-derived adaptive memory NK cell cancer therapy in treating ovarian cancer. On Dec. 9, the company announced a breakthrough in the generation of CAR-targeted T cells from a clonal engineered master pluripotent cell line (MPCL). Two days after that, Fate reported good news from a phase 2 study of its next-generation hematopoietic cell graft for patients with hematologic malignancies. 

Are they buys?

These stocks ended 2017 on a high note, but can the good times keep rolling? Maybe, but there could be some clouds ahead for at least one of them.

Ampio hopes to win FDA approval for Ampion in the not-too-distant future based on the drug's positive phase 3 results. However, assuming the drug does win approval, the product launch won't be cheap -- and Ampio only has around $1.8 million in cash and cash equivalents. Expect a stock offering to raise cash. And, despite Fate Therapeutics stock's rise in spite of a stock offering, I suspect the dilution will hurt Ampio.

Mark me as a definite maybe on Fate's chances in 2018. The biotech is certainly in a hot area with its focus on CAR cancer therapies. But its candidates are also still in relatively early development. A lot could still go wrong. 

That leaves Insys Therapeutics. I view Insys as one of the best marijuana biotech stocks for 2018. I expected a big rebound for the stock next year -- and it appears one is already under way. A little good news for the company's opioid painkiller Subsys and some sales momentum for cannabinoid drug Syndros could send Insys stock much higher in 2018.

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Stocks Mentioned

INSYS Therapeutics Stock Quote
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Ampio Pharmaceuticals, Inc.
$0.17 (-6.20%) $0.01
Fate Therapeutics, Inc. Stock Quote
Fate Therapeutics, Inc.
$24.88 (0.00%) $0.00

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