No matter what happens with the stock market in general, you can count on at least a few biotech stocks to generate sizzling returns week after week. This week was no exception, with three hot biotech stocks soaring 24% or more in just a few days.
Voyager Therapeutics (NASDAQ:VYGR), Fate Therapeutics (NASDAQ:FATE), and Odonate Therapeutics (NASDAQ:ODT) ranked as three of the biggest movers this week. What drove these biotech stocks higher -- and are they smart picks for investors now after their tremendous gains?
1. Voyager Therapeutics: It's nice to be wanted
Voyager Therapeutics stood out as the biggest biotech winner of the week, with its shares skyrocketing nearly 50% higher. The company received a huge boost from a huge drugmaker -- AbbVie (NYSE:ABBV).
On Feb. 20, AbbVie and Voyager announced a strategic collaboration to develop treatments for Alzheimer's disease and other neurodegenerative diseases. Under the terms of the deal, Voyager will receive $69 million in up-front payments and the potential for up to $155 million in preclinical and phase 1 milestone payments. Beyond that, AbbVie could also pay Voyager as much as $895 million per vectorized tau antibody if key development and regulatory milestones are reached, plus tiered royalties on any commercial sales.
Voyager currently has one clinical program. VY-AADC received a green light last month from the Food and Drug Administration to advance to a phase 2/3 clinical study targeting treatment of advanced Parkinson's disease. The small biotech also has several preclinical candidates, including a couple for which Sanofi has secured licensing option rights.
The deal with AbbVie seems to be a good fit for both companies. Voyager benefits from the influx of cash. AbbVie gets to supplement its neuroscience pipeline, which includes one experimental Alzheimer's disease drug in phase 2 testing.
2. Fate Therapeutics: Early progress is still progress
Fate Therapeutics stock jumped 45% this week, continuing a six-month streak in which the biotech's market cap has more than tripled. The catalyst for Fate over the past few days was the company's announcement about an early-stage clinical study.
The biotech's lead pipeline candidate is FATE-NK100, a natural killer (NK) cell cancer therapy. On Feb. 20, Fate Therapeutics announced that the first patient had been treated in a phase 1 study combining FATE-NK100 with either Herceptin or Erbitux in treating advanced solid tumors. Both of these other drugs are monoclonal antibody chemotherapies commonly used in cancer treatment.
Why did Fate get such a nice bump on very early news in an early-stage study? Probably because investors are excited about the potential for FATE-NK100. The immunotherapy is also in a couple of other clinical studies targeting treatment of acute myelogenous leukemia and ovarian cancer.
Although it's still early, FATE-NK100 holds considerable promise in treating cancer, especially for patients who have failed monoclonal antibody therapy. The combination of the NK cell cancer therapy with monoclonal antibody drugs could be more effective than single-drug treatments.
3. Odonate Therapeutics: One really optimistic CEO
Odonate Therapeutics stock rose 24% higher this week. But the biotech didn't announce a major partnership like Voyager did, nor did it provide a pipeline update like Fate did. So what caused Odonate stock to zoom higher?
One likely catalyst is increased insider buying of the biotech stock. Odonate CEO Kevin Tang bought nearly $2.9 million worth of the company's shares on Feb. 16, 2018. Tang followed up with another purchase totaling nearly $1.1 million on Feb. 22.
Tang seems to be optimistic about the prospects for Odonate's pipeline candidate, tesetaxel. The chemotherapy is being evaluated in a late-stage clinical study for treatment of metastatic breast cancer. Tesetaxel belongs to a class of drugs known as taxanes, several of which have been approved for treating cancer. However, tesetaxel should be more convenient for patients since it's a pill and doesn't require intravenous administration like currently approved taxanes. This advantage could make the drug a commercial success if eventually approved.
Odonate just started the phase 3 study of tesetaxel in December, so it's too soon to know how well the drug will perform. Initial results from the study probably won't be available until late 2020.
Are they buys?
At this point, Voyager, Fate, and Odonate seem to have promising pipeline candidates. I think it's great that Voyager has attracted the interest of major drugmakers. Fate also has a collaboration with Juno Therapeutics, which is being acquired by Celgene. And it's usually a positive sign for a CEO to pour big bucks into his company's stock as Odonate's Kevin Tang has done.
However, all three of this week's top biotech stocks are still in clinical stage, with no products on the market. For many investors, buying clinical-stage biotech stocks is simply too risky. The odds of failure for drugs in clinical development are pretty high, especially for early-stage candidates.
So while I think there are reasons to be cautiously optimistic about Voyager, Fate, and Odonate, I don't think they're stocks to buy right now for most investors. I'm much more comfortable taking a position in AbbVie, which keeps on giving investors more reason to buy with its increasing dividends and pipeline progress.
A big biotech like AbbVie isn't likely to jump 20% or more in one week like these three stocks just did. But AbbVie has gained more than 20% so far this year and more than 90% over the last 12 months. That's enough soaring to make most investors happy.