Drug development moves quickly and perhaps, no industry suffers as spectacular of pops and drops as biotech. Clinical trial successes and failures can make biotech investing risky or rewarding, depending on the outcome, so it pays to know as much as you can before investing in these stocks. With that in mind, I went hunting for lesser-known biotech companies that are soaring higher and discovered Ascendis Pharma AS (ASND -1.66%), AnaptysBio (ANAB -2.62%), and Global Blood Therapeutics (GBT). Are these stocks right for your portfolio?
Building a better drug
Drug development is global, but often, U.S. investors ignore foreign drug developers. Perhaps that's one reason Ascendis Pharma isn't very well known despite its $2.8 billion market cap.
IMAGE SOURCE: GETTY IMAGES.
The company has delivered investors handsome returns this past year ahead of pivotal trial data for its TransCon Growth Hormone (hGH) for pediatric growth hormone deficiency. One of two phase 3 studies is fully enrolled, with data expected early next year, and a second trial is expected to complete enrollment later this year.
Ascendis Pharma's TransCon technology delivers parent drugs to patients over time to boost efficacy and reduce patient burden, and in the case of hGH, TransCon slow release allows for once-weekly dosing, rather than the current standard daily dosing.
This longer-lasting formulation could be important, because poor adherence to daily dosing can crimp patient growth rates and reduce their quality of life.
Of course, it's anyone's guess how Ascendis' phase 3 data will read out, but based on phase 2 results, Ascendis' TransCon approach does appear to match up well against Pfizer's Genotropin, a leading pediatric hGH. That's significant, because Genotropin's sales were $532 million in 2017.
Across all indications, Ascendis Pharma pegs the global hGH market at about $3.5 billion annually. Growth hormone deficiency represents about 50% of sales, and pediatric use accounts for about 90% of sales. Therefore, if Ascendis Pharma's phase 3 trials succeed, there's reason to think it could wind up with a nine-figure drug on its hands.
A phase 3 success in hGH could validate its TransCon technology in other indications. The company's already conducted early stage trials in hypoparathyroidism (PTH), a $2 billion market, and based on results so far, a phase 3 trial in PTH is planned to begin in Q1 2019.
Ascendis Pharma is far from a risk-free stock, though. Previously, Pfizer and Opko Health's long-lasting formulation of hGH was a failure in phase 3 trials, and there's no guarantee Ascendis Pharma won't suffer a similar fate.
Nevertheless, reformulating drugs to make them better could be a less risky approach than developing new drugs from scratch, and courtesy of a $211 million equity offering in February, the company has deep enough pockets to make it a stock worth watching.
Targeting inflammatory diseases
A lot of investors focus their attention on cancer drug development, but it could pay off to keep an eye on clinical-stage companies that are developing drugs targeting multibillion-dollar autoimmune-disease indications, too, such as AnaptysBio.
AnaptysBio is working on ANB020, an antibody drug targeting atopic dermatitis, or eczema. Last fall, management reported phase 2a results showing that after a single dose of ANB020, 75% of patients achieved an Eczema Area Severity Index score improvement of 50% at day 57. The company plans to enroll a phase 2b trial this year, and data from it should be available in 2019.
In the meantime, the company still has two big catalysts on deck in 2018. First, top-line data from a phase 2a trial in severe adult peanut allergy is expected in Q1 2018, and results from a severe adult eosinophilic asthma patient trial should be reported in Q2 2018. If those trials are a success, it could add conviction to the thinking that ANB020 has blockbuster potential.
In addition to ANB020, it may be encouraging to know that Celgene is developing a PD-1 agonist in psoriasis that AnaptysBio discovered, and Tesaro's working on multiple cancer antibodies it discovered, too. In those collaborations, AnaptysBio could collect milestone payments and single-digit royalties if those therapies end up being commercialized someday.
Finally, AnaptysBio's balance sheet's in good order. Last year, management raised $293 million through stock offerings, and as of Dec. 31, it had $324 million in cash on its balance sheet. That's enough money to get it through 2019, according to management.
Betting on a breakthrough
A chronic disease that can starve vital organs of blood and cause stroke, sickle cell disease (SCD) remains a life-threatening condition for millions of people worldwide, including up to 100,000 Americans and 60,000 Europeans. SCD patients can suffer multi-organ damage and a decrease in life expectancy of 25 to 30 years. Currently, treatment options are limited and costly, averaging over $200,000 per year for adults with the most common genotype of SCD.
Global Blood Therapeutics wants to change that. It's developing voxelotor, an oral, once-daily SCD therapy that helps hemoglobin, the molecules inside red blood cells, hold more oxygen so that red blood cells will hold their normal shape and stop sickling. Currently, the company's conducting a two-part phase 3 study. Results from part A of that study are expected soon, and results from part B are anticipated in the first half of 2019.
Until results are available from its phase 3 trial, investors will have to focus on voxelotor's phase 2a trial data. In December, management presented data showing voxelotor boosted hemoglobin levels and improved clinical measures of hemolysis at 16 weeks from baseline in adolescents who were also receiving hydroxyurea, a common treatment. Six of 11 patients achieved a hemoglobin response greater than 1 g/dL with a median change of 1.1 g/dL. Total symptom scores also improved in 10 of 12 patients, and the safety profile was solid, with no serious adverse events observed. Based on those results, the FDA granted voxelotor fast-track and orphan-drug designations for use in SCD in January.
Similar to these other companies, Global Blood Therapeutics is making the most of its recent soaring share price, too. A stock offering late last year boosted its cash stockpile to $329 million on Dec. 31, and an offering earlier this month added another $248.4 million, gross of fees.
While the FDA designations provide the company with closer contact with the FDA during voxelotor's development, there's no guarantee that future trials will confirm voxelotor's efficacy. Nevertheless, the market opportunity in SCD is significant, and that may justify Global Blood Therapeutics' $2.8 billion market cap.
Overall, these are three intriguing stocks with important catalysts fast approaching, but each remains a high-risk stock and that suggests that they're best suited for aggressive investors who can withstand the risk of failing trials.
