Sell in May and go away? That old adage would have been horrible advice for investors who owned three biotech stocks that soared over the last week.
ARMO BioSciences (NASDAQ: ARMO), Opko Health (OPK 3.40%), and Arrowhead Pharmaceuticals (ARWR 2.12%) chalked up huge gains over the last five days. What sent these biotech stocks into orbit? And are they still smart picks for investors? Here's what you need to know about the fantastic week for ARMO, Opko, and Arrowhead along with what could be next for each stock.
1. ARMO BioSciences: We hardly knew ye
ARMO BioSciences stock skyrocketed 78% this week. The biotech announced on Thursday that it was being acquired by Eli Lilly (LLY 0.91%) for $1.6 billion. What's especially notable about this acquisition is that ARMO conducted its initial public offering (IPO) less than four months ago.
What made ARMO so attractive to Lilly? The small biotech's lead product candidate, AM0010, also known as pegilodecakin. AM0010 a long-acting form of recombinant human Interleukin 10 (IL-10) that stimulates white blood cells called CD8+ T cells. These T cells recognize and kill cancer cells. The drug is currently being evaluated in a phase 3 study for treating pancreatic cancer and in earlier-stage studies targeting other types of cancer.
Lilly saw AM0010 as a great addition to its current oncology lineup, which includes Cyramza, Verzenio, and three pipeline candidates in phase 2 clinical studies. The acquisition is expected to close by the end of the second quarter.
2. Opko Health: A Rayaldee of sunshine
Opko Health didn't see its stock pop as much as ARMO BioSciences, but the biotech did enjoy a big gain of 42% this week. The catalyst for Opko was the company's better-than-expected first-quarter results announced on Tuesday.
Wall Street analysts expected Opko to report Q1 revenue of nearly $237 million. The company reported revenue of close to $255 million. But while that figure beat what analysts projected, it came in right in line with what Opko's expectations.
The best news from Opko's quarterly update for investors was that chronic kidney disease drug Rayaldee appears to be picking up momentum. Opko stated that Q1 total prescriptions for the drug jumped 731% year over year and were 38% higher than the fourth quarter of 2017. The company also expects that its laboratory diagnostic business, Bio-Reference Laboratories, will see improvement this year.
3. Arrowhead Pharmaceuticals: Giving more of the silent treatment
Arrowhead Pharmaceuticals stock jumped 38% this week. Although the company announced its Q1 financial results on Tuesday, the bigger story for Arrowhead wasn't about the top and bottom lines. Instead, investors were encouraged by the biotech's pipeline updates.
"Target the gene, silence the disease" is Arrowhead's slogan. The company uses RNA interference (RNAi) to silence gene expression and regulate the production of proteins. This approach allows focused targeting of a wide range of genes and disease pathways that have been difficult to address in the past.
Arrowhead announced this week that it had initiated dosing in two phase 1 clinical studies evaluating RNAi therapies in treating rare genetic disease alpha-1 antitrypsin deﬁciency and hepatitis B. The company also reported that it plans to submit for European approval to begin clinical studies for two preclinical candidates, ARO-APOC3 and ARO-ANG3, later this year.
Are they buys?
Congratulations to those who already bought ARMO BioSciences stock. For everyone else, though, it's too late to profit from the biotech. But what about Opko Health and Arrowhead?
It's great to see Rayaldee begin to gain some traction. Opko also is seeing some growth for its 4Kscore blood test for detecting prostate cancer. And new leadership at Bio-Reference Labs could get that ship headed in the right direction. My view on Opko is that it could be a winner over the long run, but for now, I'd rather wait to see additional improvement.
I'm intrigued by Arrowhead, though. Alnylam Pharmaceuticals has already shown that RNA interference can be effective and expects to soon win Food and Drug Administration approval for patisiran in treating hereditary ATTR amyloidosis. Arrowhead could also be on the right track with its RNAi programs.
The main drawback to Arrowhead is that its pipeline candidates still have a long way to go. Arrowhead is the kind of stock that could make a ton of money -- or lose a ton of money -- for shareholders. My hunch is that it will be a winner over the long run, but I'm not ready to step out on a limb and call the stock a buy. There's simply too much risk right now despite a lot of potential for this clinical-stage biotech.