I recently checked the stocks I own to see how they're performing so far in 2018. Year-to-date gains of more than 20% for three of my stocks brought a smile to my face. That's not bad at all for less than halfway through the year, but it pales in comparison to the performance of three drug stocks in just the last five days.
Axovant Sciences (NASDAQ:AXON), Deciphera Pharmaceuticals (NASDAQ:DCPH), and TherapeuticsMD (NASDAQ:TXMD) stocks soared by 26% or more this week. What sent these drug stocks into orbit? And are they still buys? Here's the scoop behind the big gains and what could be next for the companies.
1. Axovant Sciences: A big deal and a big hire
Axovant Sciences was the biggest winner of the week with its stock skyrocketing 150%. That's a welcome change for Axovant shareholders, who had seen the stock lose more than 75% of its value in 2018 prior to this week.
The biggest news for Axovant was that the company signed an important deal with Oxford Biomedica to license experimental gene therapy OXB-102 and its predecessor product, ProSavin. Axovant paid $30 million upfront and agreed to pay Oxford Biomedical additional payments contingent on reaching development, regulatory, and commercial milestones that could top $832 million. Axovant plans to begin a phase 1/2 clinical study of OXB-102, which the company is renaming AXO-Lenti-PD, targeting treatment of Parkinson's disease by late 2018.
Axovant also announced other news on Wednesday. The company hired Fraser Wright as Chief Technology Officer (CTO) to lead its gene therapy program. Wright was a co-founder and CTO of Spark Therapeutics, where he directed the establishment of manufacturing processes for Luxturna, a gene therapy approved by the Food and Drug Administration (FDA) in December 2017 for treating a rare genetic disorder that can lead to blindness.
2. Deciphera Pharmaceuticals: An ASCO afterglow
Deciphera Pharmaceuticals stock jumped 36% higher this week. The gains could have been even higher except the biotech took advantage of the spike in its share price to raise cash through a stock offering.
It's easy to decipher why Deciphera is enjoying such great momentum. The company announced an update from its phase 1 clinical study of DCC-2618 in treating gastrointestinal stromal tumors (GIST) at the American Society of Clinical Oncology (ASCO) meeting on June 2. Deciphera's updated data shows promise for DCC-2168 to be more effective at treating GIST with a specific gene mutation than existing therapies Sutent and Stivarga.
This update gives investors more confidence about the prospects for DCC-2168 as it advances to further clinical trials. Deciphera plans to begin a phase 3 clinical study evaluating the drug as a second-line treatment for GIST later in 2018. The company also has three other phase 1 studies of DCC-2168 in progress targeting system mastocytosis -- a rare disease where mast cells accumulate in tissues and organs -- and other forms of cancer.
3. TherapeuticsMD: No stifling from Stifel
TherapeuticsMD stock vaulted nearly 27% higher over the last five days. Praise from a Wall Street analyst served as a big catalyst for the drug stock.
Investing website The Fly reported on Tuesday that Stifel Financial analyst Annabel Samimy had "high confidence" about TherapeuticsMD's prospects after attending the company's investor and analyst day held on June 4. Samimy reiterated a buy rating for the stock with a price target of $20, a level that represents a premium of 160% over the current share price.
TherapeuticsMD recently received FDA approval for Imvexxy in treating moderate-to-severe dyspareunia -- vaginal pain that's associated with sexual activity -- due to menopause. An FDA decision is expected by Oct. 28, 2018 for another of the company's drugs, TX-001HR, as a treatment for moderate-to-severe vasomotor symptoms due to menopause.
Are they buys?
I think it's too early to jump aboard the Axovant Sciences train. While it's great news that the company now has a clear strategy for moving forward, there's still a long way to go.
As for Deciphera, I suspect the company eventually could have a winner with DCC-2618. Still, I'd prefer to wait and see what happens with the drug in its late-stage clinical study.
That leaves TherapeuticsMD. After this week's nice gain, the company's market cap stands at close to $1.6 billion. Jefferies analyst Matthew Andrews thinks that Imvexxy could generate peak annual sales in the ballpark of $650 million. If approved, TX-001HR could get close to that level within five years.
So is TherapeuticsMD a slam-dunk pick? I wouldn't go that far. It could take Imvexxy over a decade to reach peak sales. TX-001HR might have challenges gaining reimbursement because it's a combination of two drugs that are already available in generic form.
I think there's a good chance that TherapeuticsMD stock will move a lot higher over the next few years. My take, though, is to see how the initial launches of Imvexxy and TX-001HR go -- assuming it wins approval.