All it takes is a little good news to brighten your day. And for some investors, a little good news has brightened their portfolios this week.
Three biotech stocks -- Solid Biosciences (SLDB 0.99%), Sarepta Therapeutics (SRPT 4.72%), and Heron Therapeutics (HRTX +5.54%) -- soared this week by 30% or more thanks to news that brought smiles to investors' faces. Here's what drove these stocks higher and whether or not they're smart picks to buy now.
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1. Solid Biosciences: The good, the bad, and the pretty
Solid Biosciences' stock was the biggest biotech winner of the week, as its share price skyrocketed 57%. But it's been a topsy-turvy few days for Solid.
The company announced on Monday that the Food and Drug Administration (FDA) had removed a clinical hold on a phase 1/2 clinical study for gene therapy SGT-001 in treating Duchenne muscular dystrophy (DMD). The FDA placed a clinical hold on testing of the gene therapy in March due to patient safety concerns. However, Solid Biosciences satisfactorily answered the agency's questions, and the clinical study will now restart. That's the good news.
Solid also had some bad news this week that caused the stock to give up some of its big gains. It came from Sarepta Therapeutics, which also is developing a gene therapy targeting DMD. We'll discuss Sarepta's announcement shortly.
When all was said and done, though, Solid Biosciences bounced back by the end of the week. My hunch is that investors realized there's a long way to go -- and that good news for Sarepta might translate to good news for Solid down the road.
2. Sarepta Therapeutics: Success is in the genes
Now we can get to the Sarepta announcement that temporarily took the wind out of the sails for Solid Biosciences. But Sarepta's news definitely blew wind into its own sails, with its share price gaining 38% this week.
On Tuesday, the company announced positive preliminary results from a phase 1/2 clinical study of the company's gene therapy, AAVrh74.MHCK7.micro-Dystrophin. The barely pronounceable name for the therapy stems from its three components: (1) rhesus monkey-derived adeno-associated virus vector AAVrh74 to deliver genes into cells; (2) MHCK7 promoter, which, among other things, promotes high production of micro-dystrophins in muscles including the heart; and (3) a healthy micro-dystrophin gene.
The early data from the study showed that patients receiving the gene therapy had robust micro-dystrophin expression in muscle tissue, as well as significantly lower levels of serum creatine kinase, which is linked to DMD-caused muscle damage. Lead investigator Jerry Mendell of Nationwide Children's Hospital said that the data could "represent an unprecedented advancement in the treatment of DMD."
It's still early, though. And Sarepta's results only included data for three patients. Still, the biotech showed that gene therapy could hold a lot of promise for DMD patients.
3. Heron Therapeutics: Two for two
Heron Therapeutics' stock also jumped 38% higher this week. The biotech actually had two positive announcements in recent days that served as catalysts.
On Thursday, Heron announced positive top-line results from a couple of phase 2b clinical studies evaluating its lead candidate HTX-011 in reducing nerve pain. One of those studies focused on the use of HTX-011 in lowering pain for patients after total knee replacement. The other study looked at HTX-011 in reducing pain following breast augmentation surgery. Both studies found that HTX-011 significantly reduced pain levels compared to commonly used anesthetic bupivacaine.
Heron's other news, also announced on Thursday, was that the FDA awarded Breakthrough Therapy Designation to HTX-011 for pain management. This designation means that the drug's review process will be expedited -- good news for Heron, which already has two approved drugs on the market.
The biotech plans to submit HTX-011 for FDA approval later this year based on positive results from two phase studies in bunionectomy and hernia repair. If approved, the drug could generate peak annual sales of more than $500 million for the two initial indications.
Are they buys?
Solid Biosciences still is a clinical-stage biotech that has a long way to go with its lead candidate. As promising as gene therapy could be in treating DMD, I think taking a wait-and-see approach with this stock is the best course of action.
Wall Street still is very bullish on Sarepta Therapeutics, even after its huge gains. The consensus one-year price target reflects a 20% premium over Sarepta's current share price. I have liked the stock for a while -- well before its flagship product Exondys 51 won FDA approval. However, my confidence in the stock's upward mobility is lower now because of the nice run Sarepta has enjoyed since last year.
What about Heron Therapeutics? The company's two approved drugs for treating chemotherapy-induced nausea and vomiting together could reach peak annual sales topping $500 million. I think that HTX-011 has an excellent chance of approval and of achieving commercial success. My view is that, while Heron still faces some risks, the biotech stock remains a pretty good pick for more aggressive investors.
