This hasn't been a tremendous year for biotech stocks across the board, but you wouldn't know it looking at the performance these drugmakers put up in the first half of 2018. All four tripled their shareholders' money in just six short months.
What's behind these dramatic gains? Read on to find out.
|Company||Gain in H1 2018||Market Cap|
|Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR)||270%||$1.19 billion|
|ArQule, Inc. (NASDAQ:ARQL)||235%||$482 million|
|Endocyte, Inc. (NASDAQ: ECYT)||222%||$959 million|
|Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL)||205%||$3.99 billion|
1. Arrowhead Pharmaceuticals, Inc.: Comeback of the year
This biotech had to scuttle all of its clinical-stage work less than two years ago, but more recently discovered drugs have pushed the stock to an all-time high. This biotech has been climbing all year as investors cheer progress with its burgeoning pipeline of novel new drug candidates. Arrowhead is developing RNA interference drugs that aim to treat serious inherited diseases by silencing the expression of troublesome genes. Earlier this year, the company began early-stage studies with its first two candidates, ARO-HBV for the treatment of hepatitis B virus and ARO-AAT for the treatment of liver disease caused by a fairly common genetic condition, alpha-1 antitrypsin deficiency (AATD).
Arrowhead Pharmaceuticals recently pleased investors with ARO-AAT's first set of data from actual humans. The first four people given a single dose showed an 87% average reduction in circulating AAT six weeks later. These were healthy volunteers so there wasn't anything wrong with the AAT they were producing in the first place, but it bodes well for the drug's chances of helping those with alpha-1 liver disease.
In the U.S. alone, AATD threatens the lives of an estimated 70,000 to 100,000 people, and there aren't any available treatment options. If Arrowhead can show that reducing AAT production provides a survival benefit, this could become a blockbuster drug.
2. ArQule, Inc.: Partnering up
This biotech's lead liver cancer candidate stumbled a few years back, but ArQule's back with four clinical-stage candidates that it owns outright and a fifth that is awfully popular lately. This year, the company sold rights to develop and commercialize derazantinib, an experimental liver cancer treatment, to Roivant Sciences in China. More recently, it inked a larger deal with Basilea Pharmaceutic Ltd. for rights to markets outside China.
The final stages of development are the most expensive but ArQule won't have to do any of the heavy lifting. The company didn't receive much up front for derazantinib, but tiered royalties on any potential sales could go a long way toward developing candidates such as ARQ-531. The experimental blood cancer drug led to a 29% tumor reduction among four patients who had failed five previous regimens, and continued performance along these lines could lead to another lucrative partnership.
3. Endocyte, Inc.: A good time to have this data
Endocyte stock has gone nuclear with the help of a radioactive therapy that specifically binds to prostate-specific antigen (PSA), so it should hammer tumors while letting normal tissues conduct business as usual. Endocyte recently showed that its candidate, Lu-PSMA-617, lowered PSA scores by 80% for 44% of patients treated.
The observed PSA reductions suggest Lu-PSMA-617 is blasting away tumors, but we really don't know if this drug actually gives patients a better chance of long-term survival. Normally, we'd assume that Endocyte would have to wait years to show a survival benefit, but the Food and Drug Administration recently promised to publish a list of biomarkers for cancer drug development, such as PSA, that the regulator might be willing to accept as proof of efficacy in order to speed new drugs to patients who need them.
Endocyte is running a long-term outcome study with its candidate that could take years to produce an overall survival result. Investors are hoping that an interim analysis could provide enough evidence to convince a more lenient FDA to begin reviewing an application much sooner.
4. Madrigal Pharmaceuticals Inc.: Huge unmet need
Nonalcoholic steatohepatitis (NASH) affects an estimated 30 million Americans. It's the leading cause of liver cancer, but there still aren't any drugs available to treat the condition.
Madrigal Pharmaceuticals shot up earlier this year after showing its lead candidate, MGL-3196, reduced liver fat content for these patients by more than a third. The company hasn't started a pivotal trial yet, and it might not have to pay for one itself. Larger drugmakers eager to serve a huge population with unmet needs could snap up this biotech before it gets much further.
Buyout rumors, on top of solid data, make this one of several NASH stocks that could soar in the second half of the year.
They don't always go up
Buying smaller biotech stocks and holding them for the long run can make millionaires, but it's important to realize there's still an awful lot that can go wrong for any one of these companies before they even have a chance to book some product sales. If investors smell the slightest whiff of trouble for any one of these companies, their stock prices have an awfully long way to tumble.