When a small biotech reports bad news, its stock can plunge. On the other hand, when a small biotech announces good news, its share price can skyrocket.
Three small biotechs have enjoyed some very good news this year. Shares of Amarin Corp. (NASDAQ:AMRN), Fate Therapeutics (NASDAQ:FATE), and Intercept Pharmaceuticals (NASDAQ:ICPT) are at 52-week highs, with Fate at an all-time high. What caused these small biotech stocks to soar -- and are they still smart picks to buy?
1. Amarin: Something fishy is going on (in a positive way)
Amarin's share price has nearly quadrupled this year. Even better, the stock has skyrocketed over 450% in just the last couple of weeks. This great performance stems from the biotech announcing results on Sept. 24 of a cardiovascular outcomes study of Vascepa, Amarin's omega3 fatty acid drug derived from fish.
As you might imagine, those results were very good. Vascepa reduced the risk of major adverse cardiovascular events by 25% with a very high degree of statistical significance. The clinical study was one of the largest to date for an omega-3 drug, including 8,179 patients with elevated cardiovascular risk who had been treated with statin drugs.
Vascepa won Food and Drug Administration approval in 2016 as a treatment for high triglyceride levels. The product label for the drug, though, doesn't reflect the latest study data. With those results in hand, Amarin is beefing up its sales force in anticipation of a high level of interest from physicians treating patients at risk of cardiovascular disease.
2. Fate Therapeutics: Lots of irons in the fire
Shares of Fate Therapeutics are up 165% year to date. And it wasn't just one catalyst that has given Fate such a great year; there are plenty of them.
One is that the biotech is making nice progress with its phase 2 clinical study evaluating Fate's next-generation hematopoietic cell graft ProTmune in patients with blood disorders who are undergoing allogeneic hematopoietic cell transplantation (HCT). Another is that Fate expanded its phase 1 clinical study of immunotherapy FATE-NK100.
Perhaps the most potentially far-reaching development for Fate is the biotech's recent submission of an application to begin clinical testing of the first universal, off-the-shelf natural killer (NK) cell product. Fate hopes to evaluate this cancer immunotherapy, FT500, with already-approved checkpoint inhibitors as a rescue therapy for cancer patients.
3. Intercept Pharmaceuticals: A liver drug delivering the goods
Intercept Pharmaceutics stock has soared 117% so far in 2018. The good performance for Intercept stems from momentum for its only approved drug, Ocaliva, and anticipation of even better news for the drug in the not-too-distant future.
Ocaliva won FDA approval in 2016 for treating primary biliary cholangitis (PBC), a rare liver disease. Intercept's Q2 results showed that the drug is picking up some steam with sales of $43.2 million. This momentum prompted several analyst upgrades.
However, investors have been eagerly awaiting results for Ocaliva in treating another liver disease, nonalcoholic steatohepatitis (NASH). Intercept expects to announce results from a phase 3 study of the drug in treating NASH in the first half of 2019. If all goes well, the biotech could have the first approved NASH drug on the market.
Are they buys?
Yes, yes, and yes. I think all three of these small biotech stocks are still pretty good picks.
The riskiest of the three is definitely Fate Therapeutics. The biotech doesn't have an approved product on the market, and it's still really early for its pipeline candidates. However, Fate's immunotherapies have a lot of potential. Buying the stock with its candidates in such early development is a roll of the dice, for sure, but a small position could pay off in a big way if all goes well.
Intercept isn't quite as risky, although there's always a possibility that Ocaliva won't fare well in the phase 3 NASH study. Still, my hunch is that the biotech will pick up a second approved indication for the drug. I also think that Intercept could be an acquisition target at some point.
Speaking of acquisition targets, Amarin might be high on the list of several big drugmakers. With its cardiovascular data in hand, Vascepa should easily become a blockbuster drug. Amarin thinks the drug could generate peak annual sales of $2 billion. If Vascepa comes anywhere close to that level -- and it could -- this biotech stock should have plenty of room to run.