The past year has been one to remember for biotech investors. The FDA smashed through its previous record for new drug approvals in a single season, and a long list of experimental drugs getting close to the finish line promise to make 2019 just as interesting.
These experimental treatments aren't approved to treat anything yet, but their continued success could send shares of the drugmakers developing them soaring in the new year.
|Company (Symbol)||Market Cap||New Drug Candidate||Disease||Consensus Net Present Value|
|Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)||$43.5 billion||VX-659 + Tezacaftor + Ivacaftor||Cystic fibrosis||$14.4 billion|
|Celgene Corporation (NASDAQ:CELG)||$47.7 billion||JCAR017||Blood cancer||$8.5 billion|
|Novo Nordisk A/S (NYSE:NVO)||$113.4 billion||Semaglutide Oral||Type-2 diabetes||$7.6 billion|
Every year, EvaluatePharma ranks experimental treatments in late-stage studies by their consensus net present values. This measurement takes into account sales expectations as well as their odds of earning approvals from the FDA and other regulators.
Here's what you need to know about potential new blockbusters and the stocks that could soar if they exceed expectations.
1. Vertex Pharmaceuticals: Staying a step ahead
Vertex Pharmaceuticals launched the first cystic fibrosis (CF) treatment in 2012, and it's still the only company marketing drugs to treat the root cause of this progressive, life-shortening disorder. The company's new triple combination treatment produced such convincing late-stage data that analysts are nearly certain the FDA will approve an application that the company expects to file in the middle of 2019.
Vertex thinks total revenue from CF products could reach $3.0 billion this year, which is 38% more than a year earlier. Although an approval and successful launch for VX-659 seems likely, investors need to realize a great deal of growth is already baked into Vertex shares, which have been trading at 15.6 times trailing sales.
Around 2,000 genetic mutations are known to cause CF for around 75,000 people in North America, Europe, and Australia. Many of those with the most common mutations are already on a Vertex therapy, which makes it hard to predict just how much new growth the company's new triplet can generate.
2. Celgene Corporation: Changing directions?
Celgene's late-stage star is a chimeric antigen receptor T-cell (CAR-T) therapy, which is really an IV bag full of a patient's own immune cells after they've been modified off-site to recognize and attack cancer. It's a complicated process that appears worth the effort for non-Hodgkin's lymphoma patients who no longer respond to standard care. Six months after treatment with JCAR017, a whopping 55% of patients were in complete remission.
While JCAR017's results are nothing short of spectacular, they're comparable to another CD19-directed CAR-T that aims for the same cancer cell target, Yescarta. Gilead Sciences (NASDAQ:GILD) launched this treatment for the same limited group of non-Hodgkin's patients over a year ago, and sales have been a huge disappointment so far.
It looks like Celgene may be repositioning JCAR017 to aim for a leukemia indication down the road instead of attempting to compete with Gilead for non-Hodgkin's patients. With plenty of potential pitfalls ahead, forward-looking estimates for this program should be taken with a big grain of salt.
3. Novo Nordisk A/S: Easy to swallow
Weekly GLP-1 injections are a popular new way to treat type-2 diabetes, and Novo Nordisk is working on a once-daily GLP-1 tablet that could become the most popular of all.
Novo's own GLP-1 injections generated around $2.8 billion in sales during the first nine months of 2018, and the company's depending on it to maintain its share of an increasingly crowded market.
Oral semaglutide probably has what it takes to become Novo's next blockbuster. Adding it to standard care reduced patients' risk of death from cardiovascular disease by 51%, plus investigators measured a 49% all-cause mortality risk reduction during a long-term outcome study with thousands of patients.
Intensifying competition for diabetes care has pressured the price of Novo Nordisk shares down to just 19.1 times trailing earnings at recent prices. That's well below the S&P 500 average, which gives this stock a chance to outperform if oral semaglutide can surpass some fairly reasonable expectations.
Time to readjust
In case you hadn't noticed, the candidate that topped the list is also the only one that will be running unopposed in 2020. That said, Novo's oral semaglutide has a convenience advantage over injections, plus it's backed up with impressive outcome data that could set it apart. If I had to pick a candidate most likely to exceed expectations, it's the one in Novo's pipeline.
Cory Renauer owns shares of Celgene and Gilead Sciences. The Motley Fool owns shares of and recommends Celgene and Gilead Sciences. The Motley Fool recommends Novo Nordisk and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.