The 3 Best-Performing Biotech Stocks at the J.P. Morgan Healthcare Conference

These companies arguably stole the show at J.P. Morgan's high-profile healthcare conference this year.

Todd Campbell
Todd Campbell
Jan 11, 2019 at 7:46AM
Health Care

Hundreds of leading healthcare companies gave their latest insights to thousands of industry watchers at J.P. Morgan's annual healthcare conference in San Francisco this week. Many companies offered up promising outlooks that moved their shares higher, but Loxo Oncology (NASDAQ:LOXO), Insmed Inc. (NASDAQ:INSM), and Sage Therapeutics (NASDAQ:SAGE) were the biggest winners at this year's event.

No. 1: Loxo Oncology -- Up 66.3%

Shares in the precision-medicine drug company skyrocketed over the past five days after biopharma giant Eli Lilly & Co. (NYSE:LLY) announced it would acquire the company for $8 billion in cash, or $235 per share.

Letters shooting out of a handheld megaphone.

IMAGE SOURCE: GETTY IMAGES.

The deal pushes the company deeper into next-generation cancer treatments targeting genetic mutations, rather than the cancer's origin. Precision medicine, like the ones developed by Loxo Oncology, may reshape how doctors treat their patients, allowing them to better target therapies to patients most likely to respond to them.

Loxo Oncology won Food and Drug Administration (FDA) approval of its first drug, Vitrakvi, in November. An inhibitor of TRK-mutations that help fuel cancer growth, Vitrakvi could help thousands of patients with solid tumor cancer. In the U.S., Eli Lilly will split sales of Vitrakvi with Bayer AG, and outside the U.S, it will collect a double-digit royalty on sales from Bayer.

The acquisition also nets Eli Lilly LOXO-292, a RET-inhibitor that could help thousands of patients with lung and thyroid cancer if it wins approval someday, as well as LOXO-305, a therapy that may overcome resistance to BTK-inhibiting therapies, such as the multibillion-dollar blockbuster Imbruvica.

No. 2: Insmed Inc. -- Up 47.8%

Check out the latest Insmed earnings call transcript.

Insmed made big waves with investors when it reported that its U.S. commercial launch of Arikayce is going smoothly. Arikayce won FDA approval in September for use in refractory patients with mycobacterium avium complex (MAC) lung disease, a rare, tough-to-treat condition. In the fourth quarter, over 500 patients initiated treatment, resulting in sales of approximately $9.8 million.

Initially, Arikayce only is approved for patients without other treatment options available to them, so management is laser-focused on targeting the 5,000 doctors responsible for treating about 70% of the 10,000 to 15,000 Americans with refractory MAC. Insmed also hopes to expand internationally by filing for approval of Arikayce in Europe by mid-2019 and Japan by mid-2020. If approved in those markets, it would increase Arikayce's addressable market by about 15,000 to 20,000 patients.

Further out, Insmed hopes clinical trial results will allow it to secure an OK for Arikayce as a front-line MAC treatment and for use in patients with nontuberculous mycobacteria (NTM). A front-line approval could significantly increase Arikayce's peak sales opportunity because over 65,000 people are diagnosed annually with MAC in the U.S. alone. An approval for NTM could increase Arikayce's market to 105,000 patients in America, further increasing the odds this treatment will reward investors with significant sales.

No. 3: Sage Therapeutics -- Up 34%

Check out the latest Sage Therapeutics earnings call transcript.

There have been few advances in treating depression over the past decade, so investors cheered news from Sage Therapeutics that it could have a convenient, oral-treatment option soon for people suffering from postpartum depression.

At the conference, Sage Therapeutics unveiled positive results for SAGE-217. In phase 3 trials, SAGE-217 statistically and significantly improved symptoms of postpartum depression versus placebo on HAMD-17, a commonly used depression scale.

The results are particularly important because they add conviction to the thinking that Sage Therapeutics will be able to build upon its early efforts in the indication. In March, the FDA is slated to issue a go/no-go decision for Sage Therapeutics' first-generation postpartum depression drug Zulresso. Like SAGE-217, Zulresso improves postpartum depression symptoms. However, it's delivered by infusion over 60 hours rather than taken orally, and that inconvenience could hamstring its use, if approved.

Although postpartum depression is underdiagnosed, there are still 400,000 cases of postpartum depression annually in the U.S., so SAGE-217 could generate significant revenue. The company may have an even a bigger opportunity, however, if phase 3 trials evaluating SAGE-217 in major depressive disorder (MDD) pan out. If it's effective in MDD, too, then its addressable market could total in the tens of millions of people, putting the drug on a path to billion-dollar blockbuster status.