It's been a pretty good year for the S&P 500, and a great year for anyone who started 2019 with one of these soaring healthcare stocks. Each has doubled its shareholders' money this year, and there's a chance they could do it again.
Past performance doesn't guarantee future results, of course, but it does provide plenty of clues about what to expect. Here's what drove these stocks up in 2019 and what needs to happen before they can do it again.
|Company (Symbol)||Year-to-Date Performance||Market Cap|
|Guardant Health (NASDAQ:GH)||105%||$6.7 billion|
|Arrowhead Pharmaceuticals (NASDAQ:ARWR)||94%||$2.3 billion|
1. Arrowhead Pharmaceuticals: Hepatitis B has met its match
This RNA-focused biotech stock gained 238% in 2018, and another 100% since Jan. 3, 2019, which is good enough to make the top of this shortlist. Arrowhead keeps rising thanks to a potentially curative treatment for people infected with the hepatitis B virus (HBV), formerly called ARO-HBV.
In October, Johnson & Johnson (NYSE:JNJ) licensed ARO-HBV, renamed it JNJ-3989, and gave Arrowhead $250 million up front. J&J will pay for development and commercialization expenses following its ongoing human proof-of-concept study. Arrowhead's eligible to receive up to $1.6 billion in milestone payments for JNJ-3989 and a tiered royalty percentage that tops out in the mid-teens.
In April, Arrowhead shared data from from the ongoing 40-patient study that showed JNJ-3989 led to lower levels of HBV surface antigen for all 40 patients treated. Remaining signs of an active HBV infection were reduced to a negligible level for 88% of patients who had 24 or more weeks of observation, and results from a higher dosage cohort could thrill investors again later this year.
On the safety side, JNJ-3989 didn't lead to any serious adverse events and all 56 patients have shown up to receive all three scheduled injections. Unless 24-week results from the highest dosage cohort reveal something unexpected, J&J will push this drug through development as quickly as possible.
Around the globe, there are hundreds of millions of people living with a hepatitis B infection, and the virus claims around 900,000 lives annually. If JNJ-3989 continues to look like a potential cure, Arrowhead stock could double again before the end of the year.
Arrowhead's burgeoning pipeline also has a clinical-stage candidate partnered with Amgen (NASDAQ:AMGN), plus three wholly owned new drug candidates in clinical trials that could keep the stock rising for years to come.
2. Guardant Health: Post-Theranos redemption
Theranos may have acted in bad faith, but highly sensitive analytics that can find circulating tumor DNA in a vial of blood are very real. Guardant Health made its stock market debut last October and steps toward becoming the liquid biopsy champ keep pushing the shares higher.
Guardant is developing a mass-market cancer screen for healthy people, but it's making money right now assisting drug developers and cancer patients in remission. Guardant recorded $36.7 million in sales during the first quarter, a 120% increase over the previous year period thanks to Guardant360 and GuardantOMNI.
Oncologists and drug developers need to know everything they can about a patient's tumors, but frequent biopsy procedures to grab a sample for testing is usually too dangerous. Guardant360 helps oncologists monitor patients for circulating tumor DNA in their bloodstream, while drug developers use GuardantOMNI to screen patients for clinical trial eligibility.
Oncologists who use Guardant360 tend to use it frequently, but reimbursement isn't nearly as easy as it could be. The key to success in healthcare is making sure the end user isn't the one paying for your product. It looks like Guardant's heading this direction thanks to guidance from the Centers for Medicare and Medicaid Services (CMS). The CMS has indicated a willingness to pay for tests like Guardant360 following pre-market approval from the Food and Drug Administration, and the company's already putting an application together.
Guardant360 has what it takes to drive more than $1 billion in annual sales if it earns a pre-market approval as expected. The icing on the cake, though, will be the upcoming Lunar tests aimed at healthier patients.
Guardant has soared recently since publishing top-line results from a study that fed 337 samples into the Lunar assay, 80 of which didn't have cancer at all. Lunar issued a single false positive and recognized 100% of samples from patients with late-stage cancer. If Lunar achieves its potential as a mass-market cancer screen, it could eventually produce 11-figure annual sales.
What to look for
Guardant and Arrowhead can probably double investors money again in a relatively short time span, but it's important to remember that both of these companies are still losing money. If something unexpectedly derails Arrowhead's HBV candidate or Guardant's Lunar assay, this year's gains could disappear in a heartbeat.