This has been a banner year for three biotech stocks and their shareholders. All of them have soared in response to promising clinical trial results for some very different experimental therapies.
If you're not sure why these stocks are among the biotech industry's top performers, let's review the highlights.
|Company (Symbol)||Stock Price Gain in 2019||Market Cap|
|Arrowhead Pharmaceuticals (NASDAQ:ARWR)||488%||$7.0 billion|
|Adverum Biotechnologies (NASDAQ:ADVM)||246%||$705 million|
|Arqule (NASDAQ:ARQL)||246%||$1.2 billion|
1. Arrowhead Pharmaceuticals: RNA interference
Arrowhead Pharmaceuticals stock has been rocketing higher this year thanks to encouraging clinical trial results for JNJ-3989, a new type of antiviral therapy that interferes with the hepatitis B virus (HBV) as it tries to replicate itself. In the U.S., there could be more than a million people chronically infected with HBV, which raises their chances of developing severe liver problems.
There are antiviral therapies that suppress the virus, but they can't get rid of it completely. During a dose-ranging study sponsored by Arrowhead's collaboration partner, Johnson & Johnson (NYSE:JNJ), adding JNJ-3989 to standard antiviral treatment reduced signs of the virus by more than 90% for 31 out of 32 patients treated. The partners also shared early results from the first 12 patients treated with a three-drug combination that contains JNJ-3989, and everyone in the triplet study reached the 90% reduction threshold.
If JNJ-3989 continues to impress, Arrowhead could receive up to $1.6 billion in milestone payments from J&J, plus a royalty percentage in the low to mid-teens on any sales.
2. Adverum Biotechnologies: Gene therapy
Adverium's experimental gene therapy for the treatment of age-related macular degeneration (AMD), ADVM-022, should deliver a gene to cells at the back of patients' eyeballs. After a single administration, their retina should be able to produce their own vascular endothelial growth factor inhibitor permanently.
In September, investors were not impressed with initial results from the first six patients injected with ADVM-022, because visual acuity test results after treatment were nine letters worse than before receiving the therapy. Luckily, another look at the same patients around 10 weeks later showed their visual acuity scores hadn't worsened.
Among six patients, there were five minor cases of inflammation that can cause vision to worsen, which is especially troubling for a treatment that employs an unfamiliar viral vector. Any danger of infection would make regular trips to a provider for Eylea injections seem more attractive.
A light risk of inflammation is a pretty good trade-off for avoiding regular injections of Eylea, but the ADVM-022 program could grind to a halt if we see any serious infections from patients who have received stronger doses. Adverium could have a blockbuster gene therapy on its hands, but it's probably best to wait for results from groups of patients whoreceive larger doses.
3. Arqule: Targeted cancer therapies
This company doesn't have any products to sell yet, but its clinical-stage pipeline is poised to deliver. The company's lead candidate, derazantinib, is in a pivotal study as a treatment for patients with a rare cancer of the bile duct. Another candidate, miransertib, has shown positive results in a study with patients born with a rare overgrowth disorder.
Imbruvica is a popular Bruton's tyrosine kinase (BTK) inhibitor that produces several billion in annual sales, but some patients relapse because of acquired resistance mutations. Arqule's largest potential growth driver in the years ahead, ARQ-531, is a reversible BTK inhibitor designed to treat leukemia patients who have acquired the C481 mutation.
During a phase 1 study, ARQ-531 shrank tumors in four out of six patients treated with a 65 mg dose. A 66% response rate is impressive for patients trying their first therapy, but this group had been treated with more than one standard leukemia treatment and relapsed or didn't respond to standard care.
With a market cap of just $1.2 billion, Arqule looks relatively cheap at the moment. People with treatment-resistant leukemia don't have any good treatment options. Arqule's reversible BTK inhibitor might not have the same potential as Imbruvica, but there's still a good chance it could crank out more than $1 billion in annual sales in just a few years.
What to look for
Before going near shares of Adverum, investors want to wait for confirmation that the risk-to-benefit ratio related to ADVM-022 won't disintegrate following observations of patients receiving a stronger dosage.
Arrowhead shares have already priced in a great deal of success. That doesn't mean they can't climb much further, but any hint of trouble with one of its clinical-stage candidates could lead to swift and heavy losses. It's probably best to wait for a more attractive valuation.
If I had to pick one of these biotech stocks to buy today, it would have to be Arqule. Three new cancer drug candidates in late-stage development could inspire a deep-pocketed drugmaker to make Arqule a buyout offer at a premium.