While coronavirus fears pressured the rest of the stock market, a handful of biotech stocks still managed to take some big steps in the right direction last week.
Unless you keep both eyes glued to the industry you're probably unfamiliar with at least one for these up-and-coming drugmakers, perhaps all three. Let's look at the factors behind their recent successes to see if they're worth a lot more of your attention.
|Company (Symbol)||Price Change During Week Ended Feb. 21, 2020||Market Cap|
|Arcus Biosciences (RCUS 5.10%)||51%||$794 million|
|BioXcel Therapeutics (BTAI 3.10%)||46%||$631 million|
|IGM Biosciences (IGMS 7.70%)||34%||$1.85 billion|
1. Arcus Biosciences: Bound for Basel?
A positive analyst rating lifted hopes that Arcus Biosciences, a cancer drug developer from the IPO class of 2018, would receive a buyout offer soon from its collaboration partner, Roche (RHHBY 2.34%).
Roche is a Swiss pharma giant with a blockbuster cancer immunotherapy called Tecentriq. This is an anti-PD1 drug that makes it harder for tumor cells to shut down a hostile immune system. Tecentriq sales that reached $1.9 billion last year are nothing to sneeze at, but Roche could start recording a lot more in the years ahead if it can market a companion therapy that boosts Tecentriq's success rate.
Arcus may have an experimental treatment in development that can help Tecentriq do its job better by targeting adenosine receptors known to regulate immune system activity.
At the moment, an adenosine receptor antagonist called AB928 from Arcus is in a clinical trial in combination with Tecentriq, and that isn't the only combination Roche might be interested in. Roche is currently running a slate of combination studies with Tecentriq and an experimental immunotherapy that targets Tigit called tiragolumab. Arcus Therapeutics also has an anti-Tigit candidate in early stage clinical testing called AB154.
Before getting carried away here, it's important to remember that increasing the efficacy of anti-PD1 drugs by combining them with immune-modulating treatments have a lousy track record. After years of effort, and billions invested, the first immune checkpoint inhibitor, Yervoy, is still the only one approved to treat any cancer patients in combination with an anti-PD1 drug.
2. BioXcel Therapeutics: Under the tongue
Arcus Therapeutics wasn't the only biotech stock that soared on the back of an analyst recommendation last week. BioXcel recently jumped higher after a SunTrust analyst shared enthusiasm for the company's new delivery mechanism for a popular norepinephrine blocker, dexmedetomidine.
An infused form of dexmedetomidine has been approved for decades as a surgical sedative, but it's also being used off-label to calm delirious hospital patients and soothe withdrawal symptoms associated with drug abuse. BioXcel's lead candidate, BXCL501, is dexmedetomidine packaged as a sublingual film that's a lot easy to administer than an intravenous infusion.
Developing a new delivery vehicle for a decades-old drug isn't the sort of innovation that gets a lot of attention, but BioXcel's sublingual dexmedetomidine could lead to exciting gains for investors.
3. IGM Biosciences: Something really different
This clinical-stage cancer drug developer made its stock market debut last September, and shareholders who have held on since its IPO have seen their investment gain 150% already. IGM Biosciences has investors and oncologists excited about the long-awaited emergence of new antibodies with a more complex shape than those we're used to.
Antibodies are proteins the immune system uses to recognize pathogens, and they come in a variety of shapes and sizes. At the moment, nearly every antibody used to treat cancer comes in the immunoglobulin G (IgG) shape, which have just two target-binding domains.
IGM Biosciences is building a pipeline of immunoglobulin M (IgM) antibodies that can perform in ways that today's antibodies can only dream of. The company's lead candidate, IGM-2323, targets CD20 proteins on cancer cells with several binding domains at once and CD3 proteins on immune cells at the same time. While there are other bi-specific T-cell engagers in development by giants like Amgen (AMGN 0.02%) that work in a similar manner, they're of the limited IgG variety, which means there's just one binding domain for each target.
IGM Biosciences began treating non-Hodgkin lymphoma patients with IGM-2323 for the first time in October. If results prove the company's IgM antibodies are as effective as their shape suggests they should be, this stock could more than double again before the end of 2020.
Time to buy?
IGM Biosciences' market cap has already swelled to a size that could deflate quickly if its upcoming clinical trial readout doesn't contain any big fireworks. Big pharmaceutical companies eager to boost sales of their anti-PD1 therapies have thrown huge sums of money at companies like Arcus in the past. For both of these cancer drug developers, it's probably best to wait for some more evidence before risking your own hard-earned money.
BioXcel's sublingual dexmedetomidine could eventually generate more than $1 billion annually if approved for several large populations that need powerful new sedatives with pain-relieving properties. Approvals for a sublingual form of this well-understood drug seem like a relatively safe bet, and so does the stock right now.