What you might find surprising is that biotech stocks easily outperformed the Dow Jones Industrial Average, the Nasdaq Composite, and the S&P 500 indices during the first wave of the so-called coronavirus crash last week. Generally speaking, biotech equities are viewed as one of the riskiest class of assets, meaning that they probably should have been among the first groups of equities to be sold off during a widespread market correction. But a broad-based biotech rout has yet to materialize. Why?
There are three favorable tailwinds likely responsible for biotech's stubborn resistance to the ongoing coronavirus correction. First up, several biotechs are expected to play a critical role in managing the outbreak of the COVID-19 illness. Secondly, it's an open secret that most large-cap biotechs are currently looking to augment their clinical pipelines and product portfolios through mergers and acquisitions. Eli Lilly, Gilead Sciences, and Novartis have even admitted that they may pull the trigger on multiple acquisitions in 2020 and beyond. Thirdly, the pace of innovation within the industry remains at fever pitch. Over the next few years, biotech is expected to introduce game-changing therapies for a laundry list of rare diseases, cancers, infectious diseases, and chronic ailments such as arthritis and diabetes.
Which biotech stocks should investors consider buying in March? Acceleron Pharma (XLRN), Novavax (NVAX -0.41%), and TG Therapeutics (TGTX -1.50%) could all turn out to be outstanding buys this month. Here's why.
Acceleron: The next leg up could be close at hand
Acceleron's stock is up an eye-popping 62% over the first two months of 2020. This mid-cap biotech stock has been a big winner this year for two reasons. First up, Acceleron and its collaboration partner Bristol-Myers Squibb (BMY -0.10%) recently grabbed a major regulatory approval from the U.S. Food and Drug Administration (FDA) for Reblozyl (luspatercept) as a treatment for adult patients with beta-thalassemia, who require regular red blood cell transfusions. This rare disease indication is believed to encompass a patient population of 1,000 to 1,500 individuals in the United States.
Secondly, investors are clearly impressed with the company's experimental pulmonary arterial hypertension (PAH) medication, sotatercept. The big attraction here is that sotatercept might spark a buyout offer, as big pharma has a strong interest in next-generation PAH drugs. A buyout, in turn, could generate a healthy windfall for shareholders in the not-so-distant future.
That said, the main reason to consider buying this stock this month is the upcoming regulatory decision for Reblozyl as a treatment for myelodysplastic syndromes, or MDS. The FDA's target date for this second indication is slated for April 4, but it could come at any time. The big deal is that this particular form of MDS represents a U.S. patient population of around 20,000. With this second high-value indication in hand, Acceleron and Bristol would probably have little trouble turning this blood disorder med into a blockbuster product in short order.
Novavax: The stage is set
Novavax's stock has been bursting higher over the past few trading sessions. This recent uptick is largely the result of the company's decision to join the coronavirus vaccine game. A far more compelling reason to buy Novavax, though, is the biotech's upcoming phase 3 trial readout for its influenza vaccine, NanoFlu. These data should be available for public consumption by the end of March.
These data have the potential to pave the way for a fairly quick regulatory approval. What's more, NanoFlu definitely has blockbuster sales potential. The global flu market already represents a $4 billion commercial space at current levels, and there is a well-documented medical need for more effective flu vaccines. Additionally, this multibillion-dollar vaccine market is only expected to grow even larger in the years to come for a variety of reasons.
What's next? NanoFlu seems to have a strong chance at hitting the mark in this phase 3 trial -- at least based on its mid-stage data. And assuming a positive readout, Novavax would have the goods to fetch a worthwhile buyout offer, or a lucrative licensing deal.
The caveat -- and it's a big one -- is that Novavax doesn't have much else to offer outside of NanoFlu. Its other respiratory vaccine candidate failed to impress in late-stage testing. Hence, everything is basically riding on NanoFlu's upcoming top-line data.
TG Therapeutics: An inbound clinical catalyst
TG Therapeutics is a clinical-stage hematology and autoimmune disease specialist with multiple catalysts on the near-term horizon. So, with its 2020 calendar chock-full of major milestones, it's not surprising that investors have bid up this small-cap biotech stock by 13% so far this year. The best could be yet to come, however.
What should investors be on the lookout for right now? The big ticket item is the mature progression-free survival (PFS) data for the biotech's potent combination of umbralisib and ublituximab in patients with chronic lymphocytic leukemia (CLL). These data are due out by the end of March.
The headline here is that these highly anticipated PFS data could unlock a $10 billion opportunity for TG Therapeutics. That's a massive commercial landscape for a company with a market cap of $1.4 billion at present. Wall Street, in fact, thinks this biotech stock could quickly double in value following a positive late-stage readout in CLL.
What's the downside risk? Cancer drugs of all types have a poor track record when it comes to pivotal trials. So there's always the chance that TG Therapeutics' novel combo therapy won't pan out. On the bright side, the biotech does have a rather broad portfolio of drugs -- and other indications -- to fall back on. As such, TG Therapeutics' stock might be worth the risk this month.