What investor doesn't want to own a solid company with exciting prospects for business growth in the near- and mid-term? Healthcare stocks often provide a safe haven during uncertain market conditions. Here we explore a few interesting opportunities ranging from a big pharma name to a pre-revenue biotech.
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1. Merck
If you want a solid stock that allows you to sleep soundly at night, buy Merck (MRK -0.05%). Keytruda, the company's flagship cancer drug, generated sales in excess of $3 billion in each of the last three quarters. It single-handedly delivers more than 25% of Merck's total sales. The drug is well on its way to being one of the biggest selling drugs of all time.
Merck just entered the crowded field of pharma and biotech companies racing to develop vaccines and drugs for COVID-19. It did so through a flurry of deals. First, it bought Themis, an Austrian biotech focused on infectious diseases. Based on technology licensed from the Institut Pasteur, a world-leading vaccine research center, Themis and Merck expect to start a trial later this year for a preventative vaccine against SARS-CoV-2. Themis also boasts a late-stage vaccine program for chikungunya, a mosquito-transmitted virus that causes fever and joint pain, adding to Merck's growing vaccine line-up.
Pursuing multiple paths to tackle COVID-19, Merck entered a collaboration for a vaccine with the non-profit research organization IAVI. Merck currently uses the same IAVI technology in its approved Ebola Zaire vaccine. Lastly, Merck licensed worldwide rights to an anti-COVID-19 therapy in phase 1 clinical trials by privately held Ridgeback Therapeutics.
Merck's healthy core business, now supplemented with an array of COVID-19 opportunities, makes owning the stock attractive. Don't forget the value of leadership. Ken Frazier, Merck's CEO, and Roger Perlmutter, president of Merck Research Laboratories, rank among the most seasoned and respected leaders in the pharma world. It all adds up to a sound investment over the long term.
2. Acadia Pharmaceuticals
Among the ranks of specialty drug developers, Acadia Pharmaceuticals (ACAD -1.47%) continues to shine. Nuplazid, its marketed drug for treating Parkinson's disease psychosis, posted first-quarter sales of $90.1 million, a 43% increase year over year.
This week Acadia updated investors following discussions with the Food and Drug Administration that it will stop enrollment early from two parallel pivotal trials for Nuplazid as a treatment for major depressive disorder (MDD). The company said that each trial enrolled "slightly more than 50%" of the planned patients. The data from both trials -- dubbed Clarity-2 and Clarity-3 -- will be combined for analysis, which is expected in Q3. If positive, Acadia plans to submit those data along, with prior clinical trial results, to support an FDA submission for approval in treating MDD. According to the National Institutes of Health, MDD affects more than 17 million Americans.
Lastly, Acadia reaffirmed its timing to submit a supplement New Drug Application with the FDA to gain approval for the use of Nuplazid to treat dementia-related psychosis. This could lead to an approval around the end of the year.
The FDA already designated the drug as a Breakthrough Therapy, which means it provides a substantial improvement over existing medicines for this serious condition. If both new indications are approved, Nuplazid's sales and Acadia's stock will continue to soar.
3. Aurinia Pharmaceuticals
This week Aurinia Pharmaceuticals (AUPH 0.79%) announced that it completed a regulatory submission to the FDA seeking approval for its drug, voclosporin. If successful, vocolosporin could be the first FDA-approved treatment for lupus nephritis, an inflammatory kidney disease.
The company requested a Priority Review from the FDA, which would compress the agency's time to make a decision from 12 to eight months. The company is planning for a commercial launch in 2021.
The bigger picture includes the potential of voclosporin as a treatment for dry eye syndrome, which affects more than 16 million in the U.S. annually, and another kidney disorder called focal segmental glomerulosclerosis. Results from a late-stage clinical trial for dry eye syndrome are expected in the fourth quarter.
If the dry eye data in Q4 look good and an FDA approval in lupus nephritis is around the corner at that point, then I can envision an acquirer swooping in to buy the company. It is basically a single product in two different formulations simplifying the acquisition. My guess is that Aurinia is acquired in the next 12 months. Investors with risk tolerance would do well to consider opening a position today.
