Last week wasn't a great one for the overall stock market, but it worked out well for investors holding some of the best stocks in the healthcare sector.
|Company (Symbol)||Price Change During Week Ended Oct. 23, 2020||Market Cap|
|Align Technology (NASDAQ:ALGN)||40%||$37 billion|
|Kodiak Sciences (NASDAQ:KOD)||26%||$4.3 billion|
Here's what drove these stocks higher, and why they can probably keep on climbing.
1. Align Technology: A big rebound
Translucent braces are increasingly popular, and this company markets a leading brand, Invisalign. Shares of Align Technology shot up last week after the company reported third-quarter revenue that rose 20.9% year over year to $734 million.
Efforts to contain the global COVID-19 pandemic led Wall Street to assume much of Align's business would be gobbled up by its main competitor, SmileDirectClub (NASDAQ:SDC), which runs a competing service that doesn't require in-person visits. Align's products require 80% fewer trips to the dentist than traditional braces, but an inability to visit anyone because of the COVID-19 pandemic still pressured second-quarter revenue 41% lower year over year to $352 million.
Align Technology stock popped because the company delivered a third-quarter performance that blew past expectations. The company reported a surprising 118% year-over-year increase in total leads thanks in part to millions of people reminded constantly via Zoom meetings that their teeth don't look as nice as they could.
2. Kodiak Sciences: Heavier is better
Wet age-related macular degeneration (wAMD) is a leading cause of vision loss that can be slowed down with regular injections of anti-vascular endothelial growth factor (VEGF), a class of proteins that prevent unnecessary blood vessel formation. The leading anti-VEGF treatment for wAMD and related causes of adult-onset blindness is a blockbuster drug from Regeneron (NASDAQ:REGN) called Eylea, but perhaps not for much longer. Eylea sales are on pace to top $7 billion this year and Kodiak Sciences may have a better treatment option in late-stage clinical trials.
Eylea and other anti-VEGF drugs are injected directly into anesthetized eyeballs, a procedure that patients, physicians, and end payers want to limit as much as possible. Kodiak's testing an anti-VEGF candidate that is designed to carry heavy chains of a benign biopolymer that make it make it stick around much longer than competing treatments.
Last week was a quiet one for Kodiak Sciences, but anticipation for upcoming clinical trial readouts drove the stock higher. Investigators running the Dazzle study began treating wAMD patients with Kodiak's long-lasting anti-VEGF candidate KSI-301 in a head to head comparison against Eylea last year. Earlier this month, the company also started treating people with related conditions, diabetic macular edema (DME) and retinal vein occlusion (RVO).
For some patients, today's anti-VEGF drugs are known to drop down to ineffective concentrations during the days preceding scheduled maintenance doses. More scheduled doses mean more opportunities for obstructive blood vessels to limit patients' vision. This means there's a good chance KSI-301 will outperform Eylea in clinical trials and in the commercial space, but it's going to take time.
More gains ahead
In addition to the Zoom effect, Align Technology's also benefiting from a growing physical footprint. Third-quarter sales of the imaging systems that produce blueprints for its aligners rose 20% year over year to $113.4 million. Among the 70,000 doctors who received clear aligners from Align Technology in the third quarter, 5,800 were first-time customers.
Align Technology's investments abroad are working as hoped. International sales rose 30% year over year in the third quarter and a new Chinese manufacturing facility, the company's first, could accelerate sales growth in the region.
For Kodiak investors who can wait, 2022 could be an exciting year with top-line data from pivotal studies for three indications. If results we've already seen from KSI-301 carry over the company could send the FDA new drug applications for wAMD, DME, and RVO in 2022.