Investors looking for stocks that can triple their money found what they were looking for in the biotech industry quite a few times this year. Some of those rockets are going to keep climbing, but most will eventually fizzle out.
Surface Oncology (SURF 0.62%) and Replimmune (REPL 2.76%) are both clinical-stage drugmakers trying to find new ways to fight cancer. Both have more than tripled investors money this year, despite just beginning to show signs their experimental treatments might work.
Here's why one's a great stock to buy now and the other probably doesn't deserve all the attention it's received lately.
1. Surface Oncology
Shares of this clinical-stage cancer drug developer have gained around 380% in 2020. Despite the big gains, this company's market cap is still a sprightly $351 million at recent prices.
Surface Oncology started 2020 at a low point because investors were still reeling from a safety issue that shut down the company's first clinical-stage program, SRF231 shortly after the company's stock market debut in 2018.
Things began perking up for Surface Oncology this spring with the start of a phase 1 trial with SRF388, an antibody that targets IL-27 in an attempt to unleash a stronger immune response among liver cancer patients.
In March, Surface Oncology began a first-in-human trial with SRF617, an antibody that targets CD39 because an overabundance of CD39 near tumors is associated with weak immune responses. In May, the stock surged when Merck (MRK 1.43%) agreed to supply Surface Oncology with doses of its blockbuster cancer immunotherapy, Keytruda, to be used in combination with SRF617.
Sales of Keytruda will probably exceed $20 billion in 2022 because it's been proven to fight cancer by disabling a sneaky method some tumors use to hide from immune systems. If SRF617 can be proven to work in concert with Keytruda, shares of Surface Oncology could explode higher.
This company's experimental cancer treatments take advantage of oncolytic viruses, which are viruses that naturally prefer infecting cancer cells. This isn't a new concept, in 2015 the FDA approved an oncolytic virus called Imlygic to treat advanced-stage skin cancer patients after it shrank tumors for 16.3% of patients for six months or longer.
Sales of Imlygic never got off the ground because the treatment didn't lead to a measurable long-term survival benefit. The dramatic results we've seen from the first patients treated with Replimunne's next-generation oncolytic viruses, though, suggests the company's new approach can succeed where its predecessor stumbled.
Imlygic commands cancer cells to produce GM-CSF, a protein that stimulates a local immune system response. Replimune's lead candidate, RP1 gets cancer cells to produce GM-CSF plus genetic blueprints for a fusogenic protein that appears to boost efficacy.
Shares of Replimune soared in October when the Society for Immunotherapy of Cancer (SITC) accidentally published a presentation not scheduled for release until SITC's annual meeting a few weeks later. Investors were most interested in results from a trial with 9 advanced-stage cancer patients that had RP2 injected into a variety of tumors that kept getting bigger despite multiple lines of previous treatment. RP2 is similar to RP1 with the addition of genes for a protein similar to the active ingredient in Yervoy, a blockbuster cancer immunotherapy from Bristol Myers Squibb.
Disease worsened for six of nine patients at the first observation following treatment with RP2, but there were dramatic improvements among three patients that responded. Injections of RP2 shrank metastatic tumors in the livers of two patients that had progressed despite previous treatment with drugs similar to Keytruda. A third patient with parotid gland cancer that progressed despite multiple lines of standard chemotherapy achieved a complete response in October.
Time to buy?
Surface Oncology asked Merck for Keytruda with the intention of using it in combination with SRF617 during this candidate's human-proof-of-concept study. It's been nearly six months since the press release and Surface Oncology still hasn't modified the study's government database entry to reflect the change.
In June 2018, Novartis (NVS 1.85%) began a study with NZV930, a candidate the big pharma licensed from Surface Oncology. To date, neither company has had anything encouraging to report. These missed opportunities to prove itself are good reasons to avoid this stock until we see some positive clinical trial results for at least one of its candidates.
There have been hundreds of attempts to combine experimental treatments with drugs like Keytruda, but none have proven themselves effective enough to earn FDA approval. While Surface Oncology attempts aren't making a great deal of progress, early data from Replimmune is compelling.
Whether Replimmune's candidates can be shown to succeed in combination with other cancer therapies or not, monotherapy data that RP2 produced for heavily pretreated patients make this a top biotech stock to buy now.