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3 Top Biotech Stocks for Spring 2021

By Jason Hawthorne - Mar 25, 2021 at 6:10AM

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Though these stocks have dropped, upcoming news offers hope for them to rebound.

What do playing right field in baseball, deep-sea fishing, and investing in small biotech stocks have in common? Long periods of boredom followed by moments of intense drama. For shareholders of bluebird bio (BLUE 5.93%), Sage Therapeutics (SAGE 4.03%), and Trillium Therapeutics (TRIL), spring announcements may pierce the monotony with updates on key drug development programs. After those stocks' recent struggles, management teams and shareholders are hoping the news will get their share prices moving back toward previous highs.

Two workers in a laboratory with pipettes and chemical samples.

Image source: Getty Images.

1. bluebird bio

Bluebird has been focused on gene therapies for severe and genetic diseases since its founding in 2010. The company went public in 2013 shortly after signing a collaboration agreement with Celgene. The stock peaked 900% higher in 2018 when the two companies agreed to co-develop and co-promote Bluebird's treatment for multiple myeloma. 

Since then, the stock has fallen nearly 90% after a series of regulatory missteps, clinical trial delays due to COVID-19, and questions about the safety of its gene therapy. Those safety questions arose after two patients who were treated for sickle cell disease were diagnosed with cancer. Bluebird's chief medical officer quit, but plans to transition his responsibilities to a successor over the next six months as the company deals with the fallout. For now, the company is working with regulators to resume trials after it said an investigation into the first case revealed its therapy was "very unlikely" to be the culprit.

Those issues couldn't have come at a worse time for Bluebird. After requesting more information about the company's manufacturing processes last May, the U.S. Food and Drug Administration is due to rule on its multiple myeloma treatment by March 27. Shareholders are hoping results will inject some positivity into a story that started with big aspirations but seems to be faltering.

Another potential catalyst for Bluebird's stock is the plan to spin off its cancer treatment programs into a separate company. This could open the door for those programs to be acquired, giving Bluebird more cash to spend on R&D for genetic and rare disease treatments. Any bump in the stock may be short-lived, but after two years of declines in the share price, investors are ready for any good news they can get. 

2. Sage Therapeutics

Sage Therapeutics is a biotech company focused on treating central nervous system disorders. Its most promising drug, zuranolone, failed a key study treating postpartum depression and major depressive disorder. That failure in late 2019 caused the stock to drop more than 80% and led management to draw up a new plan for seeking approval. The new plan involved initiating short-term studies to evaluate two-week dose regimens. The approach salvaged some data from the previous studies and positioned the company to submit for FDA approval quickly. The data is starting to come in.

Management recently shared preliminary results from the 50-milligram arm of the study and complete data from the 30-milligram cohort. The news was encouraging. More than 80% of patients who received 50 milligrams (mg) and 70% of those who received 30 mg had a clinically meaningful response. Patients who did benefit from zuranolone had received an average of 2.2 treatments. Perhaps anticipation of positive results from a better trial design is what has the stock up 155% since last March. However, it's still 60% lower than it was in June 2019. Final data for the 50-milligram study won't be available until later this year.

Sage has made some crushing sacrifices to give the drug a chance at success. The biotech laid off half of its workforce last year, changed CEOs, and inked a deal with Biogen that provided a much-needed cash infusion, but split its share of future proceeds from its tent-pole depression treatment. Despite the pain, those actions might end up saving shareholders from a worse outcome. The company ended 2020 with more than $2 billion in cash and with phase 3 trials ongoing. After a series of ups and downs, shareholders may finally be seeing some light at the end of the tunnel.

3.Trillium Therapeutics

Shares of Trillium were trading at $0.30 when Jan Skvarka was hired as its new CEO in September 2019. Few could have foreseen the impact hiring the former Bain & Company partner and Harvard Business School graduate would have. After new management focused the company's development efforts, transformed the organization, and got a $25 million investment from Pfizer, the stock rocketed to $20 by the end of November 2020.

Trillium's focus is now on cancers that affect the blood, bone marrow, and lymph nodes, as well as solid tumors. The company's drug candidates, TTI-621 and TTI-622, target the CD47 protein that resides on the surface of many cells, and is overexpressed in cancer cells. The protein essentially hides the cell by signaling to the body's immune system not to destroy it. This more-focused approach was validated when Gilead Sciences (GILD -0.18%) paid $4.9 billion to acquire CD47-focused biotech Forty Seven in March.

The latest data released at the American Hematological Society (ASH) in late November showed that both candidates were able to achieve a response rate in patients as a monotherapy -- without being administered in combination with other treatments. TTI-622 is still being studied in combination with other treatments to see if it can achieve even better results. The data from those studies will give more clarity about both its potential efficacy and which indications the company may target in further clinical trials.

Management is slated to provide an update on April 28. The stock will undoubtedly react to whatever news is delivered. The current share price of $10.50 is about halfway between where it sat when Skvarka was hired and the peak it touched shortly before the ASH presentation. With the trials focusing on lymphoma, and the global lymphoma treatment market estimated to be $17 billion next year, Wall Street could send the shares soaring back to those earlier highs if Trillium's drugs' efficacy persists as more data comes in.

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Stocks Mentioned

bluebird bio, Inc. Stock Quote
bluebird bio, Inc.
$3.57 (5.93%) $0.20
Pfizer Inc. Stock Quote
Pfizer Inc.
$49.92 (-0.93%) $0.47
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$62.37 (-0.18%) $0.11
Biogen Inc. Stock Quote
Biogen Inc.
$199.11 (2.46%) $4.79
Sage Therapeutics, Inc. Stock Quote
Sage Therapeutics, Inc.
$30.71 (4.03%) $1.19
Trillium Therapeutics Inc. Stock Quote
Trillium Therapeutics Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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