Rising interest rates, sky-high inflation, and geopolitical turmoil have all conspired against U.S. stock markets this year. Despite a bear market rally over the past seven weeks, every major U.S. stock exchange is still down big for the year.
For instance, the S&P 500 is currently in the red by 13%, while the Dow Jones Industrial Average has shed nearly 10% of its value, and the Nasdaq Composite is underwater by a hefty 20% for the year.
This unrelenting bear market hasn't ensnared every equity, however. Shares of Rhythm Pharmaceuticals (RYTM -0.89%), SIGA Technologies (SIGA 0.19%), and Veru (VERU -4.44%) have all blasted higher in 2022. Here's why this trio of healthcare stocks have been able to defy the 2022 bear market.
1. Rhythm Pharmaceuticals: A rare disease specialist
Rhythm's shares have gained a stately 145% so far this year. The drugmaker's stock has caught fire of late thanks to the strong commercial launch of its rare disease therapy, Imcivree.
Imcivree is a precision medicine designed to restore dysfunctional MC4R signaling in patients suffering from impaired MC4R pathway function. The drug recently won a key approval as a treatment for chronic weight management in adult and pediatric patients with Bardet-Biedl syndrome, an inherited condition that impacts multiple organ systems.
The main issue at play here is Imcivree's enormous commercial potential. In the U.S. alone, Imcirvree is staring down a nearly $2 billion a year sales opportunity for this single indication. Globally, the drug could achieve upwards of $3 billion in annual sales as a treatment for chronic weight management in patients with Bardet-Biedl syndrome.
That's an enormous market for a biotech with a market cap of $1.24 billion at the time of this writing. As a result, Rhythm's shares probably won't cool off anytime soon.
2. SIGA Technologies: A monkeypox player
SIGA Technologies stock has risen by an astounding 179% in 2022. The biopharma's shares are skyrocketing this year in response to the emergence of monkeypox as the latest public health emergency. The key reason investors have piled into SIGA Technologies is the company's compassionate use monkeypox therapy known as Tpoxx (tecovirimat).
Tpoxx is a Food and Drug Administration-approved therapy for smallpox. However, the drug can be prescribed under the compassionate use pathway for monkeypox patients who are either severely ill or at risk of developing severe disease. Although a vaccine does exist for monkeypox, there are currently no FDA-approved therapies available for patients who are already infected. As a result, there is a clear-cut need for new treatment options for active monkeypox infections. Tpoxx could thus fill a critical gap in care.
Is SIGA Technologies stock still a buy? This biotech stock definitely qualifies as a speculative play. After all, there is no guarantee that Tpoxx will get full FDA approval for monkeypox. Now, the drug is being trialed in the U.K. for this indication, with top-line data expected by Christmas of this year. But it's also unclear whether these data would be enough to convince U.S. regulators to green-light the drug.
All told, the large number of moving parts to this story means that this high-flying stock is arguably only suited for aggressive investors.
2. Veru: A COVID-19 stock
Small-cap biotech Veru has quadrupled in value in 2022. The main catalyst fueling Veru's rocket-like move higher this year is the company's experimental COVID-19 treatment, sabizabulin. Sabizabulin is an orally administered therapy in development for hospitalized COVID-19 patients.
In a late-stage clinical study, the drug was shown to reduce the risk of death among hospitalized COVID-19 patients by 55.2%. Based on these encouraging trial results, Veru is seeking emergency use authorizations for the drug in the U.S., EU, and U.K. If approved across these territories, Wall Street optimists think sabizabulin could surpass $1 billion in annual sales at peak.
Is Veru's stock a screaming buy? With a market cap of $1.44 billion and a potential blockbuster in hand, this small-cap biotech could have a lot more room to run. That said, the drug's sales estimates have been all over the map for this indication.
On the low end, some analysts think sabizabulin will top out at around $250 million as a treatment for hospitalized COVID-19 patients. Under that scenario, Veru's stock would probably struggle to maintain its recent gains -- at least until the company's other value drivers in breast and prostate cancer come online.
All told, this red-hot biotech stock might be a worthwhile speculative buy in light of sabizabulin's sizable commercial potential, along with the company's deeper value proposition as an anticancer stock.