BridgeBio Pharma (BBIO 2.26%) and Roivant Sciences (ROIV 1.38%) are two biotech companies that have been generating a lot of buzz lately. Both companies have promising pipelines of experimental drugs that target areas of unmet medical need, and both have upcoming catalysts that could boost their share prices significantly. Here's why you should keep an eye on these two innovation-driven growth stocks this week.
BridgeBio Pharma: A key clinical readout is on tap
On Monday, BridgeBio's management team is slated to announce top-line results from the phase 3 ATTRibute-CM clinical study in patients with transthyretin amyloid cardiomyopathy (ATTR-CM), a rare heart condition caused by the buildup of a misfolded protein. The pivotal stage trial is evaluating the orally administered small molecule acoramidis.
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Although other potent drugs such as Pfizer's (PFE 0.55%) Vyndaqel and Vyndamax tablets are commercially available for ATTR-CM, the biotech's brain trust believes the market is large enough to support multiple therapies. BridgeBio's internal estimate suggests the ATTR-CM market opportunity may be as high as $15 billion per year.
Investors appear to be anticipating positive trial results. BridgeBio's shares jumped by nearly 15% in after-hours trading Friday after the company announced Monday's 8 a.m. ET conference call to discuss the trial results.
If so, the biotech's shares ought to soar this week. Acoramidis has the potential to achieve blockbuster sales status in this setting (greater than $1 billion a year), and it has reportedly been a focal point for suitors considering the biotech as a potential acquisition target.
What's the risk-to-reward ratio? Wall Street analysts covering the stock think a positive readout could push the stock up by as much as 60% next week. And a buyout in response to this news later this year could possibly fetch shareholders another 30% on top of these gains, and quite possibly a lot more depending on the strength of these trial results. On the downside, a failure is likely to spark a sell-off, which may lead to losses in excess of 25%, based on the state of the company's other pipeline assets.
Roivant Sciences: A $7 billion payday may be close at hand
Last week, The Wall Street Journal reported that Roche is considering a $7 billion deal to acquire Roivant's experimental inflammatory bowel disease drug, RVT-3101. Roivant acquired the novel therapy from Pfizer late last year through a collaborative deal that resulted in the creation of a new subsidiary known as Telavant. As part of the deal, Pfizer took a 25% stake in the subsidiary and retained RVT-3101's commercial rights outside the U.S. and Japan, a fact that might complicate a sale.
Keeping with this theme, Pfizer has been ramping up its immunology pipeline in recent years through a combination of internal pipeline development and business development activities. As such, this out-licensing deal for RVT-3101 probably had more to do with antitrust issues than the drug's potential, so selling it to a major competitor like Roche might be bad for business.
What's the big deal? A $7 billion windfall is a tidy sum for a drugmaker with an $8.9 billion market cap at the time of this writing. It's hard to predict exactly how the market might react to a sale of this magnitude. But Roivant's stock should boom if Roche does indeed press forward with this rumored transaction.
What's the downside? The good news is that Roivant's stock screens as grossly undervalued right now, which should minimize the risk to investors in the event a sale fails to materialize. After all, RVT-3101 is targeting a multibillion-dollar-a-year commercial opportunity, and the biotech sports a host of other high-value assets in its robust and varied clinical pipeline.
