Biotech stocks have been struggling for more than two years. However, some companies with significant clinical and/or regulatory milestones have been able to overcome this trend and deliver impressive returns for investors.
In December, Bluebird Bio (BLUE 1.13%) and Structure Therapeutics (GPCR -0.10%) both have important events that could boost their stock prices in a big way. Here's what investors need to know right now.
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A potential blockbuster gene therapy
Bluebird Bio is awaiting a regulatory decision from the Food and Drug Administration (FDA) for its gene therapy, lovo-cel, indicated for patients with severe sickle cell disease (SCD). The FDA is slated to hand down its decision by Dec. 20.
This landmark gene therapy has the potential to be a blockbuster product, with peak annual sales forecast to top $1 billion within a few short years. And according to some analysts covering the biotech, it could help the company become cash-flow positive by 2026.
The gene therapy would likely face competition both from conventional SCD treatments, like Oxbryta from Pfizer and exa-cel (or Casgevy in the U.K.), a gene-edited SCD therapy from CRISPR Therapeutics and Vertex Pharmaceuticals. Bluebird Bio has a market capitalization of around $425 million at the moment, so this small-cap biotech stock could see a significant increase in its share price if it lands this historic approval.
However, the company's balance sheet isn't particularly robust, and it would likely need to raise more capital following approval for lovo-cel. For long-term investors, though, a capital raise may actually be a positive development as it would eliminate a key risk factor from the company's near-term outlook.
Another weight loss/type 2 diabetes contender
Metabolic disorders such as type 2 diabetes and obesity have become a point of emphasis in the pharmaceutical world in recent years. The leading players in this field are Novo Nordisk and Eli Lilly, with their breakthrough drugs semaglutide and tirzepatide, respectively. However, Pfizer and Structure Therapeutics, among others, have all been trying to catch up to these frontrunners with their orally administered therapies for type 2 diabetes and weight loss.
For example, Structure Therapeutics is trialing GSBR-1290, an oral GLP-1 receptor agonist indicated for weight loss in both healthy adults and those with type 2 diabetes. The company is expected to report the results of a phase 2a trial of the drug in patients with type 2 diabetes next month. Although this early-stage trial may not seem like a big deal due to its small sample size, the market potential of this class of drugs is enormous.
Turning to the specifics, GLP-1 agonists and their derivatives are expected to generate more than $200 billion in sales by the mid-2030s, according to multiple industry experts. Novo Nordisk and Eli Lilly will likely dominate this market due to their first-mover advantage. However, there may also be enough demand for latecomers like GSBR-1290 to achieve blockbuster status. As a result, this upcoming data release could be a significant catalyst for the mid-cap biotech.
