The biotech sector's pulled back slightly from its recent record highs, but the Nasdaq Biotechnology Index still managed to impress this week by racking up gains of nearly 2.3%. A number of biotech stocks have blown up for investors this year, but this past week was a quiet one for many of 2013's top movers.
Still, biotech's known for its boom-or-bust picks, and three biotech stocks soared this week. While Medivation's (NASDAQ:MDVN) big gains and Alexion Pharmaceuticals's (NASDAQ:ALXN) surge are just the latest for happy investors, Ariad Pharmaceuticals's (NASDAQ:ARIA) jump this week comes with a number of dangerous red flags attached. Let's catch up on all the action from the past week in biotech.
Medivation gets the good news
Medivation won big this week as this biotech stock roared to gains of 18.5%. Shares haven't done all that well this year with just over a 17% gain in 2013, but that didn't stop the stock from surging behind good news from a trial of its prostate cancer drug Xtandi in treating patients who haven't yet taken chemotherapy. Medivation's drug has already been approved by the FDA for limited indications, but the company's looking to expand the treatment options for Xtandi, which has garnered peak sales estimates of between $1 billion and $2 billion.
That's plenty of sales for Medivation, even with the company splitting the drug's profits with partner Astellas. Still, Xtandi will have to square off in this market against heavyweight Johnson & Johnson's (NYSE:JNJ) rival drug Zytiga. Zytiga's exploded onto the scene for Johnson & Johnson, racking up more than 71% sales growth over the first half of the year, and the drug looks to be en route to blockbuster status this year.
Nonetheless, Medivation still presents a good opportunity for investors in the wake of the successful trial data. Fellow analyst Brian Orelli sees this stock as fairly priced right now, but projects that if Xtandi's sales hit on the higher side of peak estimates, Medivation could have room to run higher.
Alexion shot higher by 15.4% this week to join in on biotech's run, but this stock didn't jump behind positive trial data. Instead, the FDA awarded the company's developmental Phase 3 asfotase alfa therapy ALXN1101 a breakthrough therapy designation this week. Alexion's made its name behind treating rare diseases, and it's hoping for another home run out of ALXN1101 down the line. For now, the FDA's given investors another reason for optimism.
Soliris, the most expensive drug in the world that has propelled Alexion to stardom and fueled this stock's rise to prominence, continues to perform well. The drug's sales jumped by 36% year-over-year for the third quarter, as Alexion reported its quarterly results this week. The company's hoping for $1.5 billion of sales out of the drug this year, and Soliris shows no signs of disappointing.
Ariad Pharmaceuticals might have jumped 33.3% this week to lead the biotech sector's gains, but beware this tricky stock. Ariad's fallen more than 81% year-to-date behind reported clotting risks from the company's chronic myeloid leukemia drug Iclusig. Iclusig's been approved in the U.S. and Europe to approve patients who haven't responded to other treatments, but Ariad's hopes to have Iclusig approved as a first-line treatment appear to have been dashed.
So why the gains this week? Chalk it up to investors hoping to capture this stock on a serious dip, but investors beware: Fellow analyst Sean Williams sees Ariad's road to profitability as a faint and fading hope now that Iclusig's taken a serious step back. Ariad might look like a great opportunity, but a big red flag has risen over Iclusig's potential. Invest at your own risk.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com, Apple, Facebook, Google, and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.