The end of the year brings with it yuletide cheer, gatherings with friends and families, and perhaps even the swapping of holiday gifts. For healthcare investors, the end of the year also brings with it time to reflect on the year that was -- and oh what a year it was!
As of this writing the SPDR S&P Biotech ETF has risen 41% for the year, nearly four times as much as the broader S&P 500. Furthermore, close to one in 10 healthcare stocks with a market valuation of $300 million or more saw their stock rise by at least 100% this year. If you weren't invested in the healthcare sector this year you've essentially been left on the sidelines to reflect on what could have been.
The good news for you, whether you were invested in healthcare this year or not, is that there are plenty of healthcare stocks to watch in 2015 that could deliver sizable moves; though understandably investors need to realize that "sizable" could just as easily mean moves to the downside.
Today, we'll take a look at three healthcare stocks that I suspect have the potential to deliver big moves for investors in 2015.
No. 1: Exelixis (NASDAQ:EXEL)
As a shareholder of Exelixis I can attest firsthand that it was an awful year. Although there are still a few weeks left, Exelixis could take the title as the worst-performing healthcare stock of 2014 and may see its shares lose around 80% for the year when all is said and done.
The impetus for the drop was the release of the COMET-1 data at the beginning of September that showed Cometriq was unsuccessful at meeting its primary endpoint of a statistically significant improvement in overall survival for patients with metastatic castration-resistant prostate cancer (mCRPC). I will note, though, that Cometriq did deliver a statistically significant improvement in progression-free survival.
Why's this important? Even if Exelixis won't be gaining an additional label indication for Cometriq in mCRPC, it does have critical data due for its phase 3 METEOR trial by the second quarter of 2015 for patients with metastatic renal cell carcinoma. This study could potentially be easier for Exelixis to meet the primary endpoint since it's not based on survival. Instead, the primary endpoint focuses on a statistically significant improvement in progression-free survival. This is noteworthy as Cometriq's approval for metastatic medullary thyroid cancer and its failed COMET-1 trial both showed marked PFS improvements.
Without question the market for mCRPC would have been more desirable, but it's not out of the question that Cometriq generates $250 million-$350 million in sales with a metastatic renal cell carcinoma indication based on my estimates. I'm still holding my Exelixis shares with no plans to sell and would suggest it's a top healthcare stock to watch in 2015.
No. 2: MannKind (NASDAQ:56400P706)
MannKind shareholders will enter a new year for the first time ever without wondering whether or not their company's lone pipeline product will be approved by the Food and Drug Administration.
In late June the FDA announced that it had approved MannKind's inhaled diabetes drug Afrezza to improve glycemic control for type 1 and type 2 diabetics. It's certainly been a long time coming for MannKind considering that it had received a complete response letter in 2011 that sent the company back to the drawing board on its delivery device. Afrezza is also particularly intriguing because it could quickly improve patient convenience and quality of care since there's no needle involved as with a traditional insulin shot.
Even more importantly, MannKind found a marketing partner in Sanofi, which provided MannKind with $150 million in upfront cash and fronted MannKind up to $175 million in expenses. The deal also puts an experienced pharmaceutical company behind the marketing of Afrezza.
Set to launch in the first-quarter of 2015, Afrezza has a shot to be a blockbuster considering there are 29.1 million diabetes patients in the United States. But, will it sell? That's going to be the primary driver of MannKind next year.
Afrezza's price is still very much up in the air, although it's widely believed to cost more than a traditional insulin shot. It remains to be seen whether diabetic patients will pay more for the convenience of not using a needle. Additionally, Afrezza's label comes with a warning against the use of the drug for patients with asthma, COPD, or who smoke. I'm curious to see how much this will adversely affect Afrezza's sales potential.
Long story short, all eyes will be on MannKind's earnings reports in 2015.
No. 3: AbbVie (NYSE:ABBV)
It's also going to a really interesting year for pharmaceutical company AbbVie (NYSE:ABBV) which is widely expected to gain approval from the FDA for its next-generation hepatitis C drug combination for genotype 1 patients. AbbVie's combo has been on par with Gilead Sciences' (NASDAQ:GILD) Sovaldi and Harvoni in terms of eliminating detectable levels of HCV in genotype 1 patients (the hardest to treat, but most common type of HCV) throughout its clinical studies; an approval from here seems like a formality.
The big question that'll be answered in 2015, assuming an FDA approval, is how AbbVie's direct-acting antiviral combo will compete against Gilead's drugs. The price for AbbVie's combo and the launch of the drug has Wall Street and investors intrigued. Gilead's Sovaldi and Harvoni come with price tags of $1,000 per pill and $1,125 per pill, respectively, causing the uninsured and most insurance companies to cringe in horror. If AbbVie's combo is markedly cheaper than Gilead's two HCV drugs, it's possible that AbbVie's launch could outpace even Sovaldi's.
Don't get me wrong, I believe there's plenty of room for Gilead, AbbVie, and even a handful of additional players to enter the HCV space and succeed. But, the wild card here is the pharmacy-benefits managers which ultimately have a say as to whether or not Gilead's HCV drugs remain on the preferred coverage list. You could certainly say Gilead and AbbVie are both healthcare stocks to watch in 2015, but my eyes are squarely on AbbVie, as it could be a stellar or thoroughly disappointing year.
Sean Williams owns shares of Exelixis, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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