Mark Schoenebaum, the biotech and pharmaceutical analyst at Evercore ISI, asked the Twittersphere for their favorite drug stocks going into next year.
What's your favorite stock for 2015 in biotech or Pharma?— Mark Schoenebaum (@MarkSchoenebaum) December 12, 2014
What was the top pick? A 21-way tie for first place. All 21 companies got a single vote.
I kid you not. As I'm writing this, more than 48 hours after Schoenebaum made his tweet, there wasn't a single duplicate in the bunch. And that's with quite a few people offering their second-best choice as well.
At first, the lack of consensus surprised me. You'd think there'd be some company that people on Twitter would have latched on to. Twitter is the perfect place for the herd mentality to kick in.
But looking at the list a little closer, there are a few themes that I think investors on Twitter have identified even if they didn't pick the same stocks.
As it should be, innovation was a big theme among Twitter's followers. One person recommended bluebird bio, which recently announced additional positive data suggesting its next-generation gene therapy treatment can cure patients with beta-thalassemia.
Big pharmas, which you usually don't associate with innovation, were also metioned. @GantosJ picked Bristol-Myers Squibb and Merck specifically for their immuno-oncology drugs that help block a repressor of the immune system that keeps the immune cells from attacking the tumor. Merck's Keytruda was approved in the U.S. this year, and Bristol-Myers Squibb's Opdivo is approved in Japan and is on track for an FDA approval before the end of March.
Both Sarepta Therapeutics and BioMarin Pharmaceuticals, which is buying Sarepta's rival Prosensa, made the list. Sarepta and Prosensa are developing drugs for Duchenne muscular dystrophy, for which there isn't a treatment currently. BioMarin already has drugs on the market for other orphan drug indications.
Intercept Pharmaceuticals' obeticholic acid is being tested in three different liver diseases, but nonalcoholic steatohepatitis, or NASH, is the indication with the most promise for the company, given the lack of treatments and the large market.
A couple of other companies on the list are also developing drugs for unmet needs: GW Pharmaceuticals is working on drugs for pediatric epilepsy, and Cempra's antibiotics are designed to treat bacteria that have become resistant to other antibiotics.
Quite a few picks -- Threshold Pharmaceuticals, TG Therapeutics, NewLink Genetics, and Merrimack Pharmaceutical -- are primarily focused on developing drugs to treat various cancers. Foundation Medicine, a diagnostic company with tests to help doctors know how to treat tumors, was also mentioned as a top pick by one of Schoenebaum's followers.
While it's tempting to call this a trend, there are probably more biotechs focused on cancer than on any other disease, so it's hard to read too much into the number of picks in this category.
Two recommended companies have a combined market cap of $37 million. I know nothing about either company and don't really care to investigate further. Investors buying shares are pricing the companies as if they're long shots.
Might one hit? Sure, but most investors will come out ahead by avoiding biotech penny stocks. That goes double if they're recommended in 140 characters by people on Twitter whom you've never met.
Finally, you need a sense of humor to invest in this industry. One person chose Chiron, following up with an "oh ... wait." Clearly a joke, since Novartis acquired the biotech in 2006. The parody account @BioTurdCEO suggested Dendreon, which declared bankruptcy last year. Considering the source, I think it's safe to assume that was a joke.
Former-CNBC-reporter-turned-PR-guy Mike Huckman didn't offer any suggestions but instead wondered where he put his crystal ball and suggested a dartboard might be of use to answer Schoenebaum's question. Sometimes it feels like that, Mike.
Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends BioMarin Pharmaceuticals and Twitter and owns shares of Twitter. 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.
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