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3 Beaten-Down Biotech Stocks You Can Buy Right Now

By Keith Speights - Apr 11, 2016 at 8:22AM

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Biomarin, Anacor, and Kite are down now, but there are good reasons to think better days may be ahead for these pharmaceuticals.

Image Source: Kite Pharma 

It's been a rough stretch for many biotech stocks, and while the major market indices have rebounded from their terrible starts to 2016, quite a few biotech stocks are still down year-to-date. Here are three beaten-down biotechs that investors with a long-term perspective should consider buying right now. 

1. Biomarin Pharmaceutical
Biomarin's (BMRN 0.56%) stock is down around 19% this year. One big reason for the market's disfavor: Regulators gave its Duchenne's muscular dystrophy drug candidate, Kyndrisa, a thumbs-down in January. The FDA determined that there just wasn't enough proof of the drug's effectiveness.

For now, at least, Biomarin's decision to buy Prosensa, the company that originally developed Kyndrisa, doesn't look too smart. The price tag paid -- $680 million up-front with potential milestone payments of up to $160 million -- really appears questionable in light of the FDA decision. 

But, aside from the Kyndrisa debacle, there's a lot to like about Biomarin. Sales of Vimizim, the biotech's enzyme replacement therapy for rare genetic disease Morquio A syndrome, nearly tripled year-over-year in 2015 to $228 million. Vimizim could reach peak annual sales of $800 million. Biomarin also has four other drugs on the market that combined for more than $656 million in sales last year.

The biotech's pipeline also holds plenty of potential. Biomarin recently announced positive results from the phase 3 clinical study of pegvaliase in treating adults with inadequately controlled blood phenylalanine levels. The company also reported good news from a phase 1/2 study of cerliponase alfa in treating children with CLN2 disease. Biomarin expects to pursue regulatory approval for both drugs later in 2016. 

2. Kite Pharma
There hasn't been much wind in Kite Pharma's (NASDAQ: KITE) sails so far this year. Shares are down more than 20% year-to-date. Good news could be on the way later in 2016, though, that could send Kite's stock soaring again.

Kite has four clinical studies in progress for cancer immunotherapy KTE-C19. The biotech expects results from the lead study of KTE-C19 targeting treatment of refractory, aggressive non-Hodgkin lymphoma in the second half of the year. If all goes well, Kite could file for FDA approval by the end of 2016. Analysts project peak sales for the cancer drug could reach $1.7 billion across all indications.

Another positive for Kite is its collaboration with Amgen. The small biotech and big biotech joined forces last year to develop chimeric antigen receptor (CAR) T-cell immunotherapies. Kite and Amgen expect to file the first of multiple investigational new drug applications in 2016 as part of their deal. 

Kite appears to be in pretty good shape when it comes to cash. The company reported $614.7 million in cash, cash equivalents, and marketable securities at the end of 2015. That should be enough to fund operations well into 2017 and perhaps even longer.

3. Anacor Pharmaceuticals
"Beaten down" might not be a strong enough term to describe the shares of Anacor Pharmaceuticals (NASDAQ: ANAC). The biotech has lost nearly half of its market cap in 2016.

We do need to keep things in perspective, though. Anacor's shares gained more than 250% last year. Then, the general slump for biotech stocks helped dragged Anacor down. Disappointing sales for the company's only commercial product, Kerydin, didn't help.

However, more success for Anacor could be on its way. The FDA recently accepted the new drug application for its dermatitis ointment, crisaborole. A decision on the drug is expected by Jan. 7, 2017. Analysts think crisaborole could generate peak annual sales of over $1 billion if approved.

Anacor reported cash, cash equivalents, and investments totaling $144.4 million as of the end of 2015. Investors worried that the company might move forward with a secondary stock offering that could dilute the value of existing shares received reassuring news last week. Anacor announced an offering of $250 million in convertible senior notes.

Best of the downtrodden
All three of these beaten-down biotech stocks could see better days ahead. If I had to pick only one to put money in, though, I'd lean toward Biomarin. 

There's still some hope for Kyndrisa, with a European regulatory decision expected in the second quarter. However, the best hope for Biomarin stems from its pipeline. Pegvaliase and cerliponase alfa appear to be on track for approval. With those two potential catalysts and continued momentum for Vimizim, I think Biomarin should end 2016 much better than it started it.

 

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