Biotech stocks can be a lot like lottery tickets: They're worth either a whole lot or almost nothing. It's the appeal of the grand slam, the allure of striking it rich overnight, that makes them such attractive stocks.
But this risk-reward proposition also means that you have to keep a close eye on the developments at your biotechs. Like few other sectors in the investing world, news in the biotech space can make or break a company overnight. Here are some developments taking place at some biotechs that you should be watching.
Last month, Cell Therapeutics
While the FDA's agreement to re-evaluate Cell Therapeutics' new drug application on Feb. 9 held some hope for investors, the company has since voluntarily withdrawn its NDA, indicating that it needed more time to prepare for the meeting. Given that the company has already had all of the data for the clinical trials since the FDA's original ruling, it's worrisome to think about what else Cell Therapeutics thinks it needs to do to ready itself.
While pixantrone has seen some setbacks in its review process with the FDA, it has gotten a positive recommendation from the Committee for Medicinal Products for Human Use, or CHMP, to be approved by the European Commission, which is the European version of the FDA. As Brian Orelli points out, positive recommendations from the CHMP almost always result in approval by the EC.
While this likely approval has potential to let pixantrone bring in some revenue from European patients, successful sales of the drug depend on the cost-benefit decisions made by the centralized health-care systems in most European countries. When a drug's clinical trials do not produce definitive results (as was the case with pixantrone), these countries are less inclined to offer it in their medical plans.
Earlier this week, the company also announced that it was starting a phase 1 dose-finding trial of cabozantinib in combination with abiraterone in men with metastatic castration-resistant prostate cancer. The study will try to find the maximum tolerated dose of cabozantinib in combination with abiraterone and prednisone.
While failing its phase 3 trials would be a bad sign for its success in treating multiple myeloma, there are many cases of drugs working on one type of cancer but not another. For example, Bayer and Onyx Pharmaceuticals collaborated on a drug called Nexavar, which failed to work on lung cancer but works on liver and kidney cancers. Also, Pfizer has a drug called Sutent, which does not work on breast, prostate, lung, or liver cancer, but works on kidney cancers and a few others.
With high-risk propositions on sometimes unproven drugs, biotech investing is not for everyone. And that's OK. If you'd like to invest in lower-risk companies with more certainty of success, check out our special free report: "3 American Companies Set to Dominate the World." It's available free for a limited time. Just click here to get your copy.