As the world rebounds from Covid, the biotech scene is heating up for the Summer of ’21. New players are entering the game, new products are being launched; deals are being made. But what should you be looking out for this summer? What are the events that could translate into stock profits for you? Analyst Aidan Asbill identified three companies with big catalyst events approaching…..
The biotech market is a very volatile industry with many drastic swings in stock prices. These drastic swings usually derive from a catalyst that can make or break a stock. Positive or negative news can be a catalyst that can skyrocket or tank a biotech stock overnight. This news can be derived from biotech company conferences, outcomes of clinical trial data, and a variety of other factors. For example, a positive catalyst for a stock could be a biotech company getting FDA approval to sell a product in the U.S. While on the other hand, the FDA denying a critical phase 3 drug can be a negative catalyst for a company. Every couple of months, the biotech industry experiences dozens of catalysts. This summer is poised to have a couple of key catalysts that will make or break stock prices. Three companies set up to have potential catalysts this summer are Seagen Inc ($SGEN), Biogen ($BIIB), and Regeneron Pharmaceuticals ($REGN).
Seagen is a Seattle-based biotech company that specializes in empowered monoclonal antibody-based therapies for the treatment of cancer. The company broke out onto the main stage with the release of its revolutionary treatment for Hodgkin Lymphoma in late 2019. However, the company is much more than a one-hit-wonder, with many more promising products in the company’s pipeline. Since 2019, the FDA has also approved two more of Seagen’s inventions. One of the drugs approved by the FDA is Tukysa a very effective chemotherapy drug that treats patients with breast cancer. Seagen agreed to collaborate on Tukysa and one other drug with Merck, which netted them $725 million in upfront licensing revenue in 2020 alone. With their collaboration with Merck, the company was able to double revenue and be profitable for the first time in 4 years. The company made $2.2 billion in revenue last year, which was an increase of 140% from the year before. Recently the company released its first-quarter results which saw a 42% increase in revenue year over year. However, it was a sharp decline in revenue compared to the last 2 quarters. In spite of Seagen posting impressive year-over-year revenue growth, the shareprice has been on a downward spiral most of 2021. The stock has been trending downwards in the past 6 months, with the stock having a 25% decline in price. This coincides with rising concern that the company is overvalued, which resulted in a sell-off. The company almost hit its 52-week low, but since then the company has started to recover and gain momentum. As it stands the company’s price to earnings ratio, which tends to represent a company’s “true value” has decreased from 50 to 40. This indicates that the stock is at a more modest valuation when compared to before.
With the market sentiment down on the stock, Seagen has been looking to fix this by expanding its commercialized products. The FDA is considering Padcev for use in additional bladder cancer patients. FDA is looking to make its final decision on Aug. 17. Currently, Padcev was granted accelerated approval for the treatment of patients who already had chemotherapy. This netted the company $34.5 million in sales, in the first quarter it was approved. However, with the FDA’s additional approval, Padcev is projected to make over $300 million in 2021. Seagen has also announced at least seven possible indications for each of its three most popular products. With the FDA’s approval, this could act as the catalyst for the stock price to spike with the additional revenue it will bring. With that being said, in the unlikely case, the FDA does not approve Padcev for wider use, this will probably reflect in another sell-off of the stock. With the company’s promising pipeline and expansion of its commercialized products, Seagen is a very promising growth company for the years to come.
Biogen is an American biotech company that specializes in research and treatment for neurological diseases. The company has been a big biotech name for quite some time, which has garnered them lots of attention. In 2019, Biogen was backed by the likes of Warren Buffett himself, when his company bought more than 192,000 shares. This was quite an unusual move for Buffett, who normally doesn’t invest in biotech companies. However, Buffett’s investment may not pay off. Biogen has had a sinking financial performance with 4 quarters of revenue decreasing. To make matters worse, the company has a lot of pressure from investors on FDA approval of aducanumab for treating Alzheimer’s disease. This approval is looking to be less and less likely though with an FDA advisory committee voting overwhelmingly against aducanumab. Three members of the committee were so against the drug they posted on their publications warning the FDA to not approve the drug. Despite this, the FDA does not always have to agree with its advisory committee, but it does so far more often than not.
Biogen has already had a negative catalyst when the company lost its patent rights for one of its key drugs Tecfidera last year. This court ruling allows other drug developers to develop a generic version of the drug, essentially take profits away from Biogen. The company previously thought they would have patent rights until 2028, but this is no longer the case. Now the company is at a critical point, with another negative catalyst looming if the FDA denies their Alzheimer’s drug. Alzheimer’s is a deadly form of dementia that affects roughly one in nine Americans over the age of 65 that has no cure. Biogen can be set on a new trajectory if aducanumab is approved it would become the first modern Alzheimer’s disease therapy approved. Alzheimer’s therapeutics market is expected to reach $13.57 billion by 2027. The company is also valued very modestly with a 14 P/E ratio, which is very reasonable when compared to some of its biotech peers. Biogen’s future will be determined on or before June 6, for aducanumab’s long-awaited approval decision. If the FDA denies aducanumab approval, Biogen’s future is very bleak. The company does have some late-stage candidates in their pipeline, but none will offer the returns that aducanumab can have.
Regeneron is a Biotech company based in New York that has a wide variety of all-star products including Dupixent, Eylea, and more. Outside of its all-star candidates, Regeneron is also one of the few companies selling treatment for COVID-19. The FDA authorized its antibody cocktail for high-risk patients, with the idea of stopping diseases and slowing down the high hospitalization rates. While some countries have slowly gotten a handle on the covid outbreak, other countries have not been as fortunate. With Regeneron’s cocktail aimed at these locations, the company could see big revenues. The company has done just that when its antibody cocktail was approved for emergency use in India. The approval was based on a phase 3 study, which found that the cocktail reduced the risk of hospitalization by 70%. With the news, the stock saw an 8% surge, but since then the stock has been keeping on its trend downwards. The company has seen a 25% dip from all-time highs but has continued to slip. Despite increasing revenue numbers, Regeneron Pharmaceuticals has a P/E Ratio of just 14, low for a company with more than 30 candidates in its pipeline. Investors seem weary of the stock with one of their biggest revenue drivers, Eylea losing its patent very soon. Market sentiment may change soon with a positive catalyst from Regeneron’s Libtayo treatment.
Libtayo has become a major growth driver for the company, having already secured FDA approvals for two types of skin cancers and was recently approved for advanced lung cancer in February. Libtayo is a prescription medicine used as a treatment for patients with severe cases of carcinoma. The Committee for Medical Products recommended the approval of Libtayo for a larger variety of patients with advanced lung cancer and basal cell carcinoma. The European Union has already approved Libtayo for the treatment of patients with advanced cell carcinoma. However, approval from the European Union for use of Libatyo on a larger variety of patients could result in a huge revenue increase. European Commission is expected to make a decision on Libatyo in the coming months. Libtayo is the first immunotherapy to receive a positive CHMP opinion for this indication, which bodes well for the drug getting approval. On top of this, Dupixent pulled in more than $4 billion in sales in 2020, with only 6% market penetration. If Regeneron is able to get approval for its 8 indications, it could increase its customer base for the drug from 190k to 4 million eligible patients in the U.S by 2023. Regeneron is a very promising company that is ready to gain momentum with positive news from their Libtayo or Dupixent drugs. While Eylea’s patent concerns may be troubling for investors in the short term, the company has far too many upcoming catalysts to look past its potential future.
The biotech industry can be a rollercoaster with catalysts that can be very detrimental or rewarding for stocks. Getting drugs and treatments into the market will require extensive testing and FDA approval. Companies in the biotech space can see 10% rises or drops in stock price overnight, based on positive or negative news about the company. This volatility can be scary to many investors. However, if an investor chooses stocks with solid fundamentals and strong conviction, they can ride out the storm and be met with a bright horizon.