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Can Biotech Keep Last Year’s Momentum Alive in 2018?

Zacks

The year 2017 has been better than expected for the biotech sector. The NASDAQ Biotechnology index was up 18.7% in 2017. While drug pricing issue, competition and a slowdown in growth of key drugs are expected to remain a hangover in 2018 as well, approval of new drugs and strategic acquisitions by several big wigs in 2017 are likely to boost investors’ sentiments. Thus 2018 needless to say, holds promise for generating stellar returns.

The slowdown in mature products compelled bigwigs like Gilead Sciences GILD to undertake acquisitions to bolster pipelines. Gilead acquired erstwhile Kite Pharma and added Yescarta to its kitty. The company also inked an agreement to acquire Cell Design Labs. Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recently, Celgene, Inc. CELG inked a deal to acquire Impact Biomedicines for an upfront amount of $1.1 billion. The acquisition will add a late-stage candidate, fedratinib, a highly selective JAK2 kinase inhibitor, to Celgene’s pipeline. The candidate is being developed for the treatment of myelofibrosis and polycythemia vera. Celgene was on the look-out of new deals and acquisitions given a lacklustre 2017, having suffered a few pipeline setbacks and weakness in Otezla sales. Celgene currently carries a Zacks Rank.

Acquisitions and mergers will keep investors focused in the space in 2018. In addition, new drug approvals and label expansion of existing drugs will boost the top line of prominent biotech companies.


Amgen, Inc. AMGN looks poised for growth with several blockbuster drugs in its portfolio. Amgen’s new drugs — Prolia, Xgeva, Vectibix, Nplate and Sensipar — are performing well. The company recently won the FDA approval for the supplemental Biologics License Application (sBLA) of Xvega to expand the drug’s label for the treatment of multiple myeloma. Amgen carries a Zacks Rank #3.

Exelixis, Inc. EXEL is another biotech which looks poised for growth in 2018. The recent FDA approval of the label expansion of lead drug Cabometyx for the treatment previously untreated advanced renal cell carcinoma is expected to drive growth. The drug has performed impressively since approval in 2016. Exelixis currently carries a Zacks Rank #1.

Alexion Pharmaceuticals, Inc.’s ALXN blockbuster drug, Soliris, continues to perform well and the FDA approval of the drug for generalized myasthenia gravis will further boost sales. Among new products, while Strensiq is gaining momentum, the company redefined its strategy for Kanuma. Alexion carries a Zacks Rank #3.

Investors should also keep an eye on key upcoming PDUFA dates. Regeneron Pharmaceuticals, Inc. REGN is looking to expand label for its newly approved drug Dupixent. The drug is already approved for the treatment of adults with moderate-to-severe atopic dermatitis. The company is also evaluating the drug for treating asthma in adults (LIBERTY ASTHMA QUEST study). sBLA for the same is expected to be filed shortly. Regeneron is working on expanding lead ophthalmology drug Eylea label into additional indications. The FDA has accepted for review the company's sBLA for the label expansion of Eylea Injection. The company is seeking approval a for a 12-week dosing interval of Eylea Injection in patients with wet age-related macular degeneration (wet AMD) based on physician's assessment. The action date set by the FDA is Aug 11, 2018. Regeneron carries a Zacks Rank #3.

Another big biotech, Vertex Pharmaceuticals Incorporated VRTX is taking measures to strengthen its already dominant position in the cystic fibrosis market (CF). Vertex has two CF drugs — Kalydeco & Orkambi — in its portfolio with blockbuster potential. The company has developed another CF corrector tezacaftor (VX-661) — in combination with ivacaftor. Regulatory applications are under review in the United States (PDUFA Date: Feb 28, 2018) and the EU. A potential approval would further bolster demand. Vertex currently carries a Zacks Rank #1.

Medical – Biomedical and Genetics Industry 5YR % Return

Medical – Biomedical and Genetics Industry 5YR % Return

Conclusion

While the threat of biosimilars loom large on key drugs of most companies, we expect investors to remain focussed on this dynamic sector eying new drug approvals and important data read-outs.

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