Consider the risks before taking any chances with these clinical-stage drugmakers.
Investors looking for stocks that could make them filthy rich need look no further than the biotechnology industry. Shares of these high-profile stocks could lead to huge gains, but each one has some important caveats to consider.
CureVac: New and shiny
On Friday, Aug. 14, 2020, this clinical-stage biotech stock made its market debut in the U.S. priced at $16 per share, then vaulted 249% to end its first day of trading at $56 per share. Unprecedented demand for a safe and effective coronavirus vaccine could drive shares of this brand-new biotech stock even higher.
The development of CVnCoV, CureVac’s SARS-CoV-2 vaccine candidate, is funded in part by nonprofit groups like the Bill & Melinda Gates Foundation, and collaborative partnerships with biotech peers large and small. Since beginning operations 20 years ago, CureVac has received seven-figure upfront payments to develop new drugs from Eli Lilly (NYSE:LLY), Boehringer Ingelheim, and Genmab. In July, GlaxoSmithKline (NYSE:GSK) agreed to pay the Germany-headquartered biotech 120 million euros upfront to develop messenger RNA-based vaccines that do not include CVnCoV.
Before getting too excited about CureVac and its industry connections, it’s important to realize that this company’s entire pipeline is built around a messenger RNA (mRNA) technology platform with a dubious track record. CureVac has been developing mRNA-based drugs without a late-stage clinical trial success. At the moment, the company’s most advanced new drug candidate is CV8102, an experimental cancer vaccine that shrank tumors for just two out of 36 skin cancer patients treated in a phase 1 study.
CureVac’s SARS-CoV-2 vaccine program began a phase 1 clinical trial in June that was expected to include 168 healthy adults. We’re still waiting for signs of efficacy that could prompt a larger, pivotal study.
Sorrento Therapeutics: Way behind
This is another clinical-stage biotech that has been gaining attention in response to progress with an experimental drug meant to address the coronavirus pandemic. Sorrento Therapeutics is developing STI-1499, a DNA-based COVID-19 investigative antibody that could inhibit SARS-CoV-2 and prevent the virus from entering host cells.
Shares of Sorrento could make investors filthy rich if STI-1499 succeeds, but it’s important to understand how little we know about the company’s COVID-19 treatment candidate. Sorrento has reported encouraging results from animal models, but still hasn’t submitted an investigational new drug (IND) application to the Food and Drug Administration, which is required to begin testing a new drug candidate with people.
Earlier this month, the National Institutes of Health (NIH) began a phase 3 clinical trial program that will test experimental COVID-19 treatments from different companies in head-to-head trials. Eli Lilly’s LY-CoV555 is the first COVID-19 treatment in the NIH’s head-to-head study, but a dual-antibody cocktail from Regeneron (NASDAQ:REGN) probably isn’t far behind. If any of the experimental treatments that enter these NIH studies set a high bar for efficacy that STI-1499 can’t outperform, shares of Sorrento could turn south.
At recent prices, Sorrento Therapeutics boasts a $2.7 billion market cap that could rise manyfold if STI-1499 shows it has what takes to take on potential COVID-19 vaccines already in late-stage trials. Given how little we know so far, though, the odds of that success are extremely slim. Roughly 10% of drugs that succeed in phase 1 go on to earn FDA approval, and this company doesn’t have any coronavirus candidates ready to begin a phase 1 trial yet.
With CVnCoV in phase 1 trials at the moment, CureVac is miles ahead of Sorrento — but so is its $9.9 billion market cap. Since we don’t know if CVnCoV succeeded in phase 1, we have to put its chance of eventually earning approval way below average. That makes CureVac an ultra-risky stock to be avoided at the moment.
Author: Cory Renauer