Cory Renauer


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.

Here’s what investors want to know about CureVac (NASDAQ:CVAC) and Sorrento Therapeutics (NASDAQ:SRNE) before jumping headfirst into the shallow end of the stock market.

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.

Tough odds

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

Source: Fool: 2 Ultra-Risky Biotech Stocks That Could Make You Filthy Rich

Warren Buffett’s holding company has disclosed its first biotechnology investment.

The legendary holding company run by Warren Buffett, Charlie Munger, and a growing team of younger tech-savvy asset managers recently unveiled its first biotechnology investment. The latest holdings disclosure form filed by Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) revealed a new nine-figure investment into one of the best-performing biotech stocks of all time, Biogen (NASDAQ:BIIB).

A small boat in well-charted water

Berkshire Hathaway is new to biotech investing, but Biogen’s been delivering market-beating returns for decades. A successful line of multiple sclerosis (MS) drugs has pushed the stock 1,360% higher over the past 20 years.

Berkshire isn’t risking a great deal on its foray into the biotech investing, at least relative to the rest of its portfolio. At the end of 2019, Berkshire held shares of Biogen worth $192 million, which works out to around 0.8% of the holding company’s overall portfolio.

Hoping for the best

At the moment, Biogen leans heavily on a line of MS products that have stagnated lately in response to fierce competition. In addition to MS pressure, the company’s lead growth driver at the moment, Spinraza, is no longer the only treatment option available to a limited population of patients born with a rare neurodegenerative disorder.

Biogen’s attempting to develop an experimental Alzheimer’s disease treatment that appears to have a slim chance of approval from an increasingly lenient FDA later this year. If Biogen’s Alzheimer’s gamble doesn’t work out, though, strong cash flows in the present will make it hard to lose money on this biotech bet. The stock has been trading at just 9.8 times this year’s earnings expectations.

Author: Cory Renauer

Source: Fool: Warren Buffett’s Berkshire Hathaway Dives Into Biotechnology

Despite soaring already, these biotech stocks aren’t finished climbing.

Buying stocks just because they’re going up is a great way to lose a lot of money, but that doesn’t mean you should avoid every company that’s signaling signs of success.

These three small-cap biotech stocks have been rocketing higher all year and for good reasons. They’re all heading toward the exciting transition from a clinical-stage drugmaker to a company with something to sell.

1. Kodiak Sciences: Pharmacokinetics made easy

It isn’t easy getting injectable drugs to do their jobs for the entire time in between visits to the practitioner who does the poking. Efficacy gaps between appointments can be a big problem for patients with progressive diseases, especially those with age-related macular degeneration (AMD) and related causes of blindness.

Along with diabetic macular edema, AMD involves the formation of unnecessary new blood vessels that obstruct the retina. Kodiak’s lead candidate, KSI-301, is a vascular endothelial growth factor (VEGF) inhibitor, like Eylea from Regeneron (NASDAQ:REGN) that prevents invading blood vessels from growing larger.

A 12-week dosing regimen is an option for treatment with Regeneron’s VEGF inhibitor, but it’s not as effective as standard eight-week dosing. That won’t be a problem with Kodiak’s VEGF inhibitor, because it’s attached to long strands of a biopolymer used in drug-eluting stents that help it stick around much longer than Eylea. In fact, the results so far suggest an injection of KSI-301 can keep doing its job for up to six months.

Sales of Eylea are on pace to reach $7.7 billion this year. If KSI-301 can repeat its previous success in an ongoing pivotal study, shares of Kodiak Sciences will soar much higher.

2. Krystal Biotech: Providing closure

Krystal Biotech’s developing a topical gene therapy called bercolagene telserpavec (B-Vec), for dystrophic epidermolysis bullosa (DEB) patients. There are different forms of DEB, but they all have trouble producing type 7 collagen on their own. Without enough collagen to keep skin layers from separating, giant blisters form easily and leave open wounds that don’t close for months at a time, if they close at all.

During a mid-stage trial with four severely affected DEB patients, a single treatment with B-Vec closed nine out of 10 open wounds, and the last one closed a week after receiving a second administration. None of the wounds treated with a placebo showed measurable improvement, but the chronic wound that required a second administration to close had been open for more than four years.

In the U.S., less than a million children are born with the most severe form of DEB, and Krystal’s B-Vec will probably be their first available treatment option. Different forms of DEB affect a combined 6.5 million newborns in the U.S. each year, which gives this biotech plenty of room to grow.

3. Axsome Therapeutics: Drug development on a shoestring

The brain doesn’t give up its secrets easily, which makes developing drugs to treat mental disorders seem like a black hole for research and development dollars. This hasn’t been the case for Axsome Therapeutics. This opportunistic biotech saved a bundle by taking advantage of two well-understood drugs known to amplify each other’s effects.

Axsome’s lead candidate, AXS-05, is the combination of a decades-old antidepressant called bupropion, and dextromethorphan, the active ingredient in most cough suppressants. In a mid-stage clinical trial, 47% of patients with major depressive disorder (MDD) who were treated with AXS-05 achieved clinical remission, compared with just 16% of those treated with bupropion on its own.

In 2020, Axsome Therapeutics could launch the first new oral antidepressant aimed at MDD and treatment-resistant depression in over a decade. Every year, millions of adults experience at least one bout of MDD, many of which resist treatment with today’s treatment options.

With such a large patient population, AXS-05 could generate more than $1 billion in annual sales for Axsome Therapeutics in a few short years. That’s a return worth waiting for.

Be responsible

It might be tempting to try supercharging your portfolio by going overboard with these stocks, but it’s not a great idea. There are plenty of factors that can delay the review of new drug applications, and most are beyond the control of the biopharmaceutical companies that submit them.

Getting the thumbs up from the FDA doesn’t guarantee a successful launch either. In fact, the trajectory of new drug launches can be harder to predict than clinical trial results. These biotech stocks have what it takes to keep flying higher, but they belong in a diversified portfolio.

Author: Cory Renauer

Source: Fool: 3 Biotech Stock Rockets With More Fuel in the Tank

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