Biotechnology has often been among the most popular sectors in the MoneyShow Top Picks report, our annual survey of the nation’s leading newsletter advisors. This year’s report is no exception; here’s a six-pack of favorite biotech ideas for the coming year.
Joe Cotton, Cotton’s Technically Speaking
Cassava Sciences (SAVA) is a high risk, high reward clinical biotech company; its flagship drug candidate is Simufilam — an Alzheimer’s drug — currently in Phase 3 trials. What makes this stock so interesting is that Simufilam appears to improve cognition in Alzheimer’s patients, not just slow the progression of the disease. If it gets approved, it could easily become a multi-billion dollar drug.
In August of 2021, a law firm representing admitted short sellers submitted a Citizen Petition to the U.S. FDA requesting that Cassava’s clinical trials of Simufilam be stopped, alleging, among other things, data manipulation in scientific articles authored by Cassava scientists, including a 2005 Neuroscience article.
As a result, the stock plummeted from $120 to $40. Neuroscience re-examined the original data for the article and in December of 2021 stated that they found no evidence to support claims of data manipulation.
The claims, although apparently false, have cast a shadow over the stock for some time. But now, the stock is acting well and we expect it to continue strongly on an upward path. Here are catalysts for a continued up-move:
The company has enrolled approximately 650 patients in two Phase 3 studies and plans to enroll a total of 1,750 patients with mild-to-moderate Alzheimer’s disease in the 2 studies of Simufilam. The results of its ongoing Phase 3 clinical program are expected to come out in mid-2024.
The company also announced completion of drug administration in an open-label study of Simufilam for approximately 200 patients designed to evaluate long-term drug safely and to measure cognitive changes over 12 months. The results may be announced approximately year end 2022.
Insiders apparently think Simufilam works, because two Directors spent their hard earned cash buying the stock in August of 2022. Director Richard Barry bought 36,159 shares @ $23.79 for a cost of $860,223. And Director Sanford Robinson bought 100,000 shares @ $20.69 for a total of $2,069,000. When the directors of a company are buying their company’s stock it’s a big plus that inspires confidence.
We like the stock. If Simufilam gets approved, the stock could go a lot higher. But keep in mind that this is a one-drug company, and the stock could go down to $1.00 if it fails to get the drug approved.
Mike Cintolo, Cabot Top Ten Trader
Neurocrine Biosciences
While rare, the drug is a big seller, with an expected $1.4 billion of revenue this year, up 30%-ish from last year, and more important, management sees a ton of opportunity just in its core area, with more than a half million undiagnosed patients in the U.S. alone (it thinks only 15% are both diagnosed and on treatment), so the potential is there for Ingrezza sales to easily more than double over time.
Neurocrine also has another niche product likely to hit the market soon — it’s applied for approval of valbenazine (likely approval early next year), which treats another disease that causes involuntary movements (side effect of Huntington’s) that affects maybe 25,000 people.
Those two should keep the numbers kiting higher, with analysts seeing the top line rising 20% next year while earnings reach nearly $4 per share — all while the firm’s excellent pipeline continues to progress. We think the stage is set for medicals and biotechs to help lead the next advance and NBIX looks like one of the top dogs in that group.
Rich Moroney, Dow Theory Forecasts
A slow-growing U.S. economy is vulnerable to downside shocks, especially with the global economy expected to struggle. Nevertheless, we still have favorites idea for year-ahead gains, such as Vertex Pharmaceuticals
The biotech firm’s biggest product, Trikafta, treats most of the 83,000 cystic fibrosis patients in North America, Europe, and Australia. Trikafta accounts for 86% of Vertex’s product sales, yet management still sees greater heights ahead.
The company continues to seek approval for Trikafta to treat different types of cystic fibrosis patients. Helped by its efforts to drive other countries to reimburse for treatment, Vertex says the drug could potentially treat 90% of cystic fibrosis sufferers throughout the world.
Admittedly, relying on one product for so much revenue adds risk to the stock. But Trikafta enjoys a first-mover advantage and currently faces limited competition in the cystic fibrosis market.
Vertex has managed seven consecutive years with at least 22% sales growth, and operating profits rose at least 24% in each of the five years since the company became profitable.
We think Trikafta still has room to grow. In addition, the company is advancing treatments for other ailments, including a genetic disease called alpha-1 antitrypsin deficiency and sickle cell disease. Drugs in development don’t always pan out, but this pipeline looks promising.
My Top Pick for speculative investors for the coming year is MannKind (MNKD) — a stock I have chosen as a favorite for the past several years. MannKind currently retains all rights to its lead product, Afrezza — an inhalable form of insulin for both Type 1 and Type 2 diabetics; the company is continuing to make inroads in these markets against “the big three” insulin makers.
MannKind now has a second product on the market as well via a licensing agreement with its partner on the project, United Therapeutics (UTHR). This product (Tyvaso DPI) has only been on the market for a few months, but it is already showing signs of becoming a blockbuster. Not only does MannKind get paid to produce the product (plus a small mark-up) for United Therapeutics, it also receives a royalty on all sales of the product as well.
MannKind also recently acquired V-Go, a small company that already has a presence in the diabetes space. In addition, a private company called Receptor Life Sciences has licensed the company’s Technosphere drug delivery system to develop cannabinoid products for epilepsy and anxiety.
While the products being developed by Receptor Life are still several years away coming to market, they represent the potential for additional milestone payments and royalties as they work their way through the clinical trials process (and, knock on wood, commercialization at the end of said process).
I believe there is still plenty of room to run before the stock will finally be back at something that more closely resembles fair value. As a result, investors are encouraged to be patient about taking profits if/when they see the stock starting to climb. As has been the case for a number of years now, MNKD is considered a very strong buy under $5 and a buy under $10.
Anavex (AVXL), is a biopharmaceutical company dedicated to the development of novel drug candidates to treat central nervous system diseases with very encouraging results so far in Alzheimer’s, Parkinson’s and Rett Syndrome.
The big news for Anavex was the release of the preliminary data from the 508 patient, placebo controlled, double-blind, 48-week, Phase 2b/3 ANAVEX 2-73 (blarcamesine or A2-73) Alzheimer’s trial which tested 3 equal cohorts with placebo, 30 mg or 50 mg oral doses.
First I need to point out two very important things:
1) There was a delay in getting the data from one of the trial sites that resulted in the company only getting the data from the third party statistical analysis company just 1 day before it was on the schedule to present at the CTAD Alzheimer’s conference. This therefore limited what the company could accurately report at that time.
2) Some of the best results from an earlier trial were for the 50 mg. cohort, while the 30 mg barely worked. However, ALL of the analysis presented recently was for the combined 30+50 mg patients as a single cohort, diluting the efficacy results.
Therefore, results yet to come should be even better once the company reports on the 50 mg cohort by itself. The primary endpoints were the reduction in the decline of cognition (ADAS-COG) and activities of daily living (ADCS-ADL) at 48 weeks.
On this the company said, “The Anavex 2-73 (blarcamesine) study met the primary and key secondary endpoints showing statistically significant reduction of clinical decline in global cognitive and functional scales in a clinical study of patients with early Alzheimer’s disease.” (MMSE baseline scores 20-28).
And more to the point: “Treatment with ANAVEX®2-73 statistically significantly reduced cognitive decline, measured with ADAS-Cog, compared to placebo at end of treatment by 45% (p=0.033).”
This is the most significant and directly on point outcome released so far for this trial given this was considerably better than Biogen
Nonetheless lecanemab’s meager result caused those two companies to increase $20 billion in market cap overnight. Most observers believe this Phase 3 result paves the way for likely FDA approval. However, Anavex’s drug beat lecanemab by a wide margin (a 45% slowing vs. 27%) in its Phase2b/3 trial.
But here’s the thing … Biogen’s drug requires IV infusion therapy and periodic MRIs to check for brain swelling and bleeding (two nasty side effects of lecanemab), while A2-73 is a pill and doesn’t require periodic MRI’s, a huge advantage even ignoring that A2-73 worked better.
While the data already released was superior to lecanemab, once the 50 mg alone cohort data comes out the results should be considerably better than for the combined group. And better still for just those 85% carrying the normal SigmaR1 gene as well as for APOE2 and 3 patients. (Still a big target market.) So I think the data so far was encouraging, but the best news is yet to come — and the stock remains a favorite for 2023.
Joe Duarte, In the Money Options
Axonics Modulation Technologies (AXNX) is a small medical technology company with a big future. The $3.4 billion market cap medical equipment company focuses on the treatment of bladder and bowel incontinence. Sure enough, this is not glamorous stuff. I certainly hear related complaints about these issues in my medical practice on a regular basis. But it is a real health problem, which is finally getting a viable solution.
Consider the fact that according to a 2014 CDC study, 51% of non-institutionalized persons over age 65 in the U.S. had some sort of bowel or bladder incontinence episode. Many develop chronic problems which can lead to frequent infections and worsening of underlying illnesses.
The condition is more common in women than men. And it affects its sufferers both physically and psychologically. Perhaps the most important fact to consider is that as the population ages and chronic conditions such as diabetes increase, so does the incidence of incontinence.
The company has a two-pronged strategy — with two products which are making a huge difference to incontinence sufferers. One is its sacral stimulator — an electronic implant which sends impulses to the nerves that control muscle tone and regulates the bladder’s ability to contract — thus reducing incontinence.
The other is an implantable permanent gel that is placed into the wall of the urethra and adds bulk to the weakened muscles and thus reduces or prevents leakage. Sales of both continue to grow steadily. The company is currently not profitable but does have sufficient cash on its balance sheet. (For disclosure, Joe Duarte own shares in AXNX.)
Source: https://www.forbes.com/sites/moneyshow/2023/01/09/6-favorite-biotech-bets-for-2023/