Over the last decade, the S&P 500 biotechnology sub-industry index has risen 344%, compared to a 102% increase for the overall index as of this month, according to an article on Morningstar.
However, over the past three years, the sector has taken a big hit due in part to the extraordinary returns the sector generated over the last few years leading to high valuations and profit-taking from some investors. Conversely, two factors probably had an even bigger impact on the sector: politics and drug development cycles.
With a more business-friendly administration in office, the fear of drug prices being capped and significant changes occurring to the healthcare system has largely waned. At the same time, the drug cycle that fuel biotech stocks to new heights over the last few years ended. According to Eddie Yoon, manager of Fidelity Select Health Care, new medicines were only beginning to materialize in 2012 and 2013, and only began generating revenues in 2015 and 2016. Simply put, the biotech sector tends to move in cycles and is fueled by new medicines hitting the market and then generating significant revenues, i.e. the hepatitis C medicines and immunotherapies.
Over the last couple of years, the sector has had to reignite its fire and begin to gain momentum as new promising therapies approach the market. These new revolutionary medicines include cell therapies, where living cells, such as stem cells, are injected into patients to treat diseases like heart failure. In one case a completely new field of medicine has emerged, called bioelectronic medicine, which seeks to treat diseases by stimulating nerves and tissues to using electrical signals to reduce inflammation and promote healing.
A few biotech companies in the news that could benefit from a resurgent biotech sector include: Endonovo Therapeutics, Inc. (OTCQB: ENDV), Athersys, Inc. (NASDAQ: ATHX), Caladrius Biosciences (NASDAQ: CLBS), ARCA Biopharma, Inc. (NASDAQ: ABIO), Geron Corporation (NASDAQ: GERN).
Endonovo Therapeutics, Inc. (OTCQB: ENDV)
Market Cap: $11.4M, current share price: $0.037
ENDV, a commercial-stage developer of Electroceutical™ Therapies targeting inflammatory conditions, cardiovascular diseases and neurological disorders recently announced that it has begun commercial sales of its FDA-Cleared Electroceutical™ Therapy for the palliative treatment of pain and post-surgical edema (swelling). Endonovo is seeking to expand the use of its Electroceutical™ Therapy to treat cardiovascular diseases such as end-stage ischemic heart disease and neurological disorders, such as traumatic brain injury, multiple sclerosis and stroke. ENDV's Electroceutical™ Therapy works by increasing the production of endothelial nitric oxide. Nitric Oxide (NO) acts as a messenger in diverse functions, such as vasodilatation, neurotransmission, and anti-pathogenic activities. Sufficient levels of NO production are necessary in protecting an organ such as the heart, brain, or liver from ischemic damage. NO dilates blood vessels, raising blood supply and lowering blood pressure. In 1992, for its importance in neuroscience, physiology, and immunology, nitric oxide was proclaimed the "Molecule of the Year". The 1998 Nobel Prize in Physiology or Medicine was awarded for discovering nitric oxide's role as a cardiovascular signaling molecule. ENDV's Electroceutical™ Therapy has demonstrated extremely promising clinical data in "no option" patients with end-stage ischemic heart disease, and Endonovo is now seeking to start a much larger clinical trial to demonstrate efficacy and file for FDA Approval. A truly innovative, non-invasive platform technology for treating cardiovascular and neurological diseases and market-ready products makes ENDV a huge bargain at its current price.
Caladrius Biosciences, Inc. (NASDAQ: CLBS)
Market Cap: $54.7M, current share price: $5.78
CLBS recently announced that it had acquired a late-stage stem cell therapy from Shire (SHPG) under a licensing deal. Under the licensing deal, Caladrius will pay an upfront payment which has not yet been disclosed. In addition, Shire will be eligible to receive milestone payments and royalties. More importantly, CLBS has acquired a CD34+ cell therapy candidate that has already completed multiple placebo controlled studies. This includes the CD34+ cell therapy program for the treatment of refractory angina. The data set that has been obtained by Caladrius for this purchase is pre-clinical, phase 1, phase 2, and phase 3 clinical study data. Although CLBS may have to run its own Phase 3 trial to confirm the results before it can file for regulatory approval, its current market capitalization is only a fraction of its competitors, such as Athersys (ATHX) and Mesoblast (MESO).
Athersys, Inc. (NASDAQ: ATHX)
Market Cap: $226.2M, current share price: $1.83
ATHX recently announced an expansion to an existing development and commercialization deal with Healios KK, it current partner for stroke in Japan. The deal will focus on products for indications to include acute respiratory distress syndrome in Japan, as well as certain ophthalmological indications globally. Healios will also obtain an exclusive option to a license to develop and commercialize MultiStem products for ischemic stroke, ARDS, and trauma in China, and obtain certain other rights. In exchange, ATHX would receive committed payments of $35 million. Furthermore, Healios has invested approximately $21 million at $1.76 per share, a 13.5% premium to the previous closing price.
ARCA Biopharma, Inc. (NASDAQ: ABIO)
Market Cap: $7.75M, current share price: $0.66
ABIO, which is developing genetically-targeted therapies for cardiovascular diseases, recently announced topline results from GENETIC-AF, a Phase 2B, double-blind, superiority clinical trial evaluating Gencaro™ (bucindolol hydrochloride) as a genetically-targeted treatment for atrial fibrillation (AF) in patients with heart failure and reduced left ventricular ejection fraction (HFrEF). In all patients, Gencaro demonstrated a similar treatment benefit compared to the active control, metoprolol succinate (TOPROL-XL). In U.S. patients (127 of 267 total patients), a trend for potential superior benefit in favor of Gencaro (approximately 30% risk reduction over TOPROL-XL), was observed for the primary endpoint of time to recurrence of AF. Additionally, in U.S. patients, Gencaro demonstrated a trend for potential superior benefit in favor of Gencaro (approximately 51% risk reduction over TOPROL-XL) in a subset of patients who underwent continuous heart rhythm monitoring with Medtronic implanted devices. Safety data indicated that Gencaro was generally safe and well-tolerated in the AF/heart failure (HF) population investigated with a safety profile similar to TOPROL-XL. At its current market cap, a sub-$1.00 share price and a looming reverse stock split, ABIO may be a bargain purchase if its share price declines further following a capital raise and reverse split.
Geron Corporation (NASDAQ: GERN)
Market Cap: 697.2M, current share price: $4.34
Gern Corporation had an earning conference call today. The company's stock as a result finished up over 28% in today's trading session. Closing the day at $4.34, this is the highest the company's security has been priced in the last two years. Keep an eye on how GERN is trading for the next few sessions, today's call must of been a really good one.
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