Enanta Pharmaceuticals (NASDAQ:ENTA) has been in the news recently. Unfortunately, it isn’t for the reasons that I’m so bullish on ENTA stock.
Although Enanta stock is off almost 30% in the past month, it is still up 52% year-to-date and up nearly 130% for the past 12 months.
Before I get around to what’s been happening with ENTA stock recently, it may help to get a broader understanding of how the company operates and what exactly it does.
The world of biotech and pharma companies has changed a great deal in the past couple decades. What used to be a fairly typical model, where you discover a drug, run it through the various drug trials, build a marketing plan and sell the drug, has now become much more focused.
Even the big pharma companies that still have this kind of integrated structure are now more likely to go out and buy a small company in a strategic sector rather than hire researchers to look for candidates in-house.
And that can be said of many operations these days. Now a whole industry of focused drug companies has emerged. Some companies simply focus on getting drugs through drug trials. Others focus on manufacturing. Some focus on blending and dosages.
Still others, like ENTA, do the R&D that used to be done in-house. It specializes in small molecule drugs for viral infections and liver diseases. As it finds promising candidates, it talks to larger pharmas about partnering on development. ENTA gets funding for research and then profits from drugs that make it to market.
For example, ENTA has two big drugs that it has co-developed with big pharma player AbbVie (NYSE:ABBV). Both are focused on the hepatitis C virus. ABBV sells them as MAVYRET and VIEKIRA PAK. MAVYRET was approved last year for use as an HCV treatment, which is why ENTA has had such a good year.
The short-term trouble that ENTA stock ran into recently was an announcement from pharmacy benefit management company Express Scripts (NASDAQ:ESRX) will drop MAVYRET from its formulary in favor of lower-priced alternatives and other HCV drugs that have better rebates. This action will take effect in 2019.
Why ENTA Stock Is Still Worth a Look
The fear that’s reflected in the selloff is that other PBMs may take the same path as ESRX and that will certainly hurt ABBV’s market share in this lucrative sector. But most of this selloff is an overreaction to a surprise decision. And no other PBMs have followed ESRX.
What’s more, ENTA has a lot more drugs in its pipeline beyond these HCV drugs. It has six drugs at various trial stages that treat the hepatitis B virus, non-alcoholic steatohepatitis and respiratory syncytial virus.
All these represent significant opportunities. RSV for example attacks the virus that is the No. 1 cause of pneumonia in children less than one-year-old and it’s responsible for 20% of children’s hospitalizations and 18% of emergency room visits. It also would be very valuable of immune-compromised individuals and the elderly.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
