Broadly speaking, drug stocks have been some of the strongest performing names in the latter part of 2019.
Since October 2019, the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) has rallied from a low of $96 to nearly $124. The SPDR S&P Biotech ETF (NYSE:XBI) exploded from $75 to a high of $98.79. Even ProShares Ultra NASDAQ Biotechnology (NASDAQ:BIB) popped from a low of $41 to a high of nearly $65.
All despite concerns over potential changes to drug pricing policies with elections ahead.
“While we get the sense that biotech investors are cautious into 2020 with the election and broader macro concerns, we believe that macro issues are unlikely to have material fundamental impact,” says Credit Suisse’s Evan Seigerman.
Wedbush analysts argue, “The fundamentals of the sector look strong. Biotech surged in the third quarter, approvals from the Food & Drug Administration are coming through above the average annual rate, the valuation of large-cap biotechs are attractive, and there have been significant mergers and acquisitions in past years.”
Plus, one of the biggest catalysts for future growth are the millions of retiring baby boomers.
We’re also seeing new, innovative treatments for a myriad of issues. In addition, such stocks are recession-proof because folks will always require medical attention.
Here are three of the top biotech stocks to watch in the New Year.
Top Drug Stocks: Fate Therapeutics (FATE)
After struggling out the gate, Fate Therapeutics (NASDAQ:FATE) exploded from a low of $14 to $20 a share after posting positive trial results from its natural kill (NK) cell product candidate.
With regards to data from its natural killer (NK) cell product candidate, “Current patient- and donor-specific CAR T-cell immunotherapies recognize only one antigen and fail to address the significant risk of relapse due to antigen escape. FT596 is ground-breaking in that it is designed to be available off-the-shelf for timely patient access and to promote deeper and more durable responses by targeting multiple tumor-associated antigens,” said Bob Valamehr, Ph.D., Chief Development Officer of Fate Therapeutics.
The company’s other natural cell killer was also found to kill off cancer in a patient with acute myeloid leukemia (AML). Wells Fargo recently upgraded the FATE stock to an overweight rating with a target of $24.
Axsome Therapeutics (AXSM)
Axsome Therapeutics (NASDAQ:AXSM) had an explosive year. Since January 2019, AXSM stock exploded from a low of $2.64 to a recent high of $105.55. All after a series of major announcements, throughout the year. In January, for example, AXSM noted that its lead drug candidate, AXS-05 met its primary endpoint in a Phase II trial for major depressive disorder.
Two months later, AXSM won FDA Breakthrough Therapy for the drug. By April, the drug also achieved its primary endpoint for smoking cessation. By December, its AXS-12 drug met its primary endpoint in a Phase II trial targeting narcolepsy.
Then just two weeks ago, the AXSM stock ramped higher on news of positive late-state results for AXS-05, as a treatment of major depressive disorder.
“Given the documented medical need for more potent MDD therapies, and the fact that a whopping 17 million American adults suffer from this condition every year, according to the National Institutes of Health, this experimental depression med has a clear path toward blockbuster status,” noted Motley Fool contributor George Budwell.
Last year wasn’t kind to Pfizer (NYSE:PFE) or its shareholders. In late July, PFE plunged 21% on company plans to combine its blockbuster drug-selling unit with Mylan (NYSE:MYL), and announced it was cutting its sales and adjusted earnings forecast.
However, with a strong drug portfolio, acquisitions, and an undervalued stock, PFE is attracting interest once again. The company also just raised its dividend by 5.6%, which brings the new quarterly dividend to 38 cents from 36 cents payable March 6, 2020 to shareholders as of Jan. 31.
Plus, “the valuation on new Pfizer looks appealing, given management’s expectation of 6% annualized sales growth through 2025, which could produce 10%-plus yearly gains in earnings per share. New Pfizer has important patent-protected drugs like Ibrance for breast cancer and the pneumonia vaccine Prevnar, plus a strong pipeline,” notes Barron’s contributor Andrew Bary.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.