Biotech stocks have never really managed to recreate the success they had in 2020 amid the Covid-19 outbreak. For a second year in running, the sector is caught in a rut, underperforming the beaten-down broader market.
The SPDR S&P Biotech ETF (NYSEARCA:XBI) and the iShares Biotechnology ETF (NASDAQ:IBB) are down about 40% and 25%, respectively, year-to-date. The steeper pullback of the former shows more pain in the mid-cap space, given the heavy weighting of the stocks in the index.
It may not be status quo for long. Research and development (R&D) momentum is continuing to accelerate, as companies, both big and small, work on improved treatments and branch out into new therapeutic areas. The total number of products in active development number around 6,000, up 68% from five years ago, data provided by healthcare analytics company Iqvia shows.
Mergers & acquisitions, another indicator of vibrancy in the space, has also picked up pace after a period of lull in 2021. Earlier this month, Pfizer (NYSE:PFE) announced a deal to buy migraine drug maker Biohaven (NYSE:BHVN) for $11.6 billion. Ahead of this, GlaxoSmithKline (NYSE:GSK) agreed to buy Sierra Oncology (NASDAQ:SRRA) for $1.9 billion.
Over and above fundamental factors, the protracted weakness renders biopharma stocks as ideal candidates for a bounce back.
|KYMR||Kymera Therapeutics, Inc.||$14.23|
|KZR||Kezar Life Sciences, Inc.||$5.06|
|PTGX||Protagonist Therapeutics, Inc.||$8.79|
Biotech Stocks to Buy: Kymera Therapeutics (KYMR)
Watertown, Massachusetts-based Kymera Therapeutics (NASDAQ:KYMR) is a clinical-stage biopharma developing small-molecule therapeutics that selectively degrade disease-causing proteins. Its primary claim to fame is its proprietary targeted protein degradation platform called Pegasus.
Kymera’s unique-selling proposition is that its therapeutic candidates can be used in areas that cannot be drugged or are inadequately drugged. The company currently focuses on therapeutic areas such as immunology-inflammation and oncology. Down the line, it has plans to expand into other areas as well.
The most advanced drug in Kymera’s pipeline is KT-474, which is being evaluated for multiple immune-inflammatory conditions, including hidradenitis suppurativa, atopic dermatitis and rheumatoid arthritis. The company has an ongoing R&D collaboration with Sanofi (NASDAQ:SNY) for the investigational therapy, with the latter agreeing to take over the clinical development from the Phase 2 stage.
Initial safety and proof-of-mechanism data from the Phase 1 study of KT-474 is due in the second half of 2022. This data is key for Sanofi to decide whether it should proceed with the Phase 2 study.
Kymera last reported having $523 million in cash, which it reports should provide a cushion until 2025.
Kezar Life Sciences (KZR)
Kezar Life Sciences (NASDAQ: KZR) has a catalyst coming up as early as June. The South San Francisco, California-based clinical-stage biopharma focuses on immune-mediated and oncologic indications.
The company’s lead compound, KZR-616 is being developed in two separate Phase 2 studies for lupus nephritis as well as dermatomyositis/polymyositis. Topline data from the lupus nephritis study is due in June. The data assumes importance as Kezar’s stock took a big hit in early May, when it announced that KZR-616 failed to meet the primary endpoint with statistical significance in the dermatomyositis/polymyositis study.
If Kezar manages to turn in positive data from the lupus nephritis study, the stock could recover the lost ground and rally from thereon.
Kezar’s cash and cash-equivalents stood at $242.6 million at the end of the first quarter.
Biotech Stocks to Buy: Protagonist Therapeutics (PTGX)
Newark, California-based Protagonist Therapeutics (NASDAQ:PTGX) has a peptide technology platform that has been used to develop drugs that stimulate or inhibit receptors. The company’s lead drug – rusfertide – is in mid-stage development for multiple indications. Preparations are ongoing for the start of the Phase 3 study in polycythemia vera (PV), a rare type of blood cancer. Enrollment into the study will close in the first half of 2023.
Data from a second Phase 2 study of rusfertide in PV will be presented at the ASCO meeting scheduled for June 3-7. The company is also working on potential next steps for the candidate in hereditary hemochromatosis.
It has two more Phase 2 candidates, codenamed PN-943 and PN-235. The former is being evaluated for ulcerative colitis and the latter for plaque psoriasis. The company is exploring potential collaborations with big pharma companies to support global registrational studies and commercialization of the former. For the latter, Protagonist has an ongoing collaboration with Johnson & Johnson’s (NYSE:JNJ) Janssen unit.
Protagonist’s cash position at the end of the first quarter was $305.3 million, providing it cash runway through the end of 2024.
On the date of publication, Shanthi Rexaline did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.