Biotech stock fortunes hinge upon potential, progress, and the ultimate realization of drugs and devices that treat diseases. Stringent regulatory processes and long development times result in substantial costs. Those costs are subsidized on the back end upon commercial success, often leading to extremely high sales.
Investing in biotech stocks is often about identifying the next potential breakthrough therapeutics and devices. That likely, even at the earliest stages of the development process, is often enough to spike share prices. Then, it’s about following the development of promising treatments as they progress through a rigid regulatory process. There, too, at all points, positive news leads to quick returns.
The ultimate goal is FDA approval and commercial success that regularly produces billions in sales. Lead times and a failure rate exceeding 90% mean that those pharmaceuticals that succeed produce substantial returns for investors.
Biotech Stocks to Watch: Nkharta (NKTX)
Nkharta (NASDAQ:NKTX) is developing therapeutics that leverage Natural Killer cells. Natural Killer cells are the body’s first line of defense against pathogens, germs, and diseases. The firm is leveraging and amplifying the power of those cells to fight malignancies. It seeks to note their benefits over T-cell therapy, an important treatment modality, but one with severe side effects.
T-cells alter the genome and have thus far only proven effective against a narrow set of tumor malignancies. Natural Killer cells, on the other hand, have more diverse applicability without altering the genome.
Nkharta’s lead candidate products, NKX101 and NKX019, continue to show promise in treating various forms of cancer. A Phase 1 trial of NKX019 resulted in a 70% complete response rate in treating a form of non-Hodgkin lymphoma. NKX101 showed a 60% complete response rate against leukemia in a Stage 1 trial.
2023 will see more results from the company, which, if positive, will likely send share prices quickly higher. NKTX shares currently trade around $3.75 but carry an average target price of $30.
Icosavax (ICVX)
Icosavax (NASDAQ:ICVX) stock is attractive for several reasons. Primarily, investors like it because it has both the possibility of being acquired by a more prominent firm and because of the FDA fast track designation.
The company failed to produce convincing results for its Covid-19 vaccine in the spring of last year. That led analysts to conclude that there might be an intractable issue with its virus-like particle (VLP) technology. Those rumors, and the data that caused them, resulted in prices falling from $15 to $4 overnight. In turn, Icosavax was the subject of potential M&A rumors due to the sinking valuation.
For investors, that’s a decent catalyst: If M&A suspicions heat up around the company, prices could rise quickly.
Perhaps as importantly, the company received FDA fast-track designation for its IVX-A12 therapeutic. That therapeutic is a vaccine candidate with potential efficacy against two respiratory diseases in patients 60 and older. So, ICVX has yet another catalyst that promises the potential to provide quick returns for investors moving forward.
Eisai (ESAIY)
Eisai (OTCMKTS:EASIY) is the lead partner in the co-development of lecanemab, an Alzheimer’s treatment. The firm jointly developed the drug with Biogen (NASDAQ:BIIB).
The Tokyo-based firm, therefore, owns the majority of the rights to the drug, which was granted FDA approval in January.
The drug works by targeting amyloid and tau proteins that accumulate in the brains of Alzheimer’s patients, destroying cognitive skills in the process and ultimately leading to death.
Lecanemab is approved to treat the early stages of the disease. The reduction in those disease-specific proteins results in a 27% reduction in cognitive skills decline and reduces the quality of life by 56%.
Lecanemab is currently only available in the U.S. However, approval processes remain underway in Europe and the United Kingdom. Approval is expected for both regions in early 2024. The good news for investors is that Eisai shares are expected to appreciate massively to the Japanese Yen equivalency of $65 over the coming 12-18 months. They currently trade for $13.50.
On the date of publication, Alex Sirois 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.
