Rare disease stocks have a difficult task. The rarer a disease is, the less public research goes into studying it. And that in turn makes it more difficult for a company to develop and test effective treatments. With so much less known about rare diseases than common ones, scientists may find themselves groping blindly trying to develop drugs and treatments.
Rare diseases have less financial incentive as well. Fewer people having a disease means fewer patients that a treatment can be sold to. This lowers revenue and makes it difficult to overcome the high cost of clinical trials and FDA approval.
Yet rare disease stocks do have some benefits over their common disease brethren. Special designations and tax benefits can be given to drugs that treat rare diseases, and the FDA can expedite approval if a drug serves an unmet need, such as curing an incurable disease or treating a rare one. The most promising rare disease stocks will be able to leverage these benefits to offset the small pool of patients paying for the drug.
Because as with any drug stocks, rare disease stocks will have plenty of misses for every hit. Clinical trials are daunting, and very few drugs make it through to be sold to customers. But while most drug trials fail, the winners can pay for the losers many times over. When investing in rare disease stocks, it’s important to spread your bets wide, as you never know exactly which one will hit or miss.
So for an investor keen to invest for clinical trials, here are 3 of the top rare disease stocks to buy.
Sangamo Therapeutics (SGMO)
Sangamo Therapeutics (NASDAQ:SGMO) is performing what could be a groundbreaking clinical trial for treating Fabry’s disease. Fabry’s is a rare and debilitating condition caused by a deficiency of the alpha galactosidase A (α-GAL) enzyme. The lack of α-GAL in Fabry’s causes patients severe pain and can lead to heart and kidney failure. Current treatments for Fabry’s disease require ongoing management, but Sangamo has a game-changing approach: a single-dose of gene therapy.
Under the STAAR clinical trial, Sangamo is testing this potential gene therapy’s efficacy. This trial is a phase 1/phase 2 trial, focusing on finding the optimal dosage of the treatment. And while it is not a phase 3 trial, the early phases are necessary to complete before proceeding to phase 3. The primary endpoint for the STAAR trial is expected in December 2023, and positive results could send Sangamo’s stock price soaring.
Sangamo’s stock price has fallen significantly year-to-date, as has much of the biotech sector. In a high interest rate environment, a speculative low-revenue company like Sangamo is seen as more of a gamble. But that low price could also be attractive for anyone with a high tolerance for risk. Small caps can fly higher than large caps on big news.
Sangamo’s most recent earnings report showed them with $143 million in cash and marketable securities. That’s dangerously close to their quarterly net loss of $115 million. Sangamo needs a big boost if it wants to survive after the STAAR trial concludes in December. But if the results are good, Sangamo could easily find ways to raise the cash needed to proceed to phase 3 trials. And from there, they’d be very close to delivering a true cure for Fabry’s disease, making them one of the most promising rare disease stocks you could possibly buy.
AstraZeneca (NASDAQ:AZN), well known for their COVID vaccine, is trialing one of their existing drugs to treat the rare condition called Hypereosinophilic Syndrome. Benralizumab is already used to treat severe asthma, and with this trial AstraZeneca aims to expand its therapeutic applications.
As Benralizumab is already FDA approved for another condition, getting approval for new conditions should be easier. With the Hypereosinophilic Syndrome trial expected to be completed in November 2023, this could be a quick turnaround from clinical trial to FDA approval.
Benralizumab is an antibody designed to specifically target and eliminate a type of white blood cell called eosinophils. When eosinophils are overactive, they can cause problems like asthma and skin disease. When eosinophils are hyperactive, they cause Hypereosinophilic Syndrome, which can damage the organs of the body. In such cases, Benralizumab can keep the eosinophils in check.
According to AstraZeneca’s pipeline report, they’re going all in on Benralizumab. And they have numerous ongoing trials for treating diseases caused by eosinophils. Many rare diseases are caused by eosinophils, and if AstraZeneca can bring treatment to underserved patients, they’ll be a top rare disease stock to buy.
AstraZeenca, like other COVID vaccine makers, has had to adjust to the post-pandemic era where their vaccines are not in high demand. But their focus on rare diseases is a strong one, accounting for $2 billion dollars in revenue out of their total Q2 2023 revenue of $11.4 billion.
With a strong drug candidate and many diseases that can be treated by it, AstraZeneca’s clinical trials are making it a big player in rare diseases. They’re bringing treatment to underserved patients, and big gains to stockholders.
PTC Therapeutics (PTCT)
Huntington’s Disease is a rare genetic disorder that causes nerve cells to break down and die. This leads to difficulty moving, involuntary movement, and cognitive decline. Life expectancy is around 10 years after diagnosis. But PTC Therapeutics (NASDAQ:PTCT) is trialing a new drug that could not only alleviate symptoms, but actually treat the disease.
Huntington’s is caused by a protein called huntingtin which is toxic to brain cells when mutuated. But PTC’s newest drug, PTC518, is a gene therapy which can prevent the toxic huntingtin from being made. By adding a premature stop codon to the huntingtin mRNA, the protein will not be produced. And without huntingtin, the disease should be alleviated.
Clinical trial results for PTC518 are expected in the first half of 2024. While this is just a phase 2 trial, a successful trial for a truly disease-modifying drug would be hugely consequential. Current Huntington’s treatments only alleviate symptoms without addressing the cause.
It’s important to note that PTC has experienced clinical trial setbacks recently. Their stock price went down in May due to the failure of a different drug in treating Friedreich Ataxia. But a good drug company knows that a single success can pay for dozens of failures. And a good investor knows that too. A drug that could truly treat Huntington’s would provide years of healthy living to patients and years of earnings to investors. And that makes PTC Therapeutics one of the top rare disease stocks to buy.
On the date of publication, John Blankenhorn did not hold (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.