Biotech stocks are still in the process of repairing the damage from recent months — and recent years. Indeed, as of a month ago, the SPDR Biotech Fund (XBI) had been dead money for an unbelievable eight and a half years, asserts Mike Cintolo, editor of Cabot Growth Investor.
While we never anticipate a change in trend, logic tells us that at some point biotech in particular is going to get moving — and if that happens soon, it should even produce some real growth stock leadership to feast on.
Granted, the biotech/medical sector as a whole still has to confirm that the trend has changed, but given some of the exciting stories among firms with legitimate drugs on the market (not just pipe dream development stage lottery tickets) and the long period of underperformance, we’re thinking some names could launch if the market remains upright.
Below are a few names in the broad biotech group we’re keeping an eye on that, if the recent bounce in the sector continues, could thrive.
The first two are names we’ve written about recently and are on the lips of many investors: Eli Lilly (LLY) and Novo Nordisk (NVO), both of which are leading a potential weight-loss revolution.
The question is whether a lot of the good news has already been discounted, but we’ll let the stocks decide — powerful upside moves in both would certainly be a good sign, especially after both have traded very tightly of late.
Looking past the mega-caps are many names that have great potential, including Intra-Cellular Therapies (ITCI), which has something special with its Caplyta treatment.
This drug was on the market for schizophrenia starting in March 2020 and saw solid growth (from zero to 2,000 prescriptions per month) through 2021, but then came a broad approval for bipolar depression, which has bumped the prescription figures to an average of 8,500 during the past two years. It’s the only therapy approved for both bipolar I and II both as a stand-alone and combo offering.
Given that there are 11 million bipolar sufferers in the U.S. alone, the potential is huge. Meanwhile, Intra-Cellular is in Phase III trials with Caplyta for major depressive disorder, which is a market potentially twice the size of bipolar. Clinical data released back in March was superb.
Sales growth is slowing as the figures get larger, but revenues still rose 76% in Q3, with 2024 expected to bring a 41% gain (likely conservative), with tons of upside if/when MDD approval hits down the road. ITCI has been range bound since April of 2022, but is showing some solid strength since the market low.
Another name to watch is Neurocrine Biosciences (NBIX), which has been riding the success of Ingrezza, a drug that treats tardive dyskinesia, which can cause muscle spasms in the face, neck and elsewhere; it also got FDA approval in August for the drug to be used for chorea (involuntary movements with those who have Huntington’s).
Ingreeza makes up basically all of the revenue pie today (should be $1.8 billion this year, with big profits too), though there’s excitement about another drug that showed great Phase III trial results for treating a group of genetic disorders, too — management thinks it can be the standard of care for that market and plans to submit plans to the FDA next year.
