The biotech sector isn’t for the faint of heart with clinical trial results sending a stock soaring or crashing by incredible amounts overnight.
But three stocks in the space have surged this year.
Arrowhead Pharmaceuticals (NASDAQ: ARWR) is up 346% year-to-date.
Endocyte (NASDAQ: ECYT) is up 291%.
Madrigal Pharmaceuticals (NASDAQ: MDGL) is up 217%.
These stocks have skyrocketed this year, but is there still room for them to soar higher? All are entering phase 3 trials, which is a precarious place to be.
Typically, 90% of drugs that enter clinical trials fail to ever make it to market, and the probability of success in phase 3 trials is only 58%. Given those odds, these companies could drop just as quickly as they have risen.
But the news isn’t all bad. These companies do have some promising therapies in the works and any positive news could prove to be major catalysts that could push share prices even higher.
Here’s what you need to know about these companies.
Arrowhead Pharmaceuticals (NASDAQ: ARWR)
In 2014, Arrowhead’s stock soared to $26 on enthusiasm that its RNAi platform would enable it to better treat hepatitis B. But liver toxicity concerns forced the company to abandon all of its clinical-stage therapies, sending the stock crashing to $4.
But this year, investors have been flocking back to the stock on the hopes that its new research and development program will be able to avoid the errors that derailed its former platform.
The company began to rise early this year after its collaboration partner, Amgen (NASDAQ: AMGN), discussed the AMG 890 RNAi therapy for atherosclerosis at an investor conference. AMG 890 will be the first RNAi therapy developed through the Arrowhead and Amgen partnership to begin clinical trials.
Just days later, Arrowhead announced that it would be restarting its RNAi research and development program focused in two areas: hepatitis B, and antitrypsin deficiency, a rare genetic disease impacting around 200,000 people across the U.S. and Europe. The company also announced that it planned to file three new clinical trial applications for drugs developed with its new TRiM RNAi platform later on in 2018 – an indication of potentially big catalysts for the stock down the road.
And just last month, Arrowhead reported that it has fully enrolled its phase 1 study of ARO-AAT, a therapy for AATD, a rare disease characterized by an inability to properly create the A1AT protein resulting in a buildup of folded proteins in the liver that can cause liver disease – ultimately leading to a liver transplant.
There currently are no treatments approved for the disease, so if the study yields positive results, Arrowhead could be the first entrant into the space.
And the hepatitis B program could potentially be an even greater opportunity. Arrowhead hopes to learn from its mistakes with the failure of its ARC-520 indication that started the unravelling of its former development platform. The new ARO-HBV treatment would be a once-monthly therapy alongside other treatments.
The first phase of Arrowhead’s ARO-HBV trial in New Zealand completed enrollment in May and the company plans to report on preliminary data from the trial in November at an industry conference.
What’s particularly exciting about Arrowhead is that its RNAi gene silencing could deliver a major advance for treatments of these and other diseases, though investors shouldn’t get too excited just yet. While clinical progress is being made, and the Amgen collaboration appears to be a valuable one for the company, its new TRiM development platform is still young and it still remains to be seen if it will deliver.
But keep an eye on this one. If any one of the treatments in its pipeline makes it through trials and goes to market, it could send the stock soaring.
Endocyte Inc. (NASDAQ: ECYT)
Endocyte is focused primarily on therapies for difficult-to-treat cancers, leveraging precision medicine in their therapeutic design.
Unlike chemotherapy which indiscriminately destroys all fast-growing cells—killing cancer cells, but also hair cells and the cells that line the gastrointestinal tract, causing hair loss and extreme nausea—Endoyte’s drugs take a different approach employing ligand binding via an antibody to a specific receptor. When a diagnosis is required, the antibody is constructed to bind to an imaging agent. And when treatment is needed, the antibody is fused to a radioactive payload to eradicate the cancer.
This year, the big driver for Endocyte has been its lead candidate, 177Lu-PSMA-617. At the end of February, the company announced it was launching into a phase 3 study of the radioligand therapy for treating prostate cancer, a pivotal step in the development of the therapy. This after a successful end of the phase 2 clinical study where 177Lu-PSMA-617 showed high rates of prostate-specific antigen response.
Endocyte also has hopes to advance an additional pipeline candidate into clinical testing. It sees potential for its chimeric antigen receptor T cell (CAR-T) therapy and will seek approval later this year to begin phase 1 testing of the therapy in treating osteosarcoma, a form of bone cancer.
With its solid phase 2 results for its radioligand therapy, and the fact that it has more cash on hand than Arrowhead—a significant advantage for clinical-stage biotech that doesn’t have steady revenue sources—I’d say Endocyte may be a slightly safer bet in the biotech space.
Madrigal Pharmaceuticals (NASDAQ: MDGL)
With just nine employees and a market value of around $4.3 billion, Madrigal is focused on treatments for a liver disease linked to obesity, nonalcoholic steatohepatits (NASH).
NASH is the result of a build up of fat in the liver primarily due to diet, and with a fat-rich western diet gaining acceptance globally, NASH has increased globally presenting a potentially lucrative opportunity for biotech companies to develop NASH-targeting treatments.
In December 2017, Madrigal reported phase 2 data showing its MGL-3196 had reduced liver fat significantly at the 12-week mark in patients with NASH. The patients saw a median relative reduction in liver fat of 36.3% versus a 9.6% reduction for the placebo group. 60.3% of all of those patients saw a greater than 30% reduction. Bad cholesterol levels, triglycerides, and lipoprotein were also improved.
The trial was continued to the 36-week mark where updated data showed that 56% of all MGL-3196 patients had a two-point or better improvement on an NAFLD activity score, 27% of patients had NASH resolution confirmed by biopsy, and 50% of patients with NASH resolution also saw their fibrosis resolved.
This data was so promising that the management said there would be a “high likelihood” of success in a longer phase 3 trial with more people. The management also said that with MGL-3196, there is “potential to resolve NASH in as little as 9 months in 30% to 40% of patients.”
Such strong results have seen investor optimism increasing for the prospect of treating NASH, and Bloomberg reported that the company is exploring a sale after receiving takeover interest from other drugmakers looking at treatments for the liver disease.
“We have managed the company with an open mind to strategics who would either want to partner or acquire us,” said CEO Paul Friedman in an interview. “There’s a lot of interest in the field, obviously.”