The 10 best-performing biopharmaceutical stocks of 2012 and their outlook for 2013:
10. Affymax 256 percent
Not only has the commercial launch of Affymax's once-monthly anemia drug Omontys started off strong, but investors are also rewarding the company for its efforts — and those of partner Takeda. Affymax shares are up more than 60 percent since Omontys was approved in late March. In other words, the "short the drug launch" thesis that has been nearly bulletproof in biotech for the past few years is not working with Affymax.
Looking ahead to 2013, Affymax could maintain its momentum by signing Omontys supply agreements with the remaining two mid-sized dialysis organizations (MDOs) that are not yet using the drug. [Four MDOs are already Omontys customers, as are about 90 small-sized dialysis centers.]
A current Omontys supply agreement with Fresenius, one of the two large dialysis service providers, expires in April 2013. A re-up of that contract, particularly for longer/better terms, would be a big boost for Omontys sales and Affymax's stock price in the coming year.
9. Pharmacyclics 259 percent
I try to steer clear of hyperbole when describing the movement of biotech stocks, but for Pharmacyclics, "rocket" is more than justified. The stock doubled in value in 2011, then more than tripled in 2012.
The object of Wall Street's affection is ibrutinib, a pill designed to block the production of an enzyme known as Bruton's tyrosine kinase (BTK) that is responsible for the unchecked or cancerous growth of B-cells. Investors see blockbuster potential in ibrutinib as a treatment for a variety of B-cell related lymphomas and leukemias, and so does Johnson & Johnson, which licensed the drug from Pharmacyclics in December 2011.
Phase III studies of ibrutinib only just began enrolling patients and won't likely have top-line results ready until 2015. But with a market cap already topping $3.7 billion, Pharmacyclics is pricing in a lot of good news already.
8. Galena BioPharma 260 percent
Galena lands a spot on this list despite a breast cancer "vaccine" showing scant evidence of efficacy and disinterest from institutional healthcare investors, who own just 6 percent of the company's outstanding shares, according to CapitalIQ. Nonetheless, retail investors bought into Galena's risky story, which like many other biotech penny stocks, received a big-time boost this year from the biotech bull market.
It's hard to envision a scenario under which Galena repeats its stock out-performance in 2013, even if the macro market remains strong. The phase III study of NeuVax in breast cancer patients with "low" levels of Her-2 expression is expected to reach full enrollment in mid-2013, with an interim analysis scheduled for the end of the year. If the interim analysis fails or comes up inconclusive — likely outcomes given the shaky assumptions used to design the study — a final analysis won't be ready until 2015.
Galena has had no luck attracting a partner, a buyer or institutional investors despite heavy promotional efforts all year. Insiders haven't been buying their own stock either. With less than $15 million in the bank, at least one dilutive financing in 2013 is likely. The best days for Galena are in the rear-view mirror already.
7. Threshold Pharmaceuticals 266 percent
Threshold wins this year's "What have you done for me lately?" award. The company owes its spot on this year's Top 10 list to a super-fantastic February in which: 1) Merck KGaA signed on as a development/marketing partner for the pancreatic cancer drug TH-302; and 2) positive results from a phase IIb study of TH-302 in pancreatic cancer were announced.
Threshold shares rose more than six-fold in value between Feb. 1 and March 30, reaching a high of $8.80 per share. Unfortunately, investor enthusiasm for TH-302 has waned, clipped by concerns about the drug's ability to prolong survival in a phase III study expected to start next year. The recently announced positive results from a phase III study of Celgene's Abraxane in pancreatic cancer also added competitive pressure to Threshold. At $4.46, the Threshold market value has been cut in half since those heady days of February and March.
6. Hemispherx Biopharma 292 percent
Hemispherx's performance this year looks impressive on a blind percentage basis, but less so when you consider the stock began the year's trading at 20 cents per share. Shares closed at $1 just once.
The only attention Hemispherx is getting comes from day traders and biotech "run-up" traders anticipating the Dec. 20 FDA advisory panel for the company's chronic fatigue syndrome therapy Ampligen. [At 5 percent, Hemispherx has even less institutional investor support than Galena.] This FDA panel isn't likely to end well for Ampligen, just like Hemispherx's previous stabs at getting Ampligen approved based on overly massaged data from a failed clinical trial.
5. Sunesis Pharmaceuticals 327 percent
Sunesis' stock price rose significantly in September after the company announced plans to enroll an additional 225 acute myeloid leukemia patients in an ongoing phase III study of vosaroxin. The market looked favorably on the upsizing of the vosaroxin pivotal study, backstopped by a cash infusion from existing and new investors.
Enrollment in the vosaroxin AML study is expected to complete in 2013 with top-line results in the first half of 2014.
4. Celsion 359 percent
Celsion's stock price traded flat for the first six months of the year, but has picked up considerable momentum this fall now that results from the phase III study of its liver cancer therapy Thermodox have been confirmed for release in January.
The stock could easily double from here if Thermodox is successful in delaying tumor growth in liver cancer patients. If the phase III study should fail, Celsion will be on the list of worst performing biotech stocks for 2013.
3. Arena Pharmaceuticals 404 percent
It is best to think of Arena's high ranking on this year's Top 10 list as a momentary suspension of reality-based investing. The approval of Belviq was easy relative to the formidable challenge Arena and its partner Eisai face when the mediocre weight-loss pill goes on sale next year. Belviq's approval in Europe, widely expected by Arena bulls, is also far from certain. I agree with my colleague Nate Sadeghi, who considers Arena to be one of the best shorts in 2013, especially if the stock continues to run up ahead of Belviq's DEA scheduling and launch.
2. BioDelivery Sciences 448 percent
BioDelivery shares began the year trading for 81 cents, which valued the drug delivery technology company at approximately $24 million. At Monday's close of $4.41, BioDelivery's market cap has grown to $135 million. It's hard to pinpoint a singular event over the past year to explain the company's second-place ranking on this year's top performers list. Perhaps it was the January partnership with Endo Pharmaceuticals for BioDelivery's BEMA buprenorphine, a quick-dissolving oral film formulation of the commonly used chronic pain drug. Or it might just be that BioDelivery was so oversold and ridiculously cheap entering 2012 that a sharp rebound was inevitable.
One of two phase III trials of BEMA buprenorphine in chronic pain is expected to read out results at the end of 2013.
1. Sarepta Therapeutics 593 percent
How fitting that Sarepta is the best performing biopharma stock of 2012 given the company's lead drug eteplirsen shows tremendous promise as a groundbreaking treatment for Duchenne muscular dystrophy (DMD), a rare genetic disorder that forces patients into wheelchairs in their teens and can be fatal shortly after.
Initial results in April from a phase II study of eteplirsen in DMD patients were tantalizing, but essentially ignored by Wall Street. Follow-up data from the same study announced in July and presented in October were nothing short of astonishing. The eteplirsen data are so good that Sarepta is hoping to convince the FDA to approve the drug early. DMD advocates are already mobilizing to lobby FDA on the company's behalf.
Sarepta will be meeting with FDA officials early next year to plot a course for eteplirsen's approval. If FDA agrees to review eteplirsen based on the small phase II study and the drug is ultimately approved next year, Sarepta could very easily find itself topping the Top 10 list in 2013.
—By TheStreet.com's Adam Feuerstein
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