Developing new drugs is a risky business that hasn't been kind to these three biotechs or their shareholders lately. But despite recent tumbling stock prices, all of these companies have a chance to bounce back in 2019.
Of course, some of these biotech stocks have a better chance than others. Here's what you need to know about potential catalysts on the horizon that could turn these sinking ships around.
|Company (Symbol)||3-Month Performance||Market Cap|
|TG Therapeutics Inc. (NASDAQ:TGTX)||(55%)||$424 million|
|Madrigal Pharmaceuticals Inc. (NASDAQ:MDGL)||(51%)||$1.7 billion|
|Puma Biotechnology Inc. (NASDAQ:PBYI)||(50%)||$920 million|
1. TG Therapeutics: Tough Acts to Follow
This biotech stock took a beating when investors expecting response rate data for a leukemia combo in late-stage development were instead told they'd have to wait for a long-term survival benefit to play out. The company expects the Unity trial to produce progression-free survival data in 2019, and results that beat the competition could help this stock bounce back.
Unfortunately for TG Therapeutics, the stock probably won't regain all of its former glory unless results from the Unity study are downright amazing. Chronic lymphocytic leukemia is the type most commonly diagnosed among adults, but it isn't common enough to drive blockbuster sales of a mediocre treatment in a crowded market.
The Unity study will test TG's candidates ublituximab plus umbralisib against Gazyva plus old-school chemotherapy. Ublituximab and Gazyva both target CD20, and TG investors should be nervous about a treatment that AbbVie (NYSE:ABBV) already markets with great success. AbbVie's Venclexta plus Rituxan blew the doors off Rituxan plus chemo for a group of patients similar to those enrolled in the Unity study.
Rituxan is an older CD20 therapy, and low-cost biosimilar versions could make Venclexta plus Rituxan an extremely difficult combination to compete with. TG Therapeutics' market cap has been reduced to ashes, so a positive result could lead to huge gains. Given the strength of the competition, though, it doesn't seem like a risk worth taking.
2. Madrigal Pharmaceuticals: Beta-agonist Battle
Madrigal Pharmaceuticals and Viking Pharmaceuticals (NASDAQ:VKTX) are both developing thyroid receptor beta (TRB) agonists for the treatment of nonalcoholic steatohepatitis (NASH). Madrigal stock peaked after its lead candidate, MGL-3196, led to a 42% average liver fat reduction earlier this year. Madrigal's gains were mostly wiped out following surprising results from Viking's TRB agonist, VK2809, which is a few steps behind on the development timeline.
Treatment with Viking's VK2809 led to a whopping 59.7% liver fat reduction for a group of 11 nonalcoholic fatty liver disease (NAFLD) patients compared with those given a placebo. Although MGL-3196 looks washed up, differences between the two patient groups probably improved VK2809's appearance. Patients with NAFLD have high levels of fat in their livers, but they haven't yet started exhibiting signs of inflammation, ballooning, or stiffening.
The NASH patients in Madrigal's much-larger study had livers that were already taking damage, and 36-week biopsy data shows their chances of achieving NASH resolution were 450% better than the placebo group. That's important because the FDA has signaled a willingness to review a drug that helps patients achieve NASH resolution rather than insisting on long-term studies to determine survival outcomes.
The disease currently threatens an estimated 20 million Americans, and there aren't any available treatments yet. Madrigal and Viking are both looking for buyers, and there's a chance a big pharma will jump at the TRB-agonist with the type of NASH data the agency wants to see.
3. Puma Biotechnology: Hey, Glaxo
Puma's breast cancer treatment Nerlynx has been proven to prevent tumors from returning after initial treatments. Unfortunately, the extended adjuvant role isn't providing the sales that investors were expecting when Nerlynx launched last summer.
GlaxoSmithKline recently agreed to acquire Tesaro, another struggling biotech in the middle of a disappointing drug launch. The return of big pharma deals has some investors hopeful that Puma could be next.
During studies leading to Nerlynx's approval, it raised patients' chances of remaining disease-free from 91.9% to 94.2% at two years. That's statistically significant, but third-quarter Nerlynx sales came in at just $53 million. That was only $2 million more than the company recorded during the previous quarter, which suggests the launch has tapered off.
Investors worried Nerlynx sales have stopped growing have hammered Puma's market cap 74% lower since the company launched the drug last summer. At recent prices, some big pharma itching to expand its oncology presence could be tempted to make Puma an offer.
A buyout at a premium could help Puma shareholders recover some recent losses, but hoping for generous offers isn't a sound investing strategy. Moreover, there are more attractive takeout targets available at the moment.
Most Likely to Succeed
While the odds of bouncing back aren't great for any of these stocks in 2019, Madrigal probably has the best chance to stage a comeback. The company's recent valuation doesn't seem entirely unreasonable for a roll of the dice on one of two drugs that are probably going to make a big difference for the enormous NASH population. That said, it's probably best to watch the show from a safe distance.