What a year! The American Stock Exchange's Biotechnology Index rose 50.6%, the average stock on this list rose 55.7%, and the median stock rose 36%. Of the 330 companies included in this screen, 257, or 78%, had positive returns. One hundred and thirty-five increased at least 50%, 68 doubled, 25 tripled, nine quadrupled, 5 quintupled, and one, the Lannett Company, a generic drug maker, saw its shares increase to six times what they were a year ago. Amazing what a bull market can do.
This screen, using data from Interactive Data and Thomson Reuters Fundamentals via FactSet Research Systems, includes drug makers, medical device manufacturers, and diagnostics companies traded on the New York Stock Exchange, the Nasdaq or the American Stock Exchange that had market capitalizations of more than $100 million a year ago.
It was also a huge year for biotech IPOs, according to Burrill & Co. Globally, 65 IPOs were completed in 2013, raising $7.5 billion, up 254 percent from the $2.1 billion raised by 38 global life sciences IPOs in 2012. Globally, there were 68 biotech IPOs that raised $7.5 billion; of those, 52 IPOs and $7 billion in funds were from the U.S. Last year, there were 16 biotech IPOs in the U.S. and they only raised $1.1 billion.
Of the 84 companies that posted negative results, the worst damage came, as usual, to those that presented bad clinical data or had run-ins with the U.S. Food and Drug Administration. It's always important to remember that a lot of the biggest gains and losses in biotech come from investors guessing wrong -- twice. See one of last-year's best performers, Celsion Pharmaceuticals, which this year was one of the worst. To quote Burrill:
Shares were boosted by expectations of positive late-stage trial results of its targeted cancer therapy ThermoDox in combination with radiofrequency ablation to treat primary liver cancer. But when it announced that the late-stage study did not meet the primary endpoint, shares tanked. With no backup development program, Celsion ended the year down 89.4 percent.
Another example would be Sarepta Therapeutics, which is developing a muscular dystrophy drug, which was in my best-performing stock lists for much of the year but ends the year down 21% after the FDA said it needs to see more data, which Sarepta must now generate.
Here are some thoughts on a few of the best-and-worst-performing stocks as we head into 2014
- Hot hand-me-down. Puma Biotechnology, the third best-performing biotech stock, is up because neratinib, a drug it licensed from Pfizer, was chosen as part of the I-SPY trial to head into phase III studies. The idea behind I-SPY, which is the brainchild of M.D. Anderson statistics maven Don Berry, is that the design of the trial changes in order to match drugs to populations of breast cancer patients who are likely to benefit. Drugs are only supposed to pass on to late-stage phase III studies if they have a substantial chance of being successful in them. This should, therefore, offer better odds than most drugs that have performed well in Phase II. ""It is better than a phase II trial because instead of having a phase II in all comers, in this you really know which group it works better in," says Hope Rugo, Professor of Medicine and Director of Breast Oncology and Clinical Trials at UCSD and an I-SPY investigator.
- A landmark for psychiatry? Acadia Pharmaceuticals, the fourth-best biotech stock, rose 437% because its drug for psychosis in Parkinson's was successful in a clinical trial. This study may represent a landmark for psychiatry medicines, because the trial was conducted using third-party reviewers to discern patients' symptoms, instead of the trial doctors who took care of them. This may help overcome the inflated placebo effects, due in part to doctors and patients overestimating symptoms at the beginning of the study, perhaps to get patients into the trial, and underestimating them at the end, maybe because both doctor and patient want the illness to improve.
- There's hope! I've been skeptical of Isis Pharmaceuticals because of the twisted path that its drug Kynamro took to market, at first appearing like it might be a big opportunity and then having expectations repeatedly cut as a competitor emerged. But it does seem likely that Isis' unique drug platform might be better suited to ultra-rare diseases, which are generating the current excitement.
- Be careful, though. It's always tempting to look at the worst performers to try to figure out if any are oversold. I think the best candidates there would be Ariad, which is still selling its drug to a dramatically reduced audience after safety worries emerged, and Infinity Pharmaceuticals, which has been a solid drug developer beset by very, very bad luck.
- Wall of Shame. I think the two standouts (in a bad way) among the worst-performing stocks are Amarin and AVEO. Amarin seems to have started large heart outcomes study without any plans as to how it will finish it, or without any backup plans following an FDA rejection. AVEO and its academic investigators did not disclose their data that made it evident what a big problem them FDA would have with them, and then walked into an FDA advisory panel completely unprepared. Pretty awful management on both counts.
The Best-Performing Biotech Stocks Of 2013
Recent | YTD | ||
Market | price | ||
value | change | ||
Ticker | Company | ($MIL) | % |
LCI | Lannett Company, Inc. | 1,153.8 | 567.3 |
INO | Inovio Pharmaceuticals, Inc. | 604.3 | 480.6 |
PBYI | Puma Biotechnology, Inc. | 2,970.2 | 452.2 |
ACAD | ACADIA Pharmaceuticals Inc. | 2,270.8 | 437.4 |
GENT | Gentium S.p.A. Sponsored ADR | 866.4 | 403.1 |
KERX | Keryx Biopharmaceuticals, Inc. | 1,066.0 | 394.3 |
INSY | Insys Therapeutics, Inc. | 831.8 | 379.4 |
ONVO | Organovo Holdings, Inc. | 855.5 | 325.8 |
ZLTQ | ZELTIQ Aesthetics, Inc. | 699.0 | 308.4 |
ANIK | Anika Therapeutics, Inc. | 527.6 | 283.9 |
ISIS | Isis Pharmaceuticals, Inc. | 4,624.4 | 281.6 |
CLVS | Clovis Oncology, Inc. | 2,042.3 | 276.7 |
PRTA | Prothena Corp. Plc | 468.9 | 261.8 |
CLDX | Celldex Therapeutics, Inc. | 2,133.1 | 260.8 |
ALNY | Alnylam Pharmaceuticals, Inc | 4,078.6 | 252.3 |
GERN | Geron Corporation | 611.3 | 236.2 |
VNDA | Vanda Pharmaceuticals Inc. | 411.9 | 235.4 |
NPSP | NPS Pharmaceuticals, Inc. | 3,099.8 | 233.6 |
PCRX | Pacira Pharmaceuticals, Inc. | 1,915.3 | 229.1 |
HZNP | Horizon Pharma, Inc. | 501.8 | 227.0 |
BTK | AMEX Biotechnology Index | 0.0 | 50.6 |
The Worst-Performing Biotech Stocks of 2013
Recent | YTD | ||
Market | price | ||
value | change | ||
Ticker | Company | ($MIL) | % |
CLSN | Celsion Corporation | 52.9 | -89.4 |
ASTM | Aastrom Biosciences, Inc. | 14.1 | -87.2 |
DCTH | Delcath Systems, Inc. | 32.2 | -79.3 |
CVM | CEL-SCI Corporation | 28.9 | -78.1 |
AVEO | AVEO Pharmaceuticals, Inc. | 94.9 | -77.3 |
AMRN | Amarin Corporation Plc Sponsored ADR | 340.1 | -75.6 |
ENZN | Enzon Pharmaceuticals, Inc. | 51.1 | -73.8 |
ZLCS | Zalicus Inc. | 29.0 | -71.5 |
ECTE | Echo Therapeutics, Inc. | 33.1 | -69.8 |
SPHS | Sophiris Bio Inc. | 59.8 | -68.9 |
PBMD | Prima Biomed Ltd Sponsored ADR | 45.1 | -68.6 |
PTX | Pernix Therapeutics Holdings, Inc. | 93.7 | -67.5 |
OXBT | Oxygen Biotherapeutics, Inc. | 47.8 | -65.1 |
ARIA | ARIAD Pharmaceuticals, Inc. | 1,266.2 | -64.4 |
GTXI | GTx, Inc. | 104.3 | -60.7 |
INFI | Infinity Pharmaceuticals, Inc. | 664.1 | -60.5 |
ONCY | Oncolytics Biotech Inc. | 131.4 | -60.5 |
VICL | Vical Incorporated | 102.4 | -59.5 |
BAXS | Baxano Surgical, Inc. | 45.6 | -59.3 |
ACHN | Achillion Pharmaceuticals, Inc. | 320.8 | -58.6 |
BTK | AMEX Biotechnology Index | 0.0 | 50.6 |