Over the years biotech investors who have owned the right stocks have made some very big money on Federal Drug Administration (FDA) approval of leading drug candidates. Typically biotech firms submit final Phase 3 trial data to the FDA, which then scrutinizes results and gives an up or down vote on whether the drug is approved to be launched for sale to the public. In some cases the FDA will restrict marketing or have the company change the label verbiage.
In a new report the analysts at Cowen point out a very interesting item. Their work shows that, on average, stocks gained 84% in the 12 months prior to approval and lost 24% in the 12 months after the FDA approval. They also pointed out the companies are rarely acquired a year before or after approval. That is a data point that may surprise many investors.
Cowen highlighted seven stocks with Phase 3 data that had solid opportunity heading into the approval process.
ACADIA Pharmaceuticals Inc. (NASDAQ: ACAD) has been one of the top performing biopharmas even since its experimental treatment for Parkinson’s disease psychosis called pimavanserin met its primary endpoints in a late-stage study in 2012. The company is getting closer to a regulatory filing for the drug. The Thomson/First Call price target for the stock is $32.76. Shares closed trading Tuesday at $23.42.
Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) is still a top stock to buy at many Wall Street firms, and it has been considered by some firms as a potential acquisition target. Some analysts see likely strong accretive near-term to an acquirer, given the very impressive $1.5 billion in company revenues that are big enough to be significant to a bigger company.
The FDA has granted an orphan drug designation to Soliris, its only marketed product, for the treatment of patients with myasthenia gravis, a rare neurological disorder that reportedly affects an estimated 13,600 people in the United States. The consensus price target is $193.89. Alexion closed Tuesday at $162.79.