3 Biotechs That Could Peak in 2017

By Alex Keown, BioSpace.com Breaking News Staff

Biotech stocks have taken a beating in 2016 and even the "Trump Bump" for pharma stocks was short-lived. But, a new year brings new hope for investors. A Motley Fool analyst thinks he has three stocks that could "shine" next year.

Brian Orelli said in his column that investors may want to look for stocks that offer the "best risk-reward profile," rather than stocks that could take dramatic swings based on unexpected reasons. He said aiming for companies that have "less potential reward" but also less potential risk will likely result in better overall returns. For 2017, Orelli has selected three stocks that fit that profile—Celgene (CELG), Ionis Pharmaceuticals (IONS) and Kite Pharma (KITE).

1. Celgene

Despite 23 percent growth in the first three quarters of 2016, Orelli said Celgene (CELG)’s stock price is not trading at a price that reflects that. Shares are currently trading at $114.18 as of 11:11 a.m. Orelli said Celgene management has predicted growth of 13 to 16 percent—which he said is on the conservative side of things. That means Celgene could be poised for greater growth, he predicted. To back up that potential growth, Orelli said Celgene expects data from 19 Phase III trials and more than 20 phase II or proof-of-concept readouts. Also, he said the company will have about 17 programs enter the clinic through the end of 2018. Not to mention all the partnerships the company has struck with other pharma companies. Since 2014, Celgene has spent more than $3 billion in partnerships, most noticeably the $1 billion the company invested in a 10-year partnership with Juno Therapeutics (JUNO) or the more more recent deal with Jounce Therapeutics that could be worth up to $2.5 billion. Celgene also has collaborations with companies like Agios (AGIO), Bluebird Bio (BLUE), Epizyme (EPZM) and others.

2. Ionis Pharmaceuticals

Ionis (IONS) also has a lot of drugs coming through its pipeline—more than 20. The company anticipates data from two Phase III trials next year, which would potentially give it four marketable drugs. Ionis, formerly known as Isis (ISIS), has several RNA-targeting drugs in late-stage development, including volanesorsen for patients with either familial chylomicronemia syndrome or familial partial lipodystrophy. In addition to a deal with Biogen (BIIB), Ionis also has a potentially lucrative deal with Janssen. In July, the company struck a deal worth up to $810 million with Janssen Biotech (JNJ) for the development of its oral gastrointestinal treatment, IONIS-JBI1-2.5.. IONIS-JBI1-2.5, is antisense drug designed to locally inhibit an undisclosed target in the gastrointestinal (GI) tract. Shares of Ionis are currently trading at $46.33.

3. Kite Pharma

Kite Pharma (KITE) could be set to explode with its CAR-T treatments. The company has started a rolling submission to the U.S. Food and Drug Administration for its lead leukemia treatment. Kite believes the interim data of the Phase II trial released in September will be strong enough to lead regulators at the U.S. Food and Drug Administration to ultimately give its approval—making KTE-C19 the first CAR-T therapy to reach the market ahead of rivals Juno Therapeutics (JUNO) and Novartis (NVS). Kite said it plans to seek regulatory approval of KTE-C19 in diffuse large B-cell lymphoma (DLBCL), transformed follicular lymphoma (TFL) and primary mediastinal B-cell lymphoma (PMBCL) based upon the combined data of multiple trial cohorts. Kite anticipates commercial launch of KTE-C19 in 2017. In addition to KTE-C19, Kite has multiple CAR and TCR products in development, Orelli said. Shares of Kite are trading at $47.01 as of 11:29 a.m.