Biotech Stocks Ready for More Covid-19 Results in First Quarter

Potential approval of an Alzheimer’s medicine, new gene therapy data and more late-stage clinical trial results for Covid-19 vaccines will keep momentum up for biotech stocks in the next three months.

The benchmark Nasdaq Biotech Index has climbed 26% this year, compared with a 15% gain in the S&P 500 Index, pointing to no let-up in market-moving drug trial data even during the pandemic.

Biotech Stocks Ready for More Covid-19 Results in First Quarter

While the index hit a bump this week amid worries of delays in distribution of the two U.S.-approved inoculations, investors are on the lookout as a second group of vaccine developers race to test shots, including those from Novavax Inc., Johnson & Johnson and partners GlaxoSmithKline Plc and Sanofi.

Read More: Fauci Says U.S. Lags With Year-End Vaccination Levels

Vaccine Data

After Novavax’s 30-fold stock surge this year, the first late-stage results from its shot developed using armyworm moth cells will be among the most watched. Data from the U.K. trial showing 90% or greater efficacy with a better safety profile could send shares soaring to $300, according to B Riley analyst Mayank Mamtani. The stock closed Tuesday at $120.27.

Efficacy of 80% or lower would be the bear case for Novavax’s vaccine and that could beat back shares by about 45%, according to Mamtani’s analysis. The emergency authorized jabs from Moderna Inc. along with Pfizer Inc. and its German partner, BioNTech SE, have demonstrated rates above 90%.

Also top of mind will be updates from leading vaccine makers GlaxoSmithKline and Sanofi. Investors will be looking for progress from the pair after disappointing data about their experimental shot in older people led them to delay the start of advanced trials earlier this month.

Johnson & Johnson said it expects interim results for its one-shot regimen by the end of January. “If J&J can establish themselves as a viable competitor with one injection, that’s a very meaningful event for the stock and also for the other Covid players,” said Jared Holz, a Jefferies health-care equity strategist. He likened the euphoric trading in vaccine stocks to Bitcoin mania.

Vaccine distribution and production will be key and could have an impact on broader sentiment outside biopharma, as could continued positive data from new shots, said Peter Hughes, a fund manager at AXA Investment Managers.

Gene Therapy

One of the most binary single-stock events of the quarter will be results from Sarepta Therapeutics Inc.’s gene therapy for Duchenne muscular dystrophy. Results from “Study 102” are expected as early as January.

“This could be the first time we really see signs of efficacy,” Hughes said in a phone interview. Early data suggest the gene therapy is generating a key protein in combating the disease, microdystrophin. The results should answer “if that expression of microdystrophin translates into functional benefits for patients,” he said.

Positive data could send the stock soaring 45%, according to analysis from Cowen’s Ritu Baral. Sarepta has gained 33% this year.

Alzheimer’s Drug

Expectations are low for Biogen Inc.’s controversial medicine for Alzheimer’s disease after an advisory committee advised the Food and Drug Administration against approving the drug known as aducanumab.

There are no approved treatments that can slow the spread of the brain-destroying disease. While the agency tends to heed the panel’s advice, positive briefing documents and safety data could drive the FDA to go against the recommendation, according to Paul Matteis, an analyst at Stifel.

“This situation is unprecedented,” he wrote in a research note. A regulatory nod could drive the shares up to about $350 while failure to win approval could send them lower to about $180. Biogen closed Tuesday at $243.46.

A surprise approval could also be another positive catalyst for the whole biotech sector, according to AXA’s Hughes.

©2020 Bloomberg L.P.

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