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To hear Wall Street tell it, AbbVie Inc. (NYSE: ABBV) drove right into a ditch last month.
Here's the thing. The company announced results of a Phase 2 trial on March 22 that were disappointing but hardly fatal. The results mean AbbVie won't seek fast-track approval for its promising antibody-drug conjugate, Rova-T, but it still expects to be able to take it to market in the near future.
Wall Street overreacted - no surprise there - and AbbVie shares lost 15% in three sessions.
Here's the thing. Wall Street's overreaction to AbbVie's disappointing U.S. Food and Drug Administration trial results weren't the only reason for its share-price plummet.
You see, though it shouldn't be, biotech is in the dog house - and investors are primed to punish stocks in the sector for just about anything.
In fact, since hitting a three-year high in August 2015, the Nasdaq Biotech Index is off 6%. During that stretch, the S&P 500 is up nearly 35%.
Biotech is down for three main reasons. Wall Street is worried about...
- High and rising drug prices...
- The impact of a possible trade war on foreign sales...
- And expiring patents for some older medications.
But what you don't hear much about is the fact that the industry is about to bust out.
That's because biopharma companies are ready to release several potential blockbuster drugs - drugs with potential yearly sales of $1 billion - over the next few months.
I've identified three specific Biotech Blockbusters that could do even better than that. So, I'll show you those.
And then I'll reveal the single best way to play all three all at once...
Pulled Back from the Cliff
Over the last several years, I've read a number of Wall Street reports about the so-called biotech patent cliff. Simply stated, a drug falls off that "cliff" when its patent runs out and it starts facing competition from generics.
And a number of successful drugs out there are rapidly approaching their patent cliffs.
That sounds bad.
But there are good things happening in biotech as well.
In fact, I was thrilled to see a recent report from Clarivant Analytics, a research firm that works closely with industry leaders and top universities, which says a total of 12 compounds being released in 2018 could become blockbusters.
So, I went through the data and found three potential "Biotech Blockbusters" that I think could lead the pack.
Let's take a look...
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Biotech Blockbuster No. 1: The First Cannabis Drug to Market
Get ready for the first in a wave of new cannabis-based drugs. Epidiolex is likely to see FDA approval early this summer - and then start bringing relief to the nearly 4% of society that suffers from seizures.
In fact, an FDA advisory committee unanimously recommended the agency approve the drug when it comes up for review in June.
Epidiolex, made by GW Pharmaceuticals Plc. (Nasdaq ADR: GWPH), could become a $1.7 billion yearly seller by 2026.
And it's just the tip of the spear for GW.
Beyond epilepsy, Epidiolex is being tested on other neurological diseases. Plus, the British firm is also testing a drug called Sativex, which appears to provide strong relief from the spasms induced by multiple sclerosis. Sativex has already been approved for sale outside the United States, pointing to the global positive response to cannabis-based drugs.
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GW Pharma also has a pipeline of earlier-stage marijuana-based drugs that are focused on schizophrenia, autism, and other conditions.
The firm should finish 2018 with roughly $400 million in the bank, enabling GW Pharma to become medical marijuana's most dominant player.
Biotech Blockbuster No. 2: Gilead's Gold
With FDA approval in hand this past February, Biktarvy is poised to zoom out of the gate.
It's expected to rack up more than $2 billion in sales by next year - and a hefty $4.3 billion by 2021.
This new drug, made by Gilead Sciences Inc. (Nasdaq: GILD), is aimed at relieving the symptoms of HIV. This syndrome afflicts 37 million people across the globe.
While Gilead - one of my top biotech picks for 2018 - already dominates treatment of HIV, hepatitis, and other ailments, the firm is now building a first-mover advantage in the emerging field of gene therapy.
A 2017 purchase of Kite Pharmaceuticals, a savvy partnership with Sangamo Therapeutics Inc. (Nasdaq: SGMO), and a hefty slate of R&D spending will position Gilead to profit from gene therapy, which I think will be the most promising new area of biotech over the next decade.
Biotech Blockbuster No. 3: The Migraine Miracle
The top-selling drugs aim at large targets. And the pool of migraine sufferers is massive.
Fully 37 million Americans suffer from migraines, according to the Migraine Research Foundation.
And many of them are awaiting FDA action on Aimovig.
This drug, co-developed by Amgen Inc. (Nasdaq: AMGN), works by blocking a specific group of amino acids. Even though it's unlikely to come to market before the middle of the year, it should rack up more than $100 million in sales in 2018.
Once doctors begin to prescribe Aimovig to more patients, the drug is poised to generate an estimated $1.17 billion in yearly sales by 2022.
Peter Goadsby, a neurologist at King's College London, says Aimovig shows that "we're in a genuine watershed moment with the very first class of migraine treatments."
In a clear vote of confidence for its newly bolstered drug pipeline, Amgen is in the midst of a $10 billion share buyback that will sharply boost its per-share profits in coming years. That's just a down payment on the $37 billion the firm is bringing back to the United States, thanks to tax reform.
Biotech Blockbusters' One Fell Swoop
That's why I think now is a great time to invest in the iShares Nasdaq Biotechnology Index (Nasdaq: IBB).
This cost-effective exchange-traded fund gives us broad exposure to a sector - an essential sector - poised for a rebound.
Since its launch in 2001, this $8.82 billion fund has been a top way to profit from the powerful growth of Biotech Blockbusters. And it holds all three of the stocks we've been talking about here.
Over the past decade, IBB has racked up a 15% yearly gain. That's the kind of returns you can come to expect, now that biotech firms have strongly rebuilt their new drug pipelines.
While the fund aims for broad-based industry exposure, it provides a hefty weighting on biotech firms with the largest drug pipelines.
Amgen, Gilead Sciences, and Celgene Corp. (Nasdaq: CELG), for example, account for a combined 22% of the portfolio. Other key holdings include...
- Regeneron Pharma Inc. (Nasdaq: REGN), which has six FDA-approved drugs on the market and is also home to a deep pipeline of new drugs being tested to treat a range of diseases, including asthma, pain, cancer, and infectious diseases.
- Vertex Pharma Inc. (Nasdaq: VRTX) is a leader in cystic fibrosis treatment. The firm's new drugs are helping boost sales from $1.7 billion in 2016 to a projected $5.2 billion by 2020.
- Illumina Inc. (Nasdaq: ILMN) provides a broad array of gene testing equipment, helping advance disease research, drug development, and the creation of molecular tests.
- Alexion Pharmaceuticals Inc. (Nasdaq: ALXN) focuses on monoclonal antibody therapies, which are used to treat ultra-rare diseases. The firm's sales have nearly tripled in the past five years, to a recent $3.6 billion. And a very deep pipeline should fuel double-digit sales gains for years to come.
The biotech industry is clearly headed for better days. Not just in 2018, but well into the next decade. That makes the iShares Nasdaq Biotechnology Index a great long-term holding that can ride the entire sector to new heights.
If you make your move now, you're getting in before Wall Street wakes up to the great story here.
And that will only further add to your long-term gains.
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The post The World's First $1B Cannabis Drug - and 2 More Biotech Blockbusters appeared first on Strategic Tech Investor.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.