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3 Biotech Stocks That Soared This Week: Are They Buys?

Keith Speights, The Motley Fool

This might have been the last official week of summer, but it still came with a lot of heat. And it was especially hot in the biotech industry, with quite a few biotech stocks skyrocketing.

Three of the biggest winners this week were Viking Therapeutics (NASDAQ: VKTX), Acadia Pharmaceuticals (NASDAQ: ACAD), and Corbus Pharmaceuticals (NASDAQ: CRBP). What drove these biotech stocks higher -- and are they buys now? 

Man in a suit with chalk-drawn wings appears to be soaring, next to a blue line chart pointing up.

Image source: Getty Images.

1. Viking Therapeutics: A big splash in NASH

Shares of Viking Therapeutics soared 73% this week after the biotech announced positive results on Tuesday from a phase 2 study of VK2809 in treating nonalcoholic fatty liver disease (NAFLD) and high cholesterol. Viking's gain would have been even greater, but the company announced a public stock offering on Wednesday to raise additional cash.

The phase 2 study results for VK2809 were exactly what investors had hoped for. Viking reported that the drug achieved up to 60% reduction in liver fat with up to 91% of patients taking VK2809 experiencing at least a 30% reduction in liver fat content. In addition, the drug appeared to be safe and well-tolerated. Viking said that no serious adverse events were reported in the study.

Viking now should advance VK2809 to a late-stage study. The biotech could also attract considerable interest from larger drugmakers looking to beef up their pipelines targeting nonalcoholic steatohepatitis (NASH), which is a type of NAFLD with no currently approved treatments.

2. Acadia Pharmaceuticals: Fears to cheers

Acadia Pharmaceuticals stock jumped 45% this week. The biotech's big gain stemmed from the U.S. Food and Drug Administration (FDA) concluding a review of the safety profile of Parkinson's disease psychosis drug Nuplazid with no new findings.

Investors had been very jittery about Acadia since CNN reported in April that Nuplazid was potentially linked to hundreds of patient deaths. The FDA initiated a safety review of the drug around the same time. However, the FDA now says that its review didn't "identify any new or unexpected safety findings with Nuplazid" and "that the drug's benefits outweigh its risks for patients with hallucinations and delusions of Parkinson's disease psychosis."

It would have been crushing news for Acadia had the FDA reached a different conclusion. The biotech now hopes to pick up momentum for Nuplazid. However, there remains a possibility that doctors' opinions of the drug could still be affected by all the bad publicity in recent months.

3. Corbus Pharmaceuticals: Padding its pipeline

Shares of Corbus Pharmaceuticals vaulted 40% higher this week. On Thursday, the company announced a licensing deal with Jenrin Discovery LLC to develop and market drugs based on more than 600 compounds targeting the endocannabinoid system.

Corbus claimed a grand total of one drug in its pipeline prior to its licensing agreement with Jenrin. The biotech is evaluating synthetic-cannabinoid drug lenabasum in a phase 3 study targeting treatment of systemic sclerosis. Corbus plans to start another phase 3 study of the drug in treating dermatomyositis, a rare inflammatory disorder of the muscles, later this year.

Thanks to its latest deal, though, Corbus now has another clinical-stage asset in CRB-4001. The company will initiate a phase 1 clinical trial of the drug in 2019. In addition, Corbus has a sizable library of preclinical compounds with its licensing agreement that the company thinks could enable it to move one or two new drugs each year into clinical testing beginning in 2020.

Are they buys?

In my view, Viking Therapeutics, Acadia Pharmaceuticals, and Corbus Pharmaceuticals are promising biotechs. However, all three are still in clinical stage and therefore come with considerable risk. 

I think that it's better to see how Nuplazid sales go after the good news from the FDA review before buying Acadia. A wait-and-see approach is also probably the better strategy with Corbus. On the other hand, I think that the risk-reward proposition for Viking looks pretty good right now, even after its big gain.

Viking has been on my radar screen for a while now. I was cautiously optimistic about the biotech's chances of success in the phase 2 study of VK2809. My hunch is that several big drugmakers could make a run at acquiring Viking in the not-too-distant future. Again, Viking remains a risky and speculative pick. However, I consider it one of the best speculative picks on the market right now.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.