If you could travel back in time just one week, it would be a smart move to buy a few stocks during your visit to the recent past. Three healthcare stocks skyrocketed 35% or more over the last five days: Reata Pharmaceuticals (NASDAQ: RETA), resTORbio (NASDAQ: TORC), and LifePoint Health (NASDAQ: LPNT).
Unfortunately, time travel isn't possible right now. Investors are stuck with trying to predict what might happen with stocks in the future. Are any of the week's biggest healthcare winners still great stocks to buy now? Here's what you need to know about Reata, resTORbio, and LifePoint Health.
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1. Reata Pharmaceuticals: Two for two in phase 2
Reata Pharmaceuticals ranked as the top healthcare stock of the week with shares soaring 67%. All it took for the huge gain was a little good news from phase 2 clinical studies. On Monday, Reata announced positive results from two phase 2 studies evaluating bardoxolone methyl (bardoxolone) in treating patients with chronic kidney disease (CKD).
One of those studies focused on patients with CKD caused by Alport syndrome, a rare genetic disorder. In this study, patients receiving bardoxolone experienced significant improvements in estimated glomerular filtration rate (eGFR), a measure for kidney function, after one year of treatment.
The other results announced by Reata this week related to a cohort of patients with autosomal dominant polycystic kidney disease in another phase 2 study. Reata observed a statistically significant improvement in eGFR for these patients also.
Investors were understandably excited about these study results, especially since the Food and Drug Administration had told Reata previously that a statistically significant improvement in eGFR after one year could potentially support accelerated approval of bardoxolone. The company is enrolling a phase 3 clinical study targeting Alport syndrome, with results expected in the second half of 2019. If all goes well after one year of treatment, Reata could be on track to win its first drug approval.
2. resTORbio: Breathing easier
ResTORbio wasn't too far behind Reata. The biotech stock jumped 61% this week thanks to its own encouraging phase 2 clinical study results. On Wednesday, resTORbio announced positive data for its lead candidate, RTB101, in treating respiratory tract infections (RTIs) in elderly patients.
Just how good were those results? There was a 30.6% reduction in the number of patients with RTIs for patients who received a 10-milligram dose of RTB101 compared to patients on a placebo. Even better, certain subsets of patients in the study achieved even greater improvements. For example, there was a 68.4% reduction in RTIs for asthma patients age 65 and up, as well as a 66.7% reduction overall in patients with RTIs age 85 and older.
RTIs in elderly patients is a serious healthcare worry in the U.S. It's the No. 7 leading cause of death for elderly Americans and the No. 4 cause of hospitalizations. RTIs result from infections by many different viruses, with no FDA-approved drugs for treating many of them.
These positive phase 2 results were a major relief for resTORbio shareholders. RTB101 is the company's only pipeline candidate.
3. LifePoint Health: A private victory
LifePoint Health's share price rose 35% this week after the healthcare facility operator's announcement that it was merging with RCCH HealthCare Partners, which is owned by private equity firm Apollo Global Management. As you might expect with this deal, if it goes through, LifePoint Health will be taken private.
The resulting entity will be known as LifePoint Health, with current LifePoint CEO William F. Carpenter III still at the helm. The combination of LifePoint and RCCH will create a company with more than $8 billion in annual revenue. Its facilities will include 84 community hospitals across 30 states, plus regional health systems, physician practices, outpatient clinics, and post-acute care facilities.
It's not a done deal just yet, though. LifePoint Health can still look for other potential acquirers until Aug. 22. If a better opportunity comes along, the merger with RCCH could be off.
The LifePoint Health transaction is one of several recent cases where private equity firms have bought healthcare companies to take them private. In June, KKR & Co. announced its acquisition of physician staffing provider Envision Healthcare, and Veritas Capital announced that it was buying healthcare technology services provider Cotiviti Holdings.
Are they buys?
Reata Pharmaceuticals' phase 2 results looked great. However, it's important to remember that these were really small studies -- one study involved only 30 patients, and the other 31 patients. Investors would be better off waiting to see how Reata's promising CKD drug fares in a larger clinical trial.
I'm cautiously optimistic about resTORbio's prospects as it advances RTB101 to late-stage testing. Again, though, it's still too early to know how successful the drug will be. In addition, I suspect that resTORbio will use its share price boost to raise more cash via a stock offering -- a move that Reata has already taken.
As for Lifepoint Health, I don't think the company will get a better deal than what Apollo has put on the table. The stock has probably jumped about as much as it's going to.
These three stocks were definitely hot this week. But for investors hoping to catch some of that heat, my view is that they'll need to look elsewhere.
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