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Gene Therapy the Next Best Thing: Here's Why

Zacks Equity Research

Gene therapy has been growing by leaps and bounds in recent times. This shows on Global X Genomics & Biotechnology ETF’s (GNOM) gain of 16.1% compared with the broader S&P 500 Index’s rally of 10.3% in the past six months. Notably, genomics primarily comprises gene therapy and gene editing. Mergers and acquisitions, collaborative operations, and a broad and intriguing pipeline of research programs have been driving the gene therapy industry.

Given such positive developments, we have shortlisted five companies involved in gene therapy that can be valuable additions to your portfolio.

Recent Activities Spurring Growth

Although the gene therapy space is impacted negligibly by geopolitical or economic factors, mergers and acquisitions, collaboration and success of R&D programs have a significant bearing on the stocks.

The broader Biomedical and Genetics industry has been in spotlight since the beginning of this year with a bigwig like Bristol-Myers Squibb Company acquiring Celgene Corporation.  Despite a few unsuccessful deals like Roche calling off plans to acquire Spark Therapeutics, Inc. in February for $4.8 billion due to regulatory snags, the gene therapy industry has witnessed several major acquisitions this year.

In June, Biogen Inc. acquired Nightstar Therapeutics for approximately $800 million in an effort to establish clinical pipeline of gene therapy candidates in ophthalmology. On Dec 2, Tokyo-based Astellas Pharma also disclosed plans to acquire Audentes Therapeutics for about $3 billion, or $60 per share.

Audentes Therapeutics, an early startup in the gene therapy area, which develops single shot carrying the correct copy of a gene to cure patients of genetic diseases. This deal will enable Audentes to operate as an independent subsidiary and access Astellas’ scientific and development resources.

Apart from massive mergers and acquisition that benefit this space, its broad and intriguing project pipeline attracts investors, as successful execution will lead to higher revenues. For example, Applied Genetic Technologies Corporation in September announced positive results from its leading pipeline program, X-linked retinitis pigmentosa (XLRP).

Almost 8,000 Americans suffer from this rare ophthalmologic disorder and a breakthrough will benefit the company financially as treatment would cost $500,000 per patient. This also provides the company an edge over competitors like Biogen and MeiraGTX.

Additionally, collaborative activities have been driving the gene therapy. On Dec 3, Seattle Genetics, Inc. and Astellas Pharma announced a deal to collaborate  with Merck & Co., Inc to commence a phase III study, that would allow combination of their antibody-drug conjugate Enfortumab Vedotin and PD-1/L1 inhibitor Keytruda (pembrolizumab) to address patients with previously untreated metastatic urothelial cancer.

Earlier in September, Seattle Genetics and Astellas had released encouraging results for the phase I EV-103 study on Enfortumab Vedotin. Such developments indicate growth in the gene therapy space.

In fact, major biotech ETFs and indexes have exhibited a strong performance year to date as the SPDR S&P Biotech ETF (XBI) gained 28.6% compared with the S&P 500 index’s rally of 23.2% so far this year. While the ProShares Ultra Nasdaq Biotechnology (BIB) rose 40.5% surpassing the Nasdaq Composite’s growth of 27.8% on a year-to-date basis.

In fact, the size of the biotechnology market was valued at $399.4 billion in 2017 and is expected to see a CAGR of 9.9% during the forecast period 2018-2024, according to Global Market Insights.

5 Biotech Stocks to Buy Now

Gene therapy falls under Zacks Medical - Biomedical and Genetics industry, which primarily comprises of biotechnology stocks. Looking at the positive development in this space we have shortlisted five stocks that flaunt a Zacks Rank #1 (Strong Sell) or 2 (Buy) and are poised to grow.

Vertex Pharmaceuticals Incorporated VRTX engages in developing and commercializing therapies for treating cystic fibrosis. The company also engages in funding and financing companies testing and developing gene therapies. Recently in June this year, the company acquired Exonics Therapeutics for $245 million, Exonics is developing gene therapies.

The company’s expected earnings growth rate for the current year is 17.9% compared with the Medical - Biomedical and Genetics industry’s projected earnings growth of 6.1%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 5% over the past 60 days. Vertex Pharmaceuticals, a Zacks Rank #1 company, has outperformed the industry in the past year (+24.3% versus -7.4%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pieris Pharmaceuticals, Inc. PIRS is a clinical-stage biopharmaceutical company that discovers and develops anticalin-based drugs. Pieris engages in several research and development programs and other gene therapy companies. In mid-November, the company was scheduled to phase 1 dose escalation data for PRS-343 in combination with Roche's Tecentriq in HER2-positive solid tumor.

The company’s expected earnings growth rate for the current year is 56%. The Zacks Consensus Estimate for the company’s current-year earnings has risen 14.3% over the past 60 days. Pieris, a Zacks Rank #1 company, has outperformed the industry in the past year (+9.6% versus -7.4%).

MeiraGTx Holdings plc MGTX is a clinical-stage gene therapy company that focuses on developing treatments for patients living with serious diseases. The company’s program pipeline in clinical development includes phase 1/2 clinical stage programs in Achromatopsia, X-Linked Retinitis Pigmentosa, RPE65-deficiency, and radiation-induced Xerostomia, and Parkinson's program. Notably, Johnson & Johnson owns a stake in this company.

The company’s expected earnings growth rate for the next year is 8.6% compared with the industry’s projected earnings growth of 6.9%. The Zacks Consensus Estimate for the company’s current-year earnings has risen 10.1% over the past 60 days. MeiraGTx, a Zacks Rank #2 company, has outperformed the industry in the past year (+47.4% versus -7.4%).

uniQure N.V. QURE is a gene therapy company that engages in the discovery, development, and commercialization of gene therapies. The company’s current pipeline has projects like developing AMT-061, a gene therapy that is in phase III clinical trial for the treatment of hemophilia B. uniQure intends to make $1 billion in annual revenues from hemophilia B treatment.

The company’s expected earnings growth rate for the current year is 27.8%. The Zacks Consensus Estimate for the company’s current-year earnings has risen 7.1% over the past 60 days. uniQure, a Zacks Rank #2 company, has outperformed the industry in the past year (+115.8% versus -7.4%).

Intellia Therapeutics, Inc. NTLA is a genome editing company that focuses on the development of therapeutics utilizing a biological tool known as the CRISPR/Cas9 system. The company has several in vivo and ex vivo programs in pipeline. While in vivo program focuses on liver diseases, including transthyretin amyloidosis, alpha-1 antitrypsin deficiency, and primary hyperoxaluria, ex vivo deals with engineering cell therapies to treat various oncological and autoimmune diseases.

The company’s expected earnings growth rate for the next quarter is 12.2% against the industry’s expected earnings decline of 31.7%. The Zacks Consensus Estimate for the company’s current-year earnings has risen 8.7% over the past 60 days. Intellia, a Zacks Rank #2 company, has outperformed the industry in the past year (+4% versus -7.4%).

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Intellia Therapeutics, Inc. (NTLA) : Free Stock Analysis Report
 
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
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Pieris Pharmaceuticals, Inc. (PIRS) : Free Stock Analysis Report
 
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