Binary events in the health care arena can be huge in determining just how well investors do and their stocks perform. Medical meetings, clinical data and of, course, decisions by the Food and Drug Administration (FDA) can all have a huge impact on the breadth and pace of innovation in the industry. In a new report, the analysts at health care boutique Leerink highlight numerous upcoming catalysts for some top stocks in the sector. Catalysts may move the stocks sharply either way, depending on the outcomes.
These top stocks have important data and decisions coming soon that could be critical in near-term performance.
Bristol-Myers Squibb Co. (BMY) announced that its new drug nivolumab plus Yervoy will move to a Phase 3 trial in non-small cell lung cancer by year-end. Wall Street thinks that is a key data point and the drug could have $500 million in sales in 2016 and $5 billion by 2020. The company is believed to be most advanced in immune oncology, given that it has multiple Phase 3 studies underway, and is pursuing more combinations than competitors and mainly with its own assets. Leerink thinks that the probability of success is in the 60% to 70% range. Should the data prove successful, the stock could move nicely higher.
Bristol-Myers pays shareholders a 3.1% dividend. The Thomson/First Call price target for the stock is $54.76. The stock closed Tuesday at $46.91 a share.
Edwards Lifesciences Corp. (EW) posted better-than-expected earnings and had solid guidance for the rest of 2014. The Leerink team expects approval for the company's Sapien XL device any day now. While the market has baked in a positive outcome, approval should still push the name higher, as any negative overhang is removed. Late last month, many top Wall Street firm moved their price targets on the device maker higher in anticipation of this event. The consensus price target now stands at $85.47. Edwards closed Tuesday at $80.71.
GW Pharmaceuticals PLC's (GWPH) epilepsy drug is one the Leerink team is becoming more confident in after they did a deep-dive into the data and the reduction in daily seizure frequency. They view the company's overall pipeline as a top strength with numerous possible 2014 catalysts. The company is focused on developing novel treatments from its proprietary cannabinoid platform. The consensus price target is $90. GW closed Tuesday at $75.49.
Insmed Inc. (INSM) provided a spring interim update from the CLEAR-110 study, an ongoing, two-year, open-label extension study of once-daily Arikace, or liposomal amikacin for inhalation, to treat Pseudomonas aeruginosa in cystic fibrosis patients. These data are from 98 patients who have completed the first 12 months of the CLEAR-110 extension study. The data were collected as part of a scheduled data safety monitoring board review of the CLEAR-110 extension study. The data showed that Arikace was well tolerated, and there was a sustained improvement from baseline level in forced expiratory volume in one second.
The Leerink team expects an announcement regarding breakthrough status for the drug with huge upside, especially if no Phase 3 study is required. The consensus price target is a stunning $33.40. Insmed closed Tuesday at $13.
Novartis A.G.'s (NVS) LCZ696 data is one of the top pipeline prospects, and the Leerink team is bullish on the outcome. LCZ696 is an investigational combination drug consisting of two antihypertensives (blood pressure lowering drugs), valsartan and AHU-377. The Wall Street buzz is that the drug could be a blockbuster for Novartis. Investors receive a 3.1% dividend. The consensus price target is $89.78. Novartis closed Tuesday at $90.53.
Orexigen Therapeutics Inc. (OREX) received disappointing news Wednesday, as the FDA delayed approval of its obesity drug Contrave. In addition to its unique clinical profile targeting both overeating and depression is that it is the only one of the three obesity drugs that can be sampled, since it is not a scheduled drug. Based on market research conducted by the company, the use of anti-obesity medications in the diabetic and pre-diabetic populations is expected to increase by four times over the next five years.
The FDA has indicated that the review extension is needed to reach agreement on the post-marketing obligation related to the previously agreed upon evaluation of cardiovascular outcomes for NB32. The new drug application resubmission package includes interim safety and cardiovascular outcomes data from the ongoing 8,900 patient Light Study. This pushes out the expected outcome, which Leerink sees as an approval. The consensus price target is $11.63. The stock closed Tuesday at $6.81 and was trading down more than 16% in morning trading Wednesday.
ALSO READ: The 10 Best Chinese Stocks to Own Now
Vertex Pharmaceuticals Inc. (VRTX) looks poised to get revenue growing again with its cystic fibrosis franchise. It already has one drug approved, but Kalydeco by itself is only appropriate for about 4% of cystic fibrosis patients. Recently Vertex said a combination of Kalydeco and an experimental compound was shown to improve lung function in a mid-stage trial, sending its shares up big.
The Leerink team thinks that the Phase 3 data will be released this summer, and could be a big event for the stock, with as much as 50% upside or downside, depending on the outcome. The consensus price target for the stock is $90.45. Vertex closed Tuesday at $74.04.
Binary events can go either way, and stocks can react violently if the outcomes are negative. For stocks that are a one-trick pony, it can mean the end. Investors need a very high risk tolerance to add most of these names to their portfolios.