For those with cash on the sidelines, the precipitous market drop means there are currently some promising companies at attractive prices. Let's delve into three exciting cancer drug developers worth strong consideration.
One has successfully commercialized its cancer drug and is expanding its pipeline. Another just received accelerated approval from the U.S. Food and Drug Administration (FDA) for its promising new cancer drug. And the third awaits with bated breath the FDA's approval decision for its lead cancer drug.
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1. Exelixis
I have trouble understanding how Exelixis (EXEL -0.65%) remains independent. This profitable cancer drug manufacturer posted $967.8 million in full-year revenue for 2019. That translated into earnings per share (EPS) of $1.02 on a GAAP basis, or $1.16 on a non-GAAP basis.
Exelixis plans to spend $460 million to $500 million on R&D in 2020 to fund six ongoing trials. This will also allow three additional pivotal trials with cabozantinib to begin and enable up to three new investigational drug filings to move ahead. Positive news from any of these trials should push the stock price higher.
Exelixis' recent $4.4 billion valuation seems remarkably cheap for this quality biotech. The company had $1.4 billion in cash on its balance sheet as of Dec. 31, 2019. For 2020, revenue guidance comes in at $850 million to $900 million, with approximately 85% coming from product sales. The remainder comes from partnering pacts. If you strip out the cash from the valuation, the stock is trading at just above three times sales.
Currently trading in the mid-$14 range, Exelixis' stock has plenty of room to grow. The bigger question is whether Exelixis will remain independent or be acquired for its profitable cancer drugs.
2. Epizyme
2020 will be a defining year for Epizyme (EPZM). Its drug Tazverik, an inhibitor of the cancer-promoting enzyme EZH2, earned accelerated approval from the FDA on Jan. 23 as a treatment for patients with epithelioid sarcoma who were ineligible for surgery. Now, the company is tasked with pulling off a successful drug launch.
Tazverik could potentially garner a second approval, this time for follicular lymphoma. The FDA granted a PDUFA date of June 18 to complete its "priority review" of the program. Amidst the backdrop of the current COVID-19 outbreak, deadlines like this may be affected.
Based on recent Securities and Exchange Commission (SEC) filings by institutional investors, the smart money crowd was clamoring to own the stock. More than 91% of the stock was in institutional hands, according to those filings. The company also boasts partnerships with GlaxoSmithKline, Bristol Myers Squibb, and Japanese pharma Eisai.
2. Immunomedics
Immunomedics (IMMU) looks attractive at its current valuation. Having traded in the $18 to $20 range, the stock lost around 50% in the recent sell-off to around $10 today.
Immunomedics seeks approval of sacituzumab govitecan as a treatment for metastatic triple-negative breast cancer. The FDA now holds a revised application for approval and has issued Immunomedics a PDUFA target action date of June 2.
The antibody-drug conjugate, a molecule that combines a cancer-targeting antibody to deliver potent cancer-fighting toxins, has broad applicability. Immunomedics expects its confirmatory phase 3 clinical trial to produce results around mid-year. Meanwhile, enrollment continues for trials in urothelial cancer and metastatic non-small cell lung cancer.
The lion's share of R&D at Immunomedics focuses on sacituzumab govitecan. If the FDA grants approval, I believe this company will be acquired. Buy shares now to take advantage of the discount.
There you have it. Three arguably discounted cancer treatment stocks that biotech investors should consider for their portfolios. Exelixis, the profitable 25-year-old biotech with nearly $1 billion in sales is the conservative play in this group. The stocks of Epizyme and Immunomedics, while riskier, have greater upside potential if the companies can secure FDA approvals and successfully launch their respective cancer drugs. These prices likely will not last, so grab shares while you can.
