Biotechnology stocks offer investors the potential to profit from the next generation of treatments. And because treatments are vast—covering everything from serious illness to cosmetic enhancements, investors are afforded a lot of choices.
Because of this potential, this sector is one of the hottest industries for investors to target. But, of course, the majority of treatments entering clinical trials end up being shot down by regulators and never get passed the laboratory Petrie dish. In fact, some 90% of new drug ventures never see the light of day and so the industry is not only costly, shares within it are volatile.
However, investors remain enraptured by the 10% that do “make it”. Because when a company finally screams “Eureka!” on a new drug; that can mean the difference between a small investment a small retirement fund.
To help spot the ones on the brink of greatness, investors must keep a close eye on the catalysts approaching. With this in mind, what are the catalysts and importantly, what are the biotechnology stocks reflecting them?
Biotechnology Stocks – Evolus (NASDAQ:EOLS)
The aesthetic neurotoxin market has a current global value of about $2.5 billion. By 2021, however, it is estimated to grow to $3.5 billion.
Currently, Botox from Allergan (NYSE:AGN) takes a massive 70% share of this market. But the world-wide famous treatment for enhancing facial aesthetics is about to face major competition from Evolus’ Jeuveau.
Similar to Botox, Jeuveau is a purified neurotoxin that received FDA approval earlier this year.
In a trial against Botox, Jeuveau may prove itself a better product if data shows it equaled Botox in efficiency and safety. This data is still pending release, but management is confident that the product will be cheaper than Botox with commercial sales expected to commence this quarter.
Further, the company is awaiting the approval of European regulators. If it receives this, then the product will be available across the EU and the US.
Second Best
While Botox is by far the industry leader and would need a behemoth challenger to steal its throne, Jeuveau may easily become the second treatment for frown lines within two years. And it’s not a bad spot to be; even second place translates into hundreds of millions of dollars in sales.
According to the Motley Fool, the company is now “guiding for $50 million to $55 million in annualized operating expenses in 2019, so a successful launch could mean it won’t be long before this company turns a profit”.
Also comparing share prices equally make this a biotechnology stock to watch. While no one can be sure that Evolus will be as successful as Allergen, its interesting to assume it could follow in its footsteps.
With a market cap of only $621 million, Evolus is a small biotech company with shares currently trading for $22.76 USD. By comparison, Allergen—with a market cap of $44.46 billion—trades for more than 5x that at $135.93 on the NYSE.
Is this the potential heights investors can expect from EOLS shares in the not-too-distant future if Jeuveau delivers? Something to think about.
Biotechnology Stocks – CARA Therapeutics (NASDAQ:CARA)
The US’s Cara Therapeutics (NASDAQ:CARA) is another potential biotechnology play for investors. CARA shares are currently selling for $18.17 USD on the NASDAQ exchange.
With a market cap of $775 million, CARA shares give investors the potential of the biotechnology sector but also the highly-lucrative and newly-legalized CBD sector.
According to the Motley Fool, “Wall Street analysts think that Cara’s valuation could jump 31% over the next 12 months”.
But why might that be? There are two very good reasons.
Reason 1 – Korsuva
The main tool in Cara’s belt is its lead drug—Korsuva. It aims to treat “chronic kidney disease-associated pruritis (CKD-aP) in patients on hemodialysis” and is currently completing a phase 3 study with the results expected later in 2019.
If those results go well, then Cara looks set for annual sales of over $500 million USD. Especially considering Korsuva would be the first FDA-approved treatment for CKD-aP. With major partnerships with Vifor Pharma and Fresenius Medical Care, Cara already has promotors and distributors itching to send Korsuva global.
Reason 2 – CBD
Elsewhere in Cara’s operations, is its use of cannabis plant extracts as a primary ingredient in its pain alleviation and itch treatments. The company is taking the focus away from highly-addictive opioids, which currently comprise most pain-relief medicines.
Instead, it is developing pain management products from marijuana properties. This is important because the demand for cannabis-infused products is surging across the US and in Canada.
The reason lies predominantly with CBD—the non-psychoactive component found in cannabis that has healing and relaxing properties. Found in all cannabis species, hemp-derived CBD is now entirely legal across the US—thanks to the signing of the Farm Bill 2018—CBD-derived from hemp is now a hugely valuable industry.
To put it plainly, biotechnology companies that create products using marijuana, such as Cara Therapeutics, are on the right side of a trend that is only exploding.
So there are two biotechnology stocks that are both potential plays for investors to consider in 2019. What stocks have you your eye on?
Featured Image: Deposit Photos/AlexFedorenko
