Why Biotech Stocks Experience Significant Price Moves
Has biotech reached the tipping point? Shares of PromethiusBiosciences (RXDX) are up 70% this week after Merck (MRK) announced on Sunday it will pay a 75% premium for the clinical-stage biotech company. This follows last month’s big news when Pfizer announced its intention to acquire Seagen (SGEN), on the same day Sanofi (SNY) announced plans to buy Provention Bio (PRVB). This sent PRVB shares skyrocketing 258%. The question for biotech investors now is, who’s next?
Drug discovery and development is a long, uncertain path that often takes 10–15 years, and costs that could exceed $1–2 billion for any new drug ultimately approved for clinical use. Unlike unregulated products, it’s a significant achievement for a candidate to get as far as clinical trials. Promethius and Provention are both clinical-stage biotech companies. Fortunately for investors, each step along the path to success, whether or not it leads to a product going to market, can cause a significant swing in the stock’s price.
Small-cap biotech stocks can experience these significant price jumps from a variety of events. During the period of research and development, a drug on the path toward success or failure will have other significant events both positive and negative, that will impact the stock price in ways not found in other industry sectors. Here are some examples:
Positive clinical trial results: When a small-cap biotech company releases positive clinical trial results, it can generate significant investor interest and drive up the stock price.
Acquisition rumors or deals: When rumors or announcements of an acquisition by a larger company circulate, it can cause a small-cap biotech stock to rise as investors anticipate a potential buyout premium.
FDA approvals: FDA approvals of drugs or medical devices can significantly boost a small-cap biotech company’s stock price, as it can open up a new revenue stream for the company.
Partnerships and collaborations: Partnerships and collaborations with larger companies can also cause a small-cap biotech stock to rise as it indicates a level of validation for the company’s technology or products.
Analyst upgrades: If an influential analyst upgrades their rating on a small-cap biotech stock, it can increase investor interest and drive up the stock price.
Companies You May Want to Watch
There is information on well-over 200 small-cap biotech companies on Channelchek. Below is a select group that investors may want to follow.
Cocrystal (COCP): Cocrystal Pharma, Inc. is a clinical-stage biotechnology company discovering and developing novel antiviral therapeutics that target the replication process of influenza viruses, coronaviruses, hepatitis C viruses and noroviruses.
Axcella (AXLA): Axcella is a clinical-stage biotechnology company pioneering a new approach to treat complex diseases using endogenous metabolic modulator compositions. The company’s product candidates are comprised of EMMs and derivatives that are engineered in distinct combinations and ratios to reset multiple biological pathways, improve cellular energetics, and restore homeostasis.
Tonix Pharmaceutical (TNXP): Tonix is a clinical-stage biopharmaceutical company focused on discovering, licensing, acquiring and developing therapeutics to treat and prevent human disease and alleviate suffering. Tonix’s portfolio is composed of central nervous system, rare disease, immunology and infectious disease product candidates.
Onconova Therapeutics (ONTX): Onconova Therapeutics is a clinical-stage biopharmaceutical company focused on discovering and developing novel products for patients with cancer. The Company has proprietary targeted anti-cancer agents designed to disrupt specific cellular pathways that are important for cancer cell proliferation.
MAIA Biotechnology (MAIA): MAIA is a targeted therapy, immuno-oncology company focused on the development and commercialization of potential first-in-class drugs with novel mechanisms of action that are intended to meaningfully improve and extend the lives of cancer patients.
PDS Biotechnology (PDSB): PDS Biotech is a clinical-stage immunotherapy company developing a growing pipeline of targeted cancer and infectious disease immunotherapies based on proprietary T cell-activating technology platforms.
Ocugen (OCGN): Ocugen, Inc. is a biotechnology company focused on discovering, developing, and commercializing novel gene and cell therapies and vaccines that improve health and offer hope for patients across the globe. The company impacts patient’s lives through innovation that forge new scientific paths.
Take Away
Biotech stocks, especially small-caps have come well off the pandemic era, sky-high price levels they had attained. At the same time, large pharmaceutical companies that are still seeing sales from covid related products have ample cash and are faced with patents that are always inching closer to expiration. Acquisitions tend to cause huge price spikes in all industries, especially biotech.
While pharmaceutical companies will be picky as they may work to own patents on their next generation of product offerings, many other positive (and negative) occurrences could impact the stock price. Channelchek provides current information on small-cap biotech stocks so that investors can determine the likelihood of success and to help them steer from negative investment results.
Managing Editor, Channelchek
Sources
https://www.channelchek.com/search-new?search=biotech
https://seekingalpha.com/article/4594550-catalyst-pharmaceuticals-a-one-hit-wonder-with-upside
