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2 Drugs That Just Gave Biotech a Boost

15 November 2012 in Trading Ideas

There’s nothing investors in biotech stocks like to hear more than good news from drug studies, and two big names recently delivered just that this week.

First, shares of Summit, N.J.-based Celgene (CELG) received a lift on Monday after the company announced that its cancer drug boosted survival in patients with advanced pancreatic cancer. Specifically, a late-stage clinical trial of 861 patients with pancreatic cancer that had metastasized showed that those taking a combination of Celgene’s Abraxane drug and Eli Lilly’s (LLY) Gemzar drug lived longer than those who took only Gemzar.

Celgene is expected to report more data from the trial at a medical conference in January, according to the Associated Press.

On Monday, the stock climbed more than 5% on the news.

Stifel Nicolaus analyst Joel Sendek said in a note that he expected the Abraxane, which has been OK’d for treating breast and lung cancer, to be approved by the Food and Drug Administration for treating pancreatic cancer in 2014. He estimates sales of the drug in pancreatic cancer will rise to $241 million in 2015 from $92 million in 2014.

Celgene posted revenue of $1.42 billion in its most recent quarter ended Sept. 30.

A day later, shares of Gilead Sciences (GILD) popped to an all-time high after the company released positive results for an experimental hepatitis C drug that has analysts suggesting it will become a best-in-class medication.

The AP reported that Gilead said its combination of sofosbuvir and daclatasvir cured between 98% and 100% of patients within 12 weeks.

Considering that about 3.2 million in the US have hepatitis C, which kills 12,000 people a year, that’s no small thing.

The traditional two-drug treatment for the virus cures only 40% of people and causes side effects like nausea, fatigue and vomiting.

Analysts said Gilead’s single-pill regimen will likely to have a competitive advantage over both companies, according to the AP. “This sets the bar very high and will be very hard for other companies to compete against Gilead,” Citi analyst Yaron Weber told the news service. “This is the best case for Gilead and suggests that they will get the lion’s share of the market.”

Of course, both drugs are just small parts of the offerings of both companies, and the fate of their shareholders could potentially be more reliant on perceptions of overall revenue. This week, however, shareholders of both companies are smiling.

Shares of Celgene and Gilead have a 30% weight in the Biotech Breakthroughs motif.