It is hard to believe that it is the end of March and the first quarter is over. The end of the quarter couldn't come soon enough for investors who have been rocked by volatility over the past two months, including the worst weekly performance for equities in over two years last week. So, I think an appropriate way to end the quarter is another edition of the Biotech Mailbag.
What is wrong with biotech lately?
After sitting near 52-week highs a few weeks ago, the main biotech indices have fallen seven to eight percent over the past couple of weeks. Obviously, a good portion of this is due to the decline in the overall market as well as the increased volatility, which is rarely kind to the high-beta parts of equities such as biotech.
In addition, there has been a dearth of M&A activity in the sector over the past two months after a promising start to 2018. What's more, it appears developmental firms are recently having a tougher time or getting worse terms raising additional capital. For example, look at this week's "fire sale" secondary offering from Invitae Corp. (NVTA) .
Look for the market and the sector to start to settle down as companies start to deliver first-quarter results. I expect many to beat consensus projections reflecting the slashing of the corporate tax rate (not fully factored in yet), robust domestic and global growth and a weak dollar.
What are some of your favorite biotech stocks for the second quarter?
I continue to like Achaogen (AKAO) , whose stock has actually risen during the past few weeks of market carnage. An Ad Comm Panel for the company's lead drug candidate has been scheduled for May 2, which should result in a recommendation for approval, which the FDA should rubber stamp in late June. One beneficial owner sure believes in the investment case around this antibiotic concern, amassing a stake of nearly 15% in the last couple of quarters.
I also like Dynavax Technologies (DVAX) , which has a held up in recent weeks. This should be an inflection year for the company as it rolls out its recently approved Heplisav-B vaccine.
Dynavax is also starting to get more notice for the progression of its oncology asset SD-101, which is moving through development. This could power further gains. More data around this compound will be presented at the upcoming American Association for Cancer Research Conference, which runs from April 14 through April 18, as well as the American Society of Clinical Oncology event, or ASCO, which happens the first week of June in Chicago.
Finally, out on the risk curve is beaten down Synergy Pharmaceuticals (SGYP) . The stock has suffered as a result of poor management execution since its lead drug candidate Trulance was approved for Chronic Idiopathic Constipation in January 2017. However, Synergy recently replaced its CEO and Trulance was approved for IBS-C (irritable bowel syndrome with constipation) this January.
This approval expanded Trulance's potential customer base by one-third and the compound is also benefiting from an enlarged sales force as well new insurance coverage contracts. Scripts have recently been rising by five percent on a weekly basis.
Synergy posted solid fourth-quarter results on March 1. If it follows up with a good first-quarter report, maybe the stock can get off the schneid.
Bret Jensen is a regular contributor to Real Money Pro. Click here to learn about this dynamic market information service for active traders and to receive daily columns from Jensen, Ed Ponsi, Paul Price and others.