Today marks the last trading session of the year. For investors, 2022 can't come to a close fast enough. The year will go down as the worst for equities since 2008 when the country was in the midst of the financial crisis.
Outside of the energy sector, there have been few parts of the market that have delivered a positive return in 2022. Even bonds have proven to be losers as the Federal Reserve swiftly ratcheted up interest rates.
As 2022 comes to a conclusion, I will dip into the biotech mailbag once last time this year to answer a couple of questions I have received from Real Money Pro subscribers in recent days.
The most popular always is where is biotech headed in 2023? My guess would be higher. To start with, the sector is overdue for some reversion to the mean trading action.
After badly underperforming in 2021, the SPDR S&P Biotech ETF (XBI) fell nearly 30% in 2022. The sector has appeared to put a long-term hard floor in around 8% below current trading levels, which should limit downside should equities get off to a hard start in the first half of 2023.
In addition, I expect M&A activity to pick up in 2023 after running below trend over the past couple of years. Big Pharma names like Pfizer (PFE) are certainly flush enough with cash to make that happen. In addition, small and midcap potential acquisition names are selling generally much lower than they were to start 2021.
Amgen (AMGN) purchased Horizon Therapeutics (HZNP) a few weeks ago in an all cash nearly $28 billion deal with a significant buyout premium. Hopefully, this is a sign of better tidings on this front in 2023. If we get some deals coming out of the big JP Morgan Healthcare conference in January, that could set the stage for a more robust M&A environment in the coming year.
I also got this question from a Real Money Pro member Thursday. "TG Therapeutics just got approval from the FDA. I know this is one stock you follow closely. Would appreciate an article on Real Money Pro on what you expect from this biotech in 2023."
To recap, Thursday the FDA approved TG Therapeutics' (TGTX) Biologics License application for its compound ublituximab to treat certain adults with relapsing forms of multiple sclerosis or RMS. Approval seemed likely based on study results and recent labeling discussions with the government agency, but the FDA approval process has been somewhat of a crap shoot since the Covid pandemic arrived on our shores. That news, and a relatively healthy short position in the stock, sent the shares up better than 20% in trading Thursday.
This was a much needed win for the company which has been through the wringer in 2022. Another of the company's drugs umbralisib, a PI3K inhibitor class drug, was previously approved for the treatment of marginal zone lymphoma and follicular lymphoma was pulled from the market over safety concerns in April. Umbralisib known by the brand name Ukoniq, seems a victim of the broader FDA scrutiny on the entire PI3K inhibitors class.
However, Ublituximab to treat MS has always been the company's best chance at blockbuster commercial success. I have seen estimates as high as a $1 billion annual run rate by the end of 2024 for ublituximab, which will be known by the brand name Briumvi. This drug will have an annual list price of just under $60,000. Those sales estimates might be a tad aggressive, and I also could see the company doing a capital raise over the next six months to burnish its coffers to support the marketing rollout of Briumvi.
That said, TGTX's market cap is roughly $1.4 billion. If the company executes well in 2023, the shares seem significantly undervalued on a longer-term basis. I also could see TGTX being a logical buyout target for a larger player now that it has garnered a critical FDA approval.
And with that, my last column of 2022 comes to a close. May 2023 be a brighter year for the markets and investors.
