1 Drug Will Make or Break These 3 Biotech Stocks

By Markets Fool.com

Biotech is often a boom-or-bust industry, and that goes double for smaller companies that have only one lead drug in their pipeline (or sometimes even if the lead drug is already on the market). Read on to see what our team of healthcare experts think of Peregrine Pharmaceuticals , Amicus Therapeutics, and Exelixis and the chances for each of these companies' lead drug.

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Sean Williams: When it comes to predominantly clinical-stage biotech companies that excite me, but which have a drug with true make-or-break potential, it'sPeregrine Pharmaceuticals and its drug bavituximab, a second-line treatment for non-small-cell lung cancer. Peregrine Pharmaceuticals is part of a new, but hot, class of cancer-drug developers focused on cancer immunotherapies. This drug class attempts to enhance the function of your immune system to better locate and kill cancer cells.

In the case of Peregrine Pharmaceuticals, bavituximab is a phosphatidylserine-targeting monoclonal antibody that looks to bind with PS receptors on the surface of cancer cells. In healthy cells, PS is located on the inside of the cell, and it acts as an immunosuppressant that keeps the immune system from destroying or attacking that cell. In cancer cells, PS is found on the outside of the cell, suppressing that cell from being attacked. Bavituximab is designed to reduce or eliminate this immunosuppressant quality and allow cancer cells to be detected more easily and destroyed.

In midstage studies, bavituximab led to a statistically significant improvement in media overall survival to 11.7 months from 7.3 months. Of course, this was after some controversy with a third-party laboratory that botched the results and made Peregrine retract its initial top-line figures. Bavituximab is currently being studied in a late-stage study known as SUNRISE, with results expected in December 2016.

Although Peregrine has a few other compounds being tinkered with in its pipeline, there's no pussyfooting around the fact that bavituximab represents nearly all of its perceived value. In late March, bavituximab also delivered promising responses in patients with HER2-negative metastatic breast cancer, meaning it could have multiple indications as a PS-inhibitor well beyond lung cancer.

If bavituximab were approved, Peregrine would likely prove to be quite inexpensive at its current price, but a lot is riding on what ultimately happens with its SUNRISE study.

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:Drug companies focused on one molecule are the highest-risk companies in the biotech world. If the drug does a high-profile flameout -- which happens all the time -- investors take a real beating. On the other hand, if that drug makes it through the regulatory gauntlet, the rewards can be jaw-dropping. One company with recent big news on that front isAmicus Therapeutics. The biopharmaceutical's Fabry disease drug, migalastat, just passed another major milestone.

Following presubmission meetings in March, Amicus hammered out enough positive outcomes with regulators to accelerate their plans to submit approval for migalastat in the U.S. and EU, respectively. The company has filed for EU approval, giving the drug the chance to reach the European market in 2016. With positive talks with both U.S. and EU regulatory bodies, it seems reasonable that these approvals should happen sometime in the future.

If approved, the oral medication should be a game-changer for Fabry disease patients. The life-threatening condition currently requires biweekly infusions with drugs from Sanofi orShire . Migalastat measured up to these IV drugs in pivotal trials, meaning patients can safely switch to the convenience of taking Amicus' every-other-day pill.

On the downside, Amicus will probably lose a big chunk of its market cap if migalastat doesn't secure approval. Beyond its lead candidate, Amicus' pipeline is preclinical. All its other drugs face five to seven years of clinical trials, assuming they even get approval from the FDA for those trials to begin.

One of the oldest cliches in boxing is that the most dangerous punch, the one to fear most, is the one you never see coming. That cliche holds up for biotechs with make-or-break drugs. Migalastat holds the promise of unseating Sanofi and Shire in the treatment of some patients with Fabry disease -- but it's way too soon to call this match.

Brian Orelli: This summer, Cometriq will make or break Exelixis.

Cometriq is already on the market to treat a type of thyroid cancer, but sales are so low -- just $9.4 million in the first quarter -- that the biotech's clinical trials testing the drug in other types of cancer will ultimately determine Exelixis' fate.

Exelixis expects data in kidney cancer toward the end of the second quarter or early in the third quarter. The biotech can't give an exact answer because the data will only be processed after a certain number of patients have progressed after taking Cometriq or the comparator, Novartis' Afinitor.

If the trial is successful, an FDA approval and decent sales of Cometriq as a second-line therapy in kidney cancer should follow. A successful clinical trial would also give investors confidence that an ongoing trial in liver cancer might also produce positive results.

Cometriq certainly has a stigma despite being on the market because it failed to show an effect in prostate cancer. Whether thyroid cancer, where it succeeded, or prostate cancer, where it failed to show an effect, is the norm for the drug's performance remains to be seen.


The article 1 Drug Will Make or Break These 3 Biotech Stocks originally appeared on Fool.com.

Brian Orelli has no position in any stocks mentioned. Cheryl Swanson owns shares of Amicus Therapeutics, Sean Williams owns shares of Exelixis. The Motley Fool recommends Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.