3 Biotech Stocks That Soared This Week: Are They Buys?

MarketsMotley Fool

Investors were glad to see the stock market bounce back this week. But glad wouldn't begin to describe the feelings for shareholders of three biotech stocks that saw gains of 25% or even more over the past few days.

The stocks of Alkermes (NASDAQ: ALKS), ImmunoGen (NASDAQ: IMGN), and Sorrento Therapeutics (NASDAQ: SRNE) soared this week. What lit a fire beneath these biotech stocks, and are any of them smart picks for investors after their huge gains? Here's what you need to know.

Continue Reading Below

Alkermes

Alkermes' share price jumped 25% this week. The biotech reported fourth-quarter results on Wednesday that handily beat analysts' estimates.

For now, Alkermes' largest source of revenue continues to be royalties from antipsychotic drugs Risperdal and Invega. That should soon change, though, with solid sales growth for Alkermes' own Vivitrol, which is approved for treatment of alcohol and opioid dependence.

Alkermes CFO James Frates predicts that 2018 will be "a transformative year" for the biotech. He's probably right. The company anticipates Food and Drug Administration (FDA) approval by June 30 for its aripiprazole lauroxil nanocrystal dispersion designed for initiation onto schizophrenia drug Aristada. Alkermes hopes to win FDA acceptance of its regulatory filing for depression drug ALKS 5461 soon. Also, the company's partner, Biogen, should submit multiple sclerosis drug BIIB098 (formerly known as ALKS 8700) for FDA approval in the second half of the year.

ImmunoGen

ImmunoGen performed even better than Alkermes, with its stock gaining nearly 27% this week. What was the catalyst?

The biotech reported its fourth-quarter 2017 results on Friday, Feb. 9. However, with no revenue-generating products of its own yet, ImmunoGen's results didn't excite investors. Alkermes presented at the Leerink healthcare conference on Thursday. While the stock had already gained close to 15% for the week prior to that presentation, it seems that investors liked what they heard, because the stock moved higher afterward.

ImmunoGen's lead candidate mirvetuximab soravtansine is what investors are most interested in. The antibody-drug conjugate holds promise in treating ovarian cancer in patients who are platinum-resistant. ImmunoGen has several clinical studies in progress for the drug, the most important of which is its Forward I study of mirvetuximab as a monotherapy. If all goes well, the biotech could launch the drug in 2020.

Sorrento Therapeutics

Sorrento Therapeutics stock soared more than 29% higher this week. Did the biotech announce quarterly results or a significant clinical update? Nope and nope. Instead, Sorrento's nice gain seems to have stemmed from investors' anticipation of good news to come.

This wasn't the first week in 2018 that Sorrento Therapeutics stock performed really well. The biotech stock is up nearly 140% year to date. There are two reasons why investors view Sorrento in a favorable light right now. First, the company expects to receive FDA approval for ZTlido this month. ZTlido is a lidocaine patch for treatment of postherpetic neuralgia -- pain caused by shingles.

Another factor behind the interest in Sorrento is its immuno-oncology pipeline. The biotech is developing chimeric antigen receptor T cell (CAR-T) therapies that are non-viral, which could offer several benefits over CAR-T that use lentivirus, retrovirus, or adeno-associated virus.

Are they buys?

I like Alkermes' pipeline quite a bit and look for the biotech to enjoy success this year. However, in my view, great expectations are already baked into the stock price.

ImmunoGen could have a winner on its hands with mirvetuximab. On the other hand, the biotech's fortunes largely ride on the one drug right now, so I'd be hesitant at putting too much money in the stock.

Sorrento's ZTlido could win approval and gain traction, but I'm more interested in its non-viral CAR-T program. The problem is that it's still really early. My preference is to wait and see what happens.

The bottom line is that all three of these biotech stocks are risky. For many investors, they're probably too risky. Although I think Alkermes, ImmunoGen, and Sorrento could be success stories in 2018, there are other stocks to buy with better risk-reward propositions.

10 stocks we like better than ImmunoGen When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and ImmunoGen wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alkermes. The Motley Fool recommends Biogen and ImmunoGen. The Motley Fool has a disclosure policy.

Continue Reading Below