This Biotech Play’s in the Buy Zone
The shortened week last week may have been the breather the stock market needed, especially after last Monday and Tuesday’s ugly trading sessions.
The environment has investors rattled and looking for safety trades, making things particularly difficult for more speculative biotech names working on bringing new therapies through trials and the FDA.
But the environment remains excellent for biotech and pharma on a fundamental level.
FDA Catalysts Buck Correction Trend
So far this year, the FDA has approved 51 novel drugs. According to my records, the regulator has nine more drugs up for decision between now and the end of the year. Potentially, we could see the approval of 60 drugs. That’s a torrid pace coming off 2017’s already red-hot approval rate of 46 new drugs.
At the same time, the regulator is approving record amounts of generics as a way to lower drug prices, a Trumpian mandate embraced by the FDA head, Scott Gottlieb.
This is good for small biotechs also, as it forces big established pharma and biotech companies to look to their smaller siblings as a way to bolster pipelines in order to compensate for revenue losses elsewhere.
The formula isn’t complicated: Lots of new drug approvals means huge new revenues and big gains.
And while things are rough right now, it puts us in a great place for big gains in the future, particularly from today’s depressed prices.
Here’s a prime example we’ve profiled recently.
Merck’s Keytruda Powers New Gains
Back in May I suggested my followers consider a move on Merck (NYSE: MRK).
At the time I was tracking developments of one of its cancer drugs, Keytruda.
Keytruda, according to Merck’s website, is a cancer immunotherapy treatment that blocks a protective mechanism of cancer cells and thereby allows the immune system to destroy them. It specifically targets the programmed cell death 1 receptor of lymphocytes.
Initial clinical trials were promising and Merck was vying for an FDA priority review consideration, which they received earlier in September.
But now we have full confirmation.
Keytruda has received FDA approval and Merck is now able to market its new cancer therapy and start raking in the revenue too.
Since we first suggested Merck in May, shares are up over 27%. This even after the market’s broad sell-off the past two weeks, as you can see in the chart below.
Clearly biotech’s that can navigate the FDA gauntlet successfully can withstand, and even gain, during a bad correction.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily