The drug and the biotech sector took a beating in 2022, despite showing signs of revival early on, as increasing interest rates, rising inflation and an uncertain macro environment had an adverse impact on major economies. As the pandemic lost steam, demand for COVID-19 treatments declined, thereby impacting the top line of the companies, which had successfully developed treatments to combat the spread or were developing treatments for the same.
Quite a few companies have been bearing the brunt of this slowdown as prices take a hit. With the world in large at the brink of yet another COVID-19 wave owing to the evolving Omicron variant, the macroeconomic environment is expected to be volatile. However, in the event of a fresh spurt in cases, the demand for coronavirus treatments and booster doses of vaccines will increase in 2023. Moreover, new drug approvals, pipeline development and an increase in M&A activity maintain investor sentiment for the broader drug and biotech sector even as the risk of global recession looms large.
The sector had earlier braved the challenges of the pandemic and aided the recovery by developing vaccines and treatments in record time. Moreover, increasing and persistent demand for better drugs and treatments keeps the sector going even as the threat of additional COVID-19 waves, rising inflation, recession and energy prices pose challenges.
Here we discuss three drug/biotech stocks, which took a beating in 2022 but are likely to bounce back in 2023 on the back of a solid portfolio and a promising pipeline. These are
Vir Biotechnology
VIR
,
Galapagos NV
GLPG
and
Pacira BioSciences, Inc
.
PCRX
.
Vir Biotechnology
It has been a bumpy ride for Vir Biotechnology in 2022. Shares of the company have lost 40.1% in a year. The FDA issued an Emergency Use Authorization (EUA) to permit the use of the unapproved product sotrovimab for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients. However, from April 2022, sotrovimab was no longer authorized to treat COVID-19 in the United States due to increases in the proportion of COVID-19 cases caused by the Omicron BA.2 sub-variant. Sotrovimab is in use outside the United States.
Vir also has many other arsenals in its armory with product candidates targeting COVID-19, hepatitis B and hepatitis D viruses, influenza A and HIV. These include VIR-2482, an investigational intramuscularly administered influenza A-neutralizing monoclonal antibody, which the company is developing with
GSK plc
GSK
.
In September, BARDA, part of the US Department of Health and Human Services’ Administration for Strategic Preparedness and Response, awarded Vir a multi-year contract with the potential for an investment of up to $1.0 billion to advance the development of a full portfolio of innovative solutions to address influenza and potentially other infectious disease threats. The contract includes an initial investment of approximately $55.0 million to propel the rapid development of VIR-2482. In September, GSK also opted-in to exclusively collaborate on the development and commercialization of antibodies against the respiratory syncytial virus.
The pipeline progress has been impressive as well. In September, Vir initiated the phase II SOLSTICE study evaluating VIR-2218 and VIR-3434 as monotherapy and in combination for the treatment of people living with chronic HDV. In October, Vir initiated the phase II PrevENtIoN of IllnesS DUe to InfLuenza A (PENINSULA) trial in healthy volunteers aged 18 to 64 to evaluate the safety, tolerability and efficacy of two different intramuscularly administered doses of VIR-2482 in preventing illness due to influenza A.
Vir currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Loss estimates for 2023 have narrowed by 95 cents in the past 60 days.
Image Source: Zacks Investment Research
Galapagos NV
The going has been tough for Galapagos. While its rheumatoid arthritis drug, Jyseleca (filgotinib) is approved in the European Union, the development of the drug with partner Gilead Sciences was scrapped in the United States. Management changes and the risk of major cardiovascular problems associated with JAK inhibitors are concerns too.
Nevertheless, in November 2022, the company increased its 2022 net sales guidance for Jyseleca to €80-€90 million from the initial guidance of €65-€75 million. Galapagos recently announced that the Committee for Medicinal Products for Human Use, the scientific committee of the European Medicines Agency, has adopted the Pharmacovigilance Risk Assessment Committee’s recommendation to add measures to minimize the risk of serious side effects with JAK inhibitors for chronic inflammatory disorders. The outcome bodes well for Jyseleca (a second-generation JAK inhibitor) as a treatment option with a positive benefit/risk profile for RA and ulcerative colitis (UC).
Following CHMP’s opinion, filgotinib 200mg once daily remains the recommended dose for the treatment of patients with RA. For patients with UC, filgotinib 200mg once daily remains the recommended dose for induction and maintenance therapy. The company also announced a restructuring plan to reduce its workforce by approximately 200 positions across Europe.
Shares of the company are down 22% this year. Galapagos currently carries a Zacks Rank #2. Loss estimates for 2023 have narrowed by 50 cents.
Image Source: Zacks Investment Research
Pacira BioSciences
Pacira’s top line mainly comprises sales of Exparel, iovera system and Zilretta. While the company lacks a strong pipeline and overdependence on Exparel remains a concern, label expansion of Exparel should boost sales. Pacira acquired MyoScience in 2019, following which, the company added the latter’s iovera system to its portfolio.
Image Source: Zacks Investment Research
In September 2022, Pacira announced positive top-line data from two phase III studies evaluating Exparel as a lower extremity nerve block. Both studies met their respective primary and secondary endpoints. Pacira plans to submit a supplemental new drug application to the FDA seeking label expansion of Exparel to include sciatic nerve blocks in the popliteal fossa as well as femoral nerve blocks in the adductor canal in early 2023. A potential label expansion for Exparel will boost the drug’s sales and drive growth for the company.
Shares of the company have lost 35.7% so far in 2022. Pacira currently carries a Zacks Rank #1.
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