Biotech stocks: Which drugmakers are worth a buy?

While the pharma space has seen growing excitement over weight-loss drugs from Eli Lilly (LLY) and Novo Nordisk's (NVO) latest earnings, investors are increasingly curious over the types of innovation biotech stocks could offer. But with so many names and new research coming out every day, it can be difficult to find where to start.

Wedbush managing director of equity research David Nierengarten joins Julie Hyman for the newest installment of Good Buy or Goodbye to give insight into which drug makers and manufacturers are worthy of investor portfolios.

Nierengarten picks Argenx (ARGX) as his Good Buy, citing continued growth in its core Vyvgart franchise — a drug that helps treat neuromuscular junction disease myasthenia gravis — and additional market opportunities involved with the franchise to help treat other ailments and conditions.

Nierengarten picks Novocure (NVCR) as his Goodbye claiming its recent rally will fade as the upcoming launch of its brain cancer drug, Optune, may not see meaningful revenue. In addition, he believes that the study of that same drug for its potential applications for pancreatic cancer treatment "will fail," presenting an even bigger risk to the stock.,

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video Transcript

It's a big, noisy universe of stocks out there.

Welcome to goodbye or goodbye.

Our goal.

To help cut through that noise to navigate the best moves for your portfolio.

Today we're zeroing in on drug makers and device manufacturers, which is worth adding to your portfolio.

I'm here with David Nearing Garden.

He's we Bush managing director of equity research, covering health care.

Thanks for being here, David.

Appreciate it.

So these names are not necessarily household names, but they're interesting ones to dig into.

Right.

And so you buy stock today is our genic.

Um, this is about a $32 billion market cap company.

It's up about 5% over the past 12 months, but it's up 40% year to date.

So really has seen a climb there.

So let's talk about why you like it here.

Um, its main franchise is something called Vivar.

So talk to me about that and why it is attractive Viv, a drug that treats myasthenia gravis and it's really had a great launch so far.

So last quarter was over $400 million in sales, continuing to grow very rapidly and with future opportunities for growth, both in its core indication, which is what's called generalised, myosin gravis, neuromuscular disease and future outgrowth.

From that initial launch, well, let's talk about that future outgrowth for a minute.

I mean, I guess First of all, how many people are afflicted with that disorder that you mentioned?

And then what are the other possible indications?

There are about 17,000 patients with generalised myosin gravis, and then the additional indications that can be added on to that, that they're planning to launch into our ocular myosin gravis, obviously afflicting the eyes and a what's called sero myosin gravis, which is just a different, um, blood test, you know, for the disease that could grow the market to about 65,000 patients.

So room for significant patient growth again in this core mysia Gravis franchise.

And then they have other indications that they're looking to expand the drug into including their most recent approved indication, which is another rare neuromuscular disease called C, ID, P. And then future growth.

Over the next few years, I guess would be pinned to those additional indications exactly.

There's those additional indications, and then they do have additional phase three studies reading out in what's called Sjogren syndrome, which is another autoimmune disorder, and Myositis, which is another neuromuscular disorder that they're planning to run these studies in, hopefully get approved in those indications also.

No, I'm just curious.

Are these considered sort of orphan diseases?

Is this a situation where it doesn't affect that many people?

But it is a high cost drug and in demand for these people because they can be debilitating what they have.

So first of all, yes, the diseases are debilitating.

They're all orphan diseases, which is defined as under 250,000 patients in the United States.

It is a higher price drug, uh, $225,000 a year for myosin gravis and $450,000 a year for C ID P patients.

Uh, that's because it's dosed more frequently in those patients.

Um, so it is a high, uh, revenue per patient opportunity gotch you.

So we always like to talk about what is a potential risk for these good buys.

In this case, it has to do with that launch of that additional indication for C ID P. Yes.

So for C ID P in the next six months.

We're hoping to see AJ code, which is just an easy way for doctors to get reimbursed for the drug.

And so But in the interim six months, you know, there could be a risk that the launch underperforms a little bit because, you know, the initial myia Gravis launch did so well.

People's expectations are quite high for C ID P got you, as evidenced by what we've seen in the stocks this year to date.

So let's get to the one that you think folks should avoid.

This is called Nova Cure.

This is about a $2 billion under $2 billion market cap.

And like the other chart, this stock has seen a big slump over the past 12 months, although it has bounced back some year to date.

So let's dig into this one.

You think that recent rally is not sustainable?

Why not?

I think it's going to fade for a couple of reasons.

The growth in the US hasn't existed for years.

First off, so they're dependent on ex US growth.

Ex US growth has been choppy and I think they're reaching saturation.

Those international markets that they've entered like France and Germany and Japan, and just for folks who are not familiar with it, it's a device to treat.

Brain cancer is called op tuned, and that's the one where we've not seen that growth in the US that you're talking about to step back.

It's a device.

It goes on a patient's head.

It is approved in brain cancer in the United States, and of course, you know elsewhere that I just mentioned, and they're looking to expand it into different opportunities, too.

But that's its initial indication.

Got you, and you don't think that we're going to see meaningful revenue from that.

It's interesting.

I think they've hit well.

They've hit saturation in the United States.

They hit saturation at similar patient penetrations Ex us.

So I think they'll hit that in France, too, based on the numbers that they posted up recently and sort of in contrast with what we were just talking about in terms of expanded indications for other types of cancer, for example, is there any kind of opportunity there, So they have been approved to treat brain metastases caused by lung cancer?

I do think that opportunity, though, is quite limited It's limited in both number of patients, I think, who will be willing to undergo the treatment and also the number of patients who, frankly, are healthy enough, and you would benefit from a prolonged treatment cycle.

I think there are very few of those gotcha.

And then finally, also there's they're testing it for pancreatic cancer as well, and you don't think that that is going to work.

I simply I've said it before.

I think that study will fail.

It's going to read out at the end of the year, and I don't think it's going to work.

And I do think that's a significant risk for the stock from these levels.

Gotcha.

So when we talk about a potential risk to the upside for something like Nova Cure, it's simply that you could be wrong on that one, right?

That they think that it could work.

Yeah, that that's a big risk of this thesis is that pancreatic cancer works against my expectations.

Also, if they do manage to get sales that I don't expect, uh, for those brain metastases and lung cancer patients, uh, that could be a risk to, you know, my my comments on it.

Avoiding the stuff right now.

Not worth stepping in on on on those chances.

David, Thanks so much.

Really interesting to bring us some different stuff that we don't talk about every day.

I appreciate you coming in for this.

And thank you so much for watching goodbye or goodbye.

We'll be bringing you new episodes three times a week at 3:30 p.m. eastern.