Julius Bär Group has labeled the recent market crash the '2018 short volatility flash crash.' However it is labeled, it was scary; it saw the NASDAQ composite fall close to 10% during the first week of the month and it may not be over yet. The S&P 500 fell more in one day than it ever has in its history and twice in the same week it moved down triple digits. It's all unprecedented.
The biotechnology sector was one of the hardest hit, with the iShares Nasdaq Biotechnology ETF (IBB) down just shy of 11% between February 1 and February 9.
Some companies in the sector though showed a degree of resilience to the crash, trading flat or even up against a backdrop of wider market decline. Identifying the biotech stocks that performed well during this period of turmoil can help investors identify defensive strategies in preparation for further market turbulence down the road.
Here is a look at three that withstood the fall pretty well. One small-cap, one mid-cap and one large-cap, with a quick discussion on why each may have avoided the fall.
Vanda Pharmaceuticals Inc. (VNDA)
Vanda, the mid-cap on this list, is actually down a percentage point since the start of the month but, again, when considered against the more than 10% dip in the major indices, a percentage point is relatively insignificant.
Vanda's resiliency may be rooted in the imminent release of some near-term data from the company's lead development program.
The program is set up to investigate the potential efficacy of a drug called tasimelteon, brand name Hetlioz, in a target indication of jet lag disorder. The drug here is actually already approved to help blind people who suffer from non-24 sleep-wake disorder, but Vanda thinks it can also be a useful drug for helping people overcome or avoid jet lag.
The drug mimics melatonin, a hormone associated with the sleep cycle and which helps induce sleep shortly after administration, but unlike sleeping pills that are tranquilizers, it is based on the natural chemical cycles that give the body a sense of the time of day.
Anyway, the catalyst that's keeping this one afloat against the backdrop of wider market weakness may be a readout from a phase 2 trial, which is set to hit press at some point before the end of the first quarter. It has already been delayed so investors are anxiously anticipating.
If the data are positive, it will pave the way for a pivotal study in this indication that, in turn, could be a real revenue driver for Vanda. Vanda expects to generate net product sales of between $108 million and $118 million for Tasimelteon in its currently approved market this year.
Oramed Pharmaceuticals Inc. (ORMP)
Moving to small-caps, this company traded for around $7.80 on February 1 and, at the close of play on February 9, went for $7.72. That is essentially flat, but not only that. Its trading range during the week was between $7.4 and $8.03, merely an 8% trading range.
So why the resilience and relative stability?
Oramed is trying to develop what many regard as the holy grail of the diabetes space - an oral insulin pill. This arena is very much in the spotlight right now, with healthcare behemoth Novo Nordisk A/S (NVO), the world's biggest insulin maker, forging towards a potential regulatory approval for an oral version of its blockbuster semaglutide asset, for which no fewer than 10 Phase III trials are set to read out before the end of this year.
These trial readouts weren't enough to help Novo avoid the dip though. Novo's dip started a few days before in late January along with the rest of biotech, preceding the wider market correction by two days, but still falling over 14% from highs. Though Oramed shares are at the bottom of their recent range established last May, there is no evidence of last week's wild market action affecting them in any significant way.
In a recent letter to shareholders, the company's CEO noted that Oramed is positioned to initiate a 90-day study of its oral insulin candidate on the lowering of HbA1c in type 2 diabetes this quarter. This is the first time that HbA1c, the gold standard endpoint in diabetes trials, will be actively pursued as a primary endpoint, so it will be a real test to see if the candidate can pass any future pivotal trial.
Data should become available by the middle of this year and the stock's value hinges on this trial rather than broader market conditions. Obviously the stock could still deteriorate if the biotech sector keeps getting hit in the short term. It depends on margin calls being made elsewhere.
AbbVie Inc. (ABBV)
AbbVie, our large-cap, traded at $112 a share at the close of trade on January 31, 2018 and closed out the session on February 9, 2018, for $111.30.
The event that's in the crosshairs for the company and the one I believe is helping to support its share price while many of its peers have crashed, is rooted in a drug called Elagolix.
Elagolix picked up priority review for the treatment of pain associated with endometriosis, a basket term for excess tissue growth outside the uterus, back in October. A target PDUFA decision date is expected for the drug during the second quarter of 2018, likely early second quarter, given the implications of a six-month priority review period.
If approved, analysts have pegged a peak sales estimate at around $1.5 billion, which Abbvie will share with its partner on the asset, Neurocrine Biosciences, Inc. (NBIX). Neurocrine has traded more in line with biotech than AbbVie has, though has still been more stable than the basket biotech ETFs.
There's also a data readout for the same asset but in an indication of heavy menstrual bleeding associated with non-cancerous growths in the uterus, slated for release during the first quarter of this year.
It looks like a combination of these two catalysts may be making investors reluctant to unload their positions, even while other companies are falling.
Disclosure: I am/we are long VNDA, ORMP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.