When traders look at a stock at its highs and imagine what would be had they gotten in at the lows, the thought that invariably gets triggered is “At the next time it falls back down I’m buying.” Much easier said than done, however, because at the lows, sentiment is so low that the fear is that price will keep falling. Sometimes that happens, but more often than not the price regresses back to the mean and gains can be made — as long as the fundamentals are sound, that is.
2016 was hard for biotech stocks, some more than others. The iShares NASDAQ Biotechnology Index (IBB) is down over 20% for the year. This after falling sharply in January and being range-bound for the rest of 2016. We’re now right in the middle of that range, though many biotechs are right at their lows. Here are three that present a buy low opportunity. These exclude stocks that deserved to reach new lows on trial failures or other negative fundamental developments in their pipelines.
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Sarepta
Sarepta Therapeutics Inc. (SPRT) was the talk of the town in 2016. Perhaps no other U.S. Food and Drug Administration (FDA) decision got as much press as the saga surrounding Sarepta’s Duchenne muscular dystrophy (DMD) drug Eteplirsen and the nearly endless back and forth, complete with delays, surrounding the agency’s final decision. In the end though, Eteplirsen got the conditional go-ahead marketing approval.
While Sarepta is not technically at its 52-week lows, it really has to be counted as two different stocks. One pre-approval, the other post. Post-approval Sarepta is indeed at its lows, having fallen 57% since reaching post-approval highs. The stock is now lower than it was pre-approval in January as well.
The main issue here is insurance coverage, as insurance companies do not want to cover the $300,000 a year drug, given that there is no hard evidence that it actually works. Why and how can Sarepta recover? Expect a political battle over Eteplirsen coverage, perhaps even reaching Capitol Hill at some point in 2017. DMD is devastating enough that insurance companies refusing coverage for the drug would be risking a public relations nightmare. Any word that any insurance company will cover Eteplirsen could bring Sarepta flying higher, if not to highs of $63, then at least somewhere in the mid $40s or so.
Teva
Teva Pharmaceutical Industries Ltd. (TEVA) closed of the generics unit of Allergan PLC (AGN) back in August. 2017 will be the first year that investors will be able to see the full impact of the acquisition on its top line. Meanwhile, as Teva has made itself the undisputed leader of generics globally, it has gotten mired in corruption charges, for which it has settled with the Securities and Exchange Commission (SEC) for $519 million.