Even though the overall stock market dipped in 2015, it was a big year for biotech companies. Nine of the top ten hottest stocks of the year in terms of share price increase came from the biotech sector. Eagle Pharmaceuticals (EGRX) was the biggest gaining stock of the year, with an increase of nearly 500 percent. At the end of the year Chimerix (CMRX) took a huge nosedive, but is now garnering positive analyst sentiment for 2016.
A Banner Year for Biotechs
Aside from the explosive growth of EGRX, other massive movers in biotech for the year were Exelixis (EXEL), which was up 292%, Anacor Pharmaceuticals (ANAC) up 248%, Prothena (PRTA), up 236% and Heron Therapeutics (HRTX) up 179%. Other than Novartis (NVS), the leaders by market cap in the biotech sector had a fairly stable year outside of the late summer meltdown. Those leaders include:
- Johnson & Johnson (JNJ)
- Roche (RHHBY)
- Pfizer (PFE)
- Merck (MRK)
On October 2, 2015 U.S. News & World Report ran a piece on 3 reasons to buy biotech stocks. The article cited that breakthroughs in treatment for cancer, Alzheimer’s, arthritis and hospital infections had an optimistic outlook. Another reason was that licensing and access to emerging technology was fueling biotech prospects. Furthermore, the article noted that biotech companies have outperformed the health care sector SPDR ETF (XLV) by 14%.
The CMRX Turnaround Story
Through most of 2015 CMRX had a steady year and traded between $35 and $50 with high spikes in the summer reaching $58. The price returned to the $30-40 range in the fall and then suffered a massive collapse below $10 in December. The 79% plunge on December 28 on heavy volume was a reaction to how the company’s antiviral trial for blood and marrow transplants did not meet management’s expectations for preventing cytomegalovirus infection. CEO M. Michelle Berrey, M.D., however, stated that the company remained committed to improvements in brincidofovir. The stock sunk as low as $6.43 before recovering.
Ratings from TheStreet.com immediately turned positive, noting the company’s recent revenue growth outpaced the industry average of 13.4%. This growth did not translate to the bottom line, leading to a decrease in earnings per share, which was -2.54 for 2015. With a debt-to-equity ratio of 0.00 and a quick ratio of 10.50, management has been keeping the company’s cash needs in order.
Piper Jaffray reiterated a “buy” rating on January 3, 2016. Hedge fund Eagle Asset Management increased its stake in CMRX by 66.4% in Q3 2015, bringing its ownership to 5.15%. Another indicator that looks bright for the stock is that Director Ernest Mario purchased 125,000 shares on December 29 at $7.09 per share. On January 4, 2016 the stock was trading between $8 and $9.
The most recent earnings for Chimerix were released on November 5, 2015. The company’s negative 70 cent EPS missed analyst estimates of negative 59 cents. Nevertheless, the stock has since attracted a “buy” rating from Citigroup and “hold” ratings from Brean Capital, Cowen and Company and Stifel Nicolaus.
Other analysts are proceeding with caution with lower price targets following the stock’s crash. Barclays has lowered its price target from $65 to $12, while FBR & Co has downgraded the target to $14 and JPMorgan’s target is now $15. The current average price target among analysts is $23.58.