5 Predictions for Biotechnology Stocks in 2015

Biotechnology was one of the market's shining stars in 2014. The Nasdaq Biotechnology Index ETF returned an impressive 33% last year, significantly outpacing the performance of the S&P 500. Of course, no one can know if biotechnology stocks will put up similar returns again, or what will or won't happen with any particular company in this highly volatile industry, but if 2014 is any indication, perhaps these five predictions may be worth watching in 2015.

Source: Celgene Corp.

No. 1. Celgene Corporation will buy somebody I don't have any idea which company Celgene could buy in 2015, but the company's getting flush with cash, and it's been kicking a lot of tires over the past two years. The company has inked collaboration deals with a host of promising emerging biotechs, including Bluebird bio , but it's also taken equity stakes in a number of them, too, including Agios , in which it owns a 14% equity stake, Acceleron , in which it also owns a 14% stake, and Epizyme , in which it owns an 11% position. I don't know if any of those are on Celgene's short list of potential acquisitions, but it wouldn't shock me if Celgene ends up making a splash with an acquisition this year.

No. 2. Investors will decide that Alkermes is worth more than it is today Alkermes isn't a household biotechnology company, but it may be a lot better known by the end of 2015. Alkermes has a string of intriguing drugs coming through its product pipeline, including a novel, long-lasting injectable formulation of the billion-dollar blockbuster schizophrenia drug Abilify. That drug, aripiprazole lauroxil, has already been filed for FDA approval, and if the FDA gives it the green light, it could significantly improve patient adherence rates. Alkermes also recently reported solid phase 3 results from one of three ongoing studies of ALKS-5461, a treatment for depression. If ALKS-5461 can deliver similar results throughout its phase 3 trials, it could also have billion-dollar blockbuster potential since it is dosed alongside top selling antidepressants like Cymbalta, rather than instead of them. Since Alkermes expects sales of between $580 million and $610 million this year, these new drugs could have investors thinking that the company is worth more at year end than the $9.75 billion it is today, especially since Actavis paid 7 times sales to buy Alkermes' peer Forest Labs in 2014.

Source: The Motley Fool.

No. 3. Marijuana drugs will make headway, but GW Pharmaceuticals won't One of the most intriguing trends in 2014 was the rise of medical marijuana. Increasing awareness of medical marijuana, which is now legal in 23 states, caused shares in GW Pharmaceuticals to soar by 63% in 2014.

GW Pharmaceuticals is developing a slate of marijuana-derived medicine for cancer pain and epilepsy, and those programs are without a doubt intriguing. However, its far from certain whether or not these programs will deliver on their promise. For example, GW Pharmaceuticals and its partner Otsuka recently reported that Sativex failed the first of three ongoing phase 3 trials designed to evaluate its ability to control cancer pain versus placebo. The company still has two remaining trials ongoing, so there's still hope for Sativex in this indication, but investors are probably best served focusing their attention elsewhere for two reasons.

First, I think that this recent failure casts far too much doubt on Sativex making its way to market and secondly, even if the remaining two studies show Sativex does work, any eventual approval would only be for its use as a second-line therapy, rather than as a first-line therapy. Additionally, the company's collaboration deal with Otsuka means that GW Pharmaceuticals will only collect a royalty on sales of Sativex in the United States, which suggests that it's Otsuka, not GW Pharmaceuticals, that would stand to benefit most from any eventual approval.

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5 Predictions for Biotechnology Stocks in 2015