Throughout the spring, analysts at Lazard Capital and Leerink
Swan kept pounding the table for little-known
The analysts kept telling clients that Insmed's Arikace, which
is an inhalable antiobiotic used in serious lung infections, was
poised to be given a "breakthrough therapy" designation by the
FDA. They even suggested such an event would come in June. Their
clients should have listened. If they did, they would have scored
quick gains when that scenario played out as planned.
As far as these analysts were concerned, an investment in
Insmed was almost a sure thing. The clinical data in support of
Arikace were just that good. (For more on Insmed,
read this profile from last year
Of course, most other biotechs can never be considered a sure
thing. Even when armed with robust efficacy and safety data, a
key drug can still get the kibosh from the mercurial FDA.
Still, as the Insmed example shows, biotechs that are
approaching major clinical milestones, or will soon come before
the FDA for final drug approval, can make for very profitable and
timely trades. Even once a company has FDA approval for a key
drug or medical test, further catalysts can still exist.
Here are three biotech and medtech firms that could see major
upside in 2014.
|1. Genomic Health (Nasdaq:
This company offers a test for breast cancer, known as
Oncotype-DX, which already generates nearly $300 million
in annual sales.
In July, Medicare will be reviewing the test and is
expected to provide it with a unique CPT (current
procedural technology) code, as opposed to its current
miscellaneous code. That could lead to even more doctors
authorizing the test, according to Merrill Lynch.
Genomic Health has also developed -- but not yet
received Medicare reimbursement -- for a new prostate
cancer test. If Medicare gives the nod for this test,
GHDX will no longer be seen as a one-trick pony. In the
interim, the company also aims to provide more extensive
data regarding the tests' accuracy. "In the past,
clinical studies have served as positive catalysts for
GHDX shares," note Merrill's analysts.
|2. Kindred Biosciences (Nasdaq:
This is an unusual biotech firm. It is developing drugs
that improve the health of pets, not people. That may
seem like a silly niche, but we all know people who have
spent hundreds or even thousands of dollars at the vet to
help alleviate any suffering their pets may be
Kindred's lead product is CereKin, which treats
arthritic inflammation in dogs. A major study is under
way, and Kindred may release test results within the next
month, which could give shares a lift. Kindred also has
many other animal-focused drugs in earlier stages of
testing. Another reason to know about this stock:
, who has delivered stellar returns for clients thus far
in 2014, owns more than 400,000 shares of Kindred
Biosciences. He has a strong track record with biotechs
(most recently with a very profitable investment in
Idenix Pharma (Nasdaq:
, and he presumably sees Kindred as another potential big
I have been following
this biotech firm for several years
, acknowledging all the while that investors would need
to show patience during the long and arduous phases of
clinical trial testing.
Well, the wait is almost over.
Threshold's TH-302, which focuses on oxygen-deprived
tumors that are hard to treat with traditional
chemotherapy drugs. Though the company is testing a wide
range of tumors in Phase I and II clinical trials, it is
also conducting Phase III trials for soft tissue sarcoma
and pancreatic cancer.
The primary data collection phase for the soft tissue
sarcoma trial nearing completion (
says it was
scheduled to be completed in June
). Although Threshold won't provide a complete set of
analysis to the FDA until next winter, it is expected to
release a preliminary look at the data in coming
Positive results could send this stock far higher, in
part because it would serve as an endorsement for all of
the TH-302 earlier-stage trials.
Risks to Consider: Even armed with solid clinical trial data,
some drugs just don't pass muster with the FDA, so no drug is a
sure thing, until it is approved.
Action to Take -->
Biotech and medtech catalysts often stare investors right in the
face, yet still get ignored. I greatly prefer focusing on
companies with drugs or devices in Phase II or Phase III trials,
simply because earlier-stage trials often end up yielding poor
results. These three stocks are poised to deliver solid catalysts
in 2014, making this a good time to listen to their imminent
quarterly conference calls.
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