When analysts received word on March 30 that
pricey drug Provenge, used to treat prostate cancer,
of the drug maker steadily rose from $35 to $43 in just one month.
Many biotech watchers had expected the move and set themselves up
for a nice and quick gain. Some analysts even suspect Dendreon will
eventually power into the $60s, though profit-taking has pushed the
stock back down to $38 for now.
Here's the charm of health care: the Food and Drug Administration
(FDA) establishes clear dates for when it will approve or reject a
drug or a medical device. If you have a clear sense of the odds and
can stomach a high degree of risk, then investing ahead of such
dates can be wise -- and profitable.
I've just found four biotech companies that could get a boost from
FDA-related or other catalysts in 2011. Here they are…
1. Exelixis (Nasdaq:
This drug-development company will go before the FDA later this
year and throughout 2012 and 2013 with a series of new drug
applications. Exelixis' drug cabozantinib, code-named XL1-84, has
shown a great deal of promise with a range of metastasizing tumors.
The drug is being tested in the treatment of several types of
cancers, hence the multiple filings with the federal regulator.
But a much closer
exists: at the annual American Society of Clinical Oncology
meeting, to be held in early June, Elexilis will present data from
the phase II trial of cabozantinib. If history is any guide, then
the interim testing results will be well-received by shareholders.
During the second half of 2011, the drug will go deeper into the
clinical testing trials. Each time that happens, the company will
provide effectiveness data on the performance of the prior round of
testing. Results from a phase III study of metastasized thyroid
cancers are expected to be concluded in a few months, while phase
III studies for the treatment of prostate cancer are expected to
begin later this year. Every one of these instances could be a
catalyst to take shares higher.
As a final catalyst, Exelixis has allegedly been having discussions
with potential buyers, according to Bloomberg, though waiting on
such a transaction before making a move also represents risk.
Investors bid up shares of
Savient Pharma (Nasdaq:
after the company put itself up for sale. Hopes for a quick
were dashed when the company couldn't find any suitors and shares
lost almost half of their value in just one day.
2. Celsion Pharma (Nasdaq:
This is another play on clinical trial progress as a catalyst for
higher share prices. This micro-cap stock uses heat-sensitive
nano-particles to precisely place cancer-treatment drugs within
specific tumors. A number of approaches are currently being tested.
The first approach uses its ThermoDox technology in conjunction
with radio frequency (RF) ablation for primary liver cancer.
ThermoDox is being evaluated under a special protocol assessment
with the FDA in a pivotal 600-patient Phase III trial. Results from
this study are expected to be released in the next few months.
Celsion shares weakened in the first quarter, as the company has
sold new stock on a pair of occasions to keep the
healthy. Further equity offerings appear likely, but with positive
feedback from the FDA, shares could pop nicely higher before that
3 & 4: The two sales-force plays
I'm adding two other companies to this list, simply because they
lack the ability to sell their drug as skillfully as a large firm.
I have mentioned Savient before, which has already received FDA
approval for its highly-effective gout drug. The company hoped to
fetch $15 per share or more from a buyer, but left the dance alone.
Sales of Savient's Krystexxa gout drug have been OK in the past few
quarters and management has done a solid job of building a sales
force, but there's no question Krystexxa would be a better-selling
drug in the hands of one of the Big Pharma companies. That
is likely to never happen, but a
in the area of $15 a share is conceivable, which is well above the
company's current $8.50 share price. In the absence of a buyer,
shares look attractive on a standalone basis.
AMAG Pharma (Nasdaq:
is also being hampered by a too-small sales force. The company
helps patients with chronic kidney disease to boost their levels of
iron. In the first quarter, AMAG's Ferahame drug saw sales of just
$11 million, below expectations of $15 million. AMAG has also been
beset by manufacturing issues and by the FDA's more restrictive
The time appears at hand to let a larger management team come in
and fix this quasi-broken business. Any suitor wouldn't have to pay
too much, as the company's $272 million in cash already accounts
for much of the company's $350 million
. Making an offer of $500 million, more than 40% above the current
share price, still implies a technology value of just $225 million.
That's not a bad price for a drug that may hit $200 million in
annual sales, according to investment firm McNicoll, Lewis &
Action to Take -->
Biotech stocks are inherently risky and require a lot of background
reading to get comfortable with the investment thesis behind them.
Each of these stocks, however, could turn a quick profit for
investors if any of the events described above
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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