as part of our
Trading Biophama stocks before a catalyst event - if done
correctly - can be a very profitable proposition, but if traded in
a wrong manner can cause losses. I remarked
in an article
from March of this year that
Horizon Pharma (
was a good mid-term catalyst trade heading into its PDUFA 7/26/12
of LODOTRA, a proprietary modified delayed-release formulation of
prednisone for the treatment of rheumatoid arthritis.
In the article from March I remarked:
I recommend Horizon as a strong buy for the short and midterm
swing trade. As the company nears its PDUFA date for LODOTRA, the
price should be nearing $7 a share as I do not see insiders
selling before this point. It appears to me they believe the drug
will gain approval based on their heavy insider buying.
- Short term price target: $4.25
- Midterm price target: $7.00
At the time of my write-up the stock was trading at $3.69 a
share. My goal of $7 was reached long in advance of the actual
decision, in which LODOTRA gained FDA approval. However, after
trading as high as $8.72 on July 3rd, the stock sold off on
investor fear that the company might not have enough money to
properly market the drug, raising concerns of a possible secondary
offering - shareholder dilution.
The above demonstrates the clear risk/reward potential of these
types of trades. There are times I feel that holding through a
catalyst event is warranted. The first company I mention here is
one that both traders and investors should give serious
consideration as a longer term hold.
Ligand Pharmaceuticals (
Ligand Pharmaceuticals engages in the acquisition and
development of royalty revenue generating assets in the United
States. The company's assets include PROMACTA, an oral
thrombopoietin receptor agonist therapy for the treatment of adult
patients with chronic immune thrombocytopenic purpura; AVINZA, a
pain therapeutic; Viviant/Conbriza for the treatment of
postmenopausal osteoporosis; and Nexterone, an injectable
formulation. Its late-stage development program is comprised of
PROMACTA, which has completed Phase III studies for
thrombocytopenia in patients with hepatitis C; and is in Phase II
clinical studies for the treatment of oncology-related
thrombocytopenia in patients with solid tumors, sarcoma, and
advanced Myelodysplastic Syndrome.
An FDA decision is expected on November 30th for its
supplemental new drug application (SNDA) to the FDA for Promacta
(eltrombopag) as a treatment for thrombocytopenia in adults with
chronic hepatitis C infection to enable the initiation of
interferon-based therapy, and to optimize interferon-based
In July 2012, Ligand's partner
was granted priority review from the US Food and Drug
Administration for the sNDA for Promacta to treat thrombocytopenia
in adult patients with chronic hepatitis C virus (HCV) infection.
Priority Review designation is given to drugs that if approved,
offer major advances in treatment, or provide a treatment where no
adequate therapy exists. Under the Prescription Drugs User Fee Act
(PDUFA), the goal for completing a Priority Review is six
Thrombocytopenia is a relative decrease of platelets in blood. A
normal human platelet count ranges from 150,000 to 450,000
platelets per microlitre of blood. These limits are determined by
the 2.5th lower and upper percentile, so values outside this range
do not necessarily indicate disease. One common definition of
thrombocytopenia is a platelet count below 50,000 per
HCV is a huge market and is forecast to grow upwards of $8.5B by
2016, so I believe this event alone is a very good catalyst trade
set up here for Ligand. Ligand also plans to start Phase 3 trials
in multiple myeloma by the end of this year after reporting
top-line results from their Phase 2 trial during Q4 2011. Ligand
might also be a good longer term investment as two well-known
analyst firms slapped a $25 price target on the company.
Onyx Pharma (
a partner of Ligand, reported $18.6M in Kyprolis sales for Q3 2012
- spurring Roth Capital to note that Ligand receives a 3% average
royalty on Kyprolis sales. The firm believes that Kyprolis will
help enable Ligand to rapidly become profitable and it maintains a
$25 target and buy rating on the stock.
Cantor Fitzgerald also recently reiterated its rating of
for Ligand, raising its price target from $22 to $25 - the same
price target as Roth.
Also of note, the stock has a $35 price target from the point
and figure chart.
(click to enlarge)
I like where the RSI and MACD signals are trending above and
feel that with a market cap of $329.63M, the company makes for both
an excellent catalyst event trade and long term buy and hold. My
catalyst trade price target opinion is $19 - $20 with one year
target of $27.
Catalyst trade strength opinion:
Impax Laboratories (
Impax Laboratories engages in the development, manufacture, and
marketing of bioequivalent pharmaceutical products. The company
operates in two divisions, Global Pharmaceuticals and Impax
Pharmaceuticals. The Global Pharmaceuticals division develops,
manufactures, sells, and distributes generic pharmaceutical
products. It provides its generic pharmaceutical prescription
products directly to wholesalers and retail drug chains; and
generic pharmaceutical over-the-counter and prescription products
through unrelated third-party pharmaceutical entities.
On 2/23/12, IPXL announced the FDA acceptance of the IPX066 NDA
to the FDA for the treatment of idiopathic Parkinson's disease
The FDA notified Impax that its September 28, 2012 submission of
requested information on an excipient in the Rytary formulation to
the FDA has been designated as a major amendment. Since the receipt
date of this additional information is within three months of the
PDUFA date, the FDA has exercised its option to extend the PDUFA
date to review the information. No new clinical trials or studies
have been requested by the FDA. The original PDUFA date set for
10/21/12 has now been extended 3 months to 1/21/13.
Rytary is an investigational extended release capsule
formulation of carbidopa-levodopa for the treatment of idiopathic
Parkinson's disease - it's not approved or licensed anywhere in the
Idiopathic Parkinson's disease is a degenerative disorder of the
central nervous system. The motor symptoms of Parkinson's disease
result from the death of dopamine-generating cells in the
substantia nigra, a region of the midbrain; the cause of this cell
death is unknown. Early in the course of the disease, the most
obvious symptoms are movement-related; these include shaking,
rigidity, slowness of movement and difficulty with walking and
gait. Later, cognitive and behavioral problems may arise, with
dementia commonly occurring in the advanced stages of the disease.
Other symptoms include sensory, sleep and emotional problems. PD is
more common in the elderly, with most cases occurring after the age
The global market for Parkinson's disease drug therapies is
nearly $3 billion a year and growing - including $720 million in
the United States.
Rytary is licensed to GlaxoSmithKline for countries outside the
U.S. and Taiwan for development and marketing.
On October 30th, Impax shares fell as much as 18% following the
release of disappointing third-quarter earnings results. With its
current price of $20.25, I strongly feel it's a very good entry
point to go long up to the new PDFUA date of 1/21/13.
(click to enlarge)
The above chart demonstrates a possible pinch play. A pinch play
is a good way to take advantage of dips and oversold stocks. The
pinch play was founded on the convergence/divergence of the PPO and
ADX indicators which can be found on all chart time intervals and
markets. The chart above reflects a "knee jerk" sell-off reaction
the stock saw after its earnings disappointment. Considering all
the factors here, I rate Impax a very solid long catalyst
Catalyst trade strength opinion:
Amarin Corporation (
Amarin focuses on developing the treatment for cardiovascular
disease in the field of lipid science. Its lead product is Vascepa,
a prescription-only omega-3 fatty acid comprised of icosapent ethyl
or ethyl-EPA for the treatment of patients with very high
triglyceride levels and high triglyceride levels or
Vascepa hopes to compete with
1 billion dollar drug Lovaza. Both Vascepa and Lovaza are
essentially pharmaceuticalized fish oil drugs that went through the
full phase 1 to phase 3 process, and are now approved by the U.S.
Food and Drug Administration for treating very high triglyceride
Amarin has been expecting a FDA orange book decision on its New
Chemical Entity (NCE) status soon for its recently FDA approved
Vescepa - however, NCE approval or denial status continually has
A new chemical entity or new molecular entity (NME) according to
the U.S. Food and Drug Administration is a drug that contains no
active moiety that has been approved by the FDA in any other
application submitted under section 505(b) of the Federal Food,
Drug, and Cosmetic Act.
An active moiety is a molecule or ion excluding those appended
portions of the molecule that cause the drug to be an ester, salt
(including a salt with hydrogen or coordination bonds), or other
noncovalent derivative (such as a complex, chelate, or clathrate)
of the molecule which is responsible for the physiological or
pharmacological action of the drug substance.
A NCE is a molecule developed by the innovator company in the
early drug discovery stage, which after undergoing clinical trials
could translate into a drug that could be a cure for some disease.
Synthesis of an NCE is the first step in the process of development
of a drug. Once the synthesis of the NCE has been completed,
companies have two options before them. They can either go for
clinical trials on their own or license the NCE to another
In the latter option, companies can avoid the expensive and
lengthy process of clinical trials, as the licensee company would
be conducting further clinical trials and subsequently launching
the drug. Companies adopting this model of business would be able
to generate high margins as they get a huge one-time payment for
the NCE apart from entering into a revenue sharing agreement with
the licensee company.
The most important aspect of an NCE status grant is that it
gives a drug a five year exclusivity period - giving the granted
NCE status drug strong insulation from generic competition and
challenges. This translates into more possible revenue - a higher
The FDA updates its orange book this Friday, so a decision for
Vescepa is possible then. Based on this factor, I consider Amarin a
decent catalyst trade this week.
Catalyst trade strength opinion: 7/10.
Disclaimer: This article is intended for informational and
entertainment use only, and should not be construed as professional
investment advice. They are my opinions only. Trading stocks is
risky - always be sure to know and understand your risk tolerance.
You can incur substantial financial losses in any trade or
investment. Always do your own due diligence before buying and
selling any stock, and/or consult with a licensed financial