as part of our
Trading biophama companies before a catalyst event, if done
correctly, can be a very profitable proposition. Some traders and
investors who enjoy bringing more risk into play often times will
hold through the actual catalyst event. While this does bring more
risk into play, the reward from engaging in this can be a massive
one. Today, I would like to talk about one such company I feel has
strong upcoming catalysts that could drive the stock price higher
in the short term.
Anacor Pharmaceuticals (
is a biopharmaceutical company focused on discovering, developing,
and commercializing novel small molecule therapeutics derived from
its novel boron chemistry platform. The company has discovered,
synthesized, and developed seven product candidates currently in
development. Its two lead product candidates are topically
administered dermatologic compounds; Tavaborole, a topical
antifungal for the treatment of Onychomycosis, and AN2728 a topical
anti-inflammatory for the treatment of atopic dermatitis and
psoriasis. The company also discovered two compounds that are in
development with its partners. One is an animal health product
candidate which is licensed to
Eli Lilly and Company (
. The other, AN5568, is for human African Trypanosomiasis (HAT, or
sleeping sickness), which is licensed to Drugs for Neglected
The company's lead drug, Tavaborole is a boron-based topical
solution currently in Phase III clinical trials. Tavaborole is
designed to treat fungal infections of the nails and nail bed
(onychomycosis) on a localized basis.
Implementing a novel mode of action, Tavaborole is unique
compared to current treatments such as
Lamisil in that it's designed to greatly minimize the risk of any
systemic side effects while achieving similar or greater
To offer an idea of the potential market for Tavaborole, Penlac
at its peak realized $330M world wide sales, while Lamisil realized
$1.2B in peak sales. If Tavaborole ultimately gains FDA approval,
the treatment could prove itself a very strong revenue generator
Recently, Anacor had its third quarter conference call where the
company presented a story worth watching because of its recent
highlights and upcoming catalysts. After its stock offering in
October, the stock price reacted unfavorably. However, now with
sufficient cash to get them through several catalysts, it could be
a good time to buy at these levels. Let's take a look at the
upcoming events for Anacor.
Upcoming Catalyst events:
Anacor plans to announce top-line data for Tavaborole in January
2013 for the first Phase III trials related to this drug in
treating Onychomycosis. Six weeks later, the company expects the
second trial results to be publicized for this same indication.
Onychomycosis is a fungal infection of the nail and nail bed that
affects approximately 35 million people in the United States. The
company plans to file an NDA for tavaborole in mid-2013, subject to
the results of the phase three trials.
By the end of this year, Anacor plans to announce data from the
phase two safety, pharmacokinetics, and efficacy study related to
AN2728. AN2728 is a topical anti-inflammatory product candidate for
the treatment of dermatitis and psoriasis in adolescents. The
company expects to initiate phase two trials in children ages 2-11
shortly after the announcement of these results. Atopic dermatitis
is a chronic rash characterized by inflammation and itching and
affects an estimated 10% to 20% of infants and young children.
Psoriasis is a chronic inflammatory skin disease that affects
approximately 7.5 million people in the United States and over 100
million people worldwide. The ongoing studies with AN2728 include
- An open-label study of the safety, pharmacokinetics (PK) and
efficacy of AN2728 2% ointment when applied twice-daily for up to
28 days. The primary outcome measure will be an assessment of
safety and tolerability. Secondary outcome measures will include
a PK profile and achievement of treatment success.
- A randomized, double-blind, bilateral dose-ranging study of
AN2728 2% and 0.5% ointments applied once-daily or twice-daily
for up to 29 days. The purpose of this trial is to determine the
optimal dosing concentration and frequency for phase three
studies. Secondary outcome measures will include an assessment of
safety and tolerability.
Dependent on positive phase two trials, the company expects to
initiate a phase three trial in atopic dermatitis in mid-2013.
Also during the third quarter conference call, Anacor referred
to its cash position and spoke about the offering of stock I wrote
about earlier. The company believes that its existing cash, cash
equivalents and short-term investments totaling approximately $36.6
million as of September 30, 2012 and the net proceeds of
approximately $22.7 million from the October 2012 sale of 4,000,000
shares of the company's common stock will be sufficient to meet its
anticipated operating requirements until it files its NDA for
Tavaborole in Onychomycosis. This is currently expected to occur in
the middle of next year. If necessary, the company would make
appropriate adjustments to its spending plan in order to ensure
sufficient capital resources to complete this filing.
ANAC will also be participating in the Piper Jaffray 24th Annual
Healthcare Conference on Wednesday, November 28, 2012 at 11:30 a.m.
ET in New York, New York. Often times after a company presents at a
large investor conference, the stock price receives a boost so I
consider this a small catalyst event that should add to the short
term upside potential of the stock.
Anacor projects cash, cash equivalents, and short-term
investments to be at least $45.0 million at year-end 2012, which
the company believes will be sufficient to meet the anticipated
operating requirements until the New Drug Application (NDA) for
Tavaborole is filed.
(click to enlarge)
From the chart above, ANAC has begun to trade upwards in advance
of the catalyst events mentioned here. The Relative Strength Index
(RSI) is turning bullish again and volume is also picking up. The
MACD Histogram also indicates this. During the recent run, we can
see higher highs and high lows displayed. It's my opinion a short
term price target of $6 is on the horizon.
|Avg Vol (3 month):
|Avg Vol (10 day):
|% Held by Insiders:
|% Held by Institutions:
Shares Sold Short:
- Short Positions (10/31/2012) 431,065Shares
- Change from Last -13.04%
- Percent of Float 2.06%
ANAC's current price is $5.40 a share with a market cap of
Mike Havrilla a well respected biotech trader, is also is
bullish on ANAC according to his recent Seeking Alpha
on the company;
Given the near-term timeline for Phase III results in January
and the relatively low-risk nature of the Phase II results this
quarter (i.e. the study is designed to assess safety and PK
parameters); Anacor is poised to rebound back toward the moving
averages and the recent stock offering price of $6/share.
Finally, I estimate a high probability for success (i.e. 80%) in
the Phase III clinical trials for Tavaborole vs. placebo based on
the results of previously conducted Phase 2 clinical trials and
an objective endpoint of eradicating nail fungal infections that
is not subject to placebo effect or subjective bias.
I agree with Mike's assessment 100% as stated above, and it's
also my opinion the stock should see a move to around $6 soon.
Depending on stock market conditions next year and positive results
for ANAC's trials, a stock price over $10 a share is not out of the
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