It is always great to see companies furthering the development of new drugs and bringing them into the marketplace to improve the lives of individuals. I compiled a list of five companies that have U.S. Food and Drug Administration [FDA] approval decision dates in the near future. These decisions are considered binary events for the smaller biotech companies, as a lot of future revenue and earnings are riding on bringing new drugs to market. The stocks could see a large rise upon an approval or a large drop in the case of a rejection.
On Wednesday, November 14, 2012, Dynavax Technologies Corp. (DVAX) has an expected FDA discussion date for the potential approval of its drug, Heplisav, as a hepatitis B vaccination for adults 18 to 70 years of age. The company then has a PDUFA date of February 24, 2013. Dynavax is a $747 million small-cap biotech company with no commercial drugs currently on the market. Therefore, a lot is riding on the approval of Heplisav for the company.
Heplisav is designed to address the limitations of current vaccines by providing earlier and higher protection with fewer doses. Upon approval, the drug could become the standard vaccine for hepatitis B. With 12 million people in the United States and 2 billion people worldwide infected with hepatitis B, Heplisav has huge potential for the success of Dynavax.
Dynavax is expected to earn $112 million in revenue and turn profitable with an EPS estimate of $0.10 for 2013. William Blair published a report that shows a 90% probability of an eventual approval for Heplisav. Its price target for the company has been placed at $9 (the current price is $4.18).
On November 29, 2012, Theravance Inc. (THRX) is expected to have the FDA review its drug, Vibativ, for the treatment of nosocomial pneumonia (hospital acquired pneumonia). Theravance is a $2.05 billion mid-cap biotech company. Vibativ has already been approved for the treatment of Gram-positive infections, including MSRA. Theravance also has drugs in developmental stages for treating respiratory conditions, bacterial infections, central nervous system/Pain, gastrointestinal motility dysfunction, and cognitive disorders.
The company is expected to earn $37 million in revenue for 2013. Piper Jaffray has placed a $35 price target on the stock as compared to its current price of $20.96.
Alexza Pharmaceuticals (ALXA) has an FDA decision date on December 21, 2012 for Adasuve for the treatment of agitation associated with schizophrenia or bipolar I disorder in adults. More than 3.5 million adults suffer from schizophrenia or bipolar I disorder in the United States, with 90% of those suffering from agitation. The company also has compounds under development for treating migraine headache, breakthrough pain, acute repetitive seizures, insomnia, and nicotine addiction. JMP Securities has a $12 price target on the stock as compared to the current price of $4.08. This is contingent upon approval of Adasuve in the U.S. and Europe and accounts for projected sales through 2022.
Biogen Idec (BIIB) has an FDA decision date for BG-12 for the treatment of multiple sclerosis. Biogen is a more established biotech company with five FDA approved drugs already on the market. This makes the company less risky among the others featured in this article. Biogen's Avonex, Fampyra and Tysabri are on the market to treat multiple sclerosis. Rituxan is another one of Biogen's marketed drugs and is the most prescribed treatment for non-Hodgkin's lymphoma. Biogen also has Fumaderm for the treatment of severe plaque psoriasis in adults.
Analysts at Zack's have a $152 price target on the stock which closed Friday November 9 at $138. Biogen is a $33 billion large-cap biotech company. The stock looks fairly valued with a forward PE of 19.16, a PEG of 1.23, and a price to book ratio of 4.9. After falling from a 52-week high of $157, the stock is now temporarily oversold. Biogen is expected to grow earnings annually at 17.1% for the next five years.
Biogen is the least risky among these companies, but will not have as dramatic a move in stock price on the binary event, as it already has five drugs on the market producing revenue and earnings. The other three companies are highly risky, but will move more dramatically on binary events as their most of their business is riding on the approval of these drugs. Only use money that you can afford to lose on the small companies in the event of an FDA rejection.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.