Here is a recap of some of the major events that moved the biotech stocks mentioned below in the trading week of November 12-16th 2012. This should brief you on the most important events that the market had its eye on as they occurred throughout the week. Whether you have any positions in the stocks mentioned in the article, or whether you are just trying to keep up to date, I hope this helps you!
As a general overview, I have to say that these last few trading sessions have been overwhelmingly bullish for the biotech sector as a whole. Many of the rallies were simply relief rallies after the weakness in the biotech sector over the last few weeks, but many are in anticipation of upcoming events. Since it's the most heavily watched name, we'll start out with everyone's favorite - Amarin:
So, more good news came in on Monday from Amarin Corporation (NASDAQ: AMRN), which received additional patent protection of Vascepa. Patent 13/608,775, gives Amarin the rights to Vascepa with regards to the cardiovascular health applications as demonstrated in the MARINE trials.
In its recent Q3 2012 earnings release conference call, Amarin management made it very clear from their statements that the company was not as concerned about the NCE (New Chemical Entity) status of Vascepa due to the strong portfolio of patents that Amarin is developing for Vascepa that will make it difficult for competitors to create generic versions of Vascepa until 2030.
The NCE status of Vascepa has been holding the stock down since the initial FDA approval date of Vascepa (July 27, 2012) since it will determine whether Vascepa receives five or three years of exclusivity on the drug market for hypertriglyceridemia. The two extra years of exclusivity that Vascepa would have with an NCE decision makes a significant difference in the valuation of the drug, since drugs that have no generic competition generate significantly more revenue due to their ability to hold a monopoly. Vascepa may end up with a "no" on the NCE (resulting in a measly three years of exclusivity after it reaches market in 2013), but there is still a lot of confidence in the expanding patent protection on the drug. Patent 13/608,775 is just another step in the right direction.
We saw a lot of recovery rallies last week, a few of which were especially large. First we'll give our attention to Alexza Pharmaceuticals (NASDAQ: ALXA), which moved about 22% into the green since the start of last week and an impressive 36% in the last five trading sessions. ALXA traders are anticipating the FDA decision on the NDA (New Drug Application) for flagship product ADUSAVE (staccato loxapine) that was submitted in May 2012.
The PDUFA action date (or the date of the FDA approval or denial on the drug) is on December 21st. Alexza is also anticipating the decision on its MAA (Marketing Authorization Application) submitted to the European Medicines Agency ((EMA)) earlier in the year.
ADUSAVE is a respiratory-based delivery system for the generic schizophrenia treatment loxapine, and is expected to bring an improvement to schizophrenia treatment. Traders are getting especially excited about ADUSAVE as we get closer to decisions by the FDA and the EMA in December. News from Europe that was released on November 19th was also a vital component of the recent rally in ALXA. After a review by the CHMP (the Committee for Medicinal Products for Human Use), they presented a "List of Outstanding Issues" (or LoOI) that showed no objections to EMA approval of ADUSAVE's MAA.
This implies that ADUSAVE is likely to receive approval from both the FDA and the EMA in December, which should result in an increased valuation of Alexza after confirmation. Still, frontrunners that reacted to the CHMP statements as if they were confirmation of an MAA approval have already removed much of the upside potential of ALXA.
Celsion Corporation (NASDAQ: CLSN) also made an enormous recovery too, moving up an incredible 45% in the last five trading sessions and roughly 20% throughout last week. CLSN is now 22.4% higher than it was after initial coverage by Bio-Wire on October 1st, 2012 which claimed that the stock was generating bullish potential based on the upcoming phase III clinical trial results of the HEAT study - the study that will provide results that will be used in the eventual NDA for Celsion's flagship product ThermoDox for the treatment of liver cancer.
Since liver cancer is one of the most challenging types of cancer to treat, and since unmet demand is already enormous (and growing) for this particularly disease, ThermoDox has very exciting prospects given that it can provide a favorable efficacy and safety profile when we see the data in December 2012. A recent article on Option Monster also caught my attention, since it alerted me to some really serious buying in call options that are set to expire in January and February. There is clearly some interest in CLSN stock, anticipating the upcoming clinical trial data for ThermoDox. Momentum traders should consider CLSN since it seems that there is strong bias on the bullish side as we wait - particularly in the options market.
More bullishness was seen in shares of BG Medicine (NASDAQ: BGMD), which moved up about 45% last week after topping off the trading period with a 23% rally (this was on Friday.) This was a much needed relief rally after a lengthy period of selling. BGMD has been on a steady decline ever since a weak Q2 2012 earnings release, which showed unexciting progress for the cardiocascular diagnostic platform known as "BGM Galactin-3" (at least relative to market expectations.) The company also heard back from the FDA about its CardioSCORE diagnostic platform, and decided to temporarily withdraw its 510(k) application from the FDA to buy more time to build a proper application. The lack 510(k) application stands between CardioSCORE and the cardiovascular diagnostic medical device market, which is surely annoying to shareholders who have helped fund its development.
Although BG medicine has fallen a lot (about 77% since the start of August), short interest has actually died throughout the period. Bears, eager to capture gains, have reduced the total pool of shares short from about 556,000 shares at the start of August to roughly 250,000 shares at the end of October. This does reduce short-squeeze potential in a situation where BGMD were to move upwards, and also makes the profit-taking factor more apparent. This means that BGMD may have trouble building upwards.
After a huge jump in May 2012 fueled by an infusion of capital into Rosetta Genomics (NASDAQ: ROSG), shares have been trading very weak but have showed some signs of life in recent trading. The stock caught my attention on October 1st due to a particularly nasty sell order that overwhelmed the very weak demand for shares of ROSG. Of particular interest is the astounding 78.5% short interest in the stock, which appears to be an obvious short-squeeze waiting to happen. Looking deeper, you can see that the number of outstanding shares that are reported by major financial news sites is wrong, since they do not account for the shares that the company issued to raise capital earlier in the year. The short interest is roughly 21% at this point.
Still, investors should be careful with Rosetta. Recall that ROSG was a $100 stock when it held an IPO in 2007. A quick calculation reveals that ROSG has lost about 97% of shareholder value ever since - who would want to catch a knife like that? An article on Seeking Alpha outlines the potential for the company's microRNA diagnostic technology in a $600 million market. The company's market cap, which hovers just over $30 million or so (it is NOT $3.38 million like Google Finance implies), implies that the market doesn't have much faith in the company at this time. There is clear potential for the stock to rebound at this point, although ROSG is a hard sell given its history.
The troubled prescription obesity pill play Vivus (NASDAQ: VVUS) got jolted to life on the day before Thanksgiving (November 21st) in reaction to a clinical policy bulletin update from Aetna that coverage for their obesity drug Qsymia will become possible after very specific guidelines are put into place. You can view the actual requirements here. Vivus moved up about 11% since that particular piece of news hit, although much larger percentage gains are possible due to how far the stock has fallen since FDA approval in July. The reputation of VVUS has been tarnished by insider sales (soon after FDA approval), a failure for MAA approval in Europe (at least for now), and a weak launch for Qsymia as detailed here. Expectations for the company have gotten quite bad at this point, and any reversal of fortune for the company and its product Qsymia could result in major potential on the long side. But, as always, caution is advised - especially for biotech stocks on a downtrend.
Another stock that has been trailing many of the other biotech tickers was Dynavax Technologies (NASDAQ: DVAX), which is still licking its wounds after a painful press release from November 15th. DVAX was very close to breaching the psychological $5/share barrier (that separates the penny stocks from the "regular" stocks) but got cut in half after it the results of the U.S. Food and Drug Administration (FDA) Vaccines and Related Biological Products Advisory Committee vote. It was eight to five against the approval of its Hepatitis B BLA for Heplislav, but only because of the questionable safety profile of Heplislav (the committee agreed that the efficacy was very well-documented.) Going forward, expect the market to trade on news of Heplislav's progress in future trials, which will aim to prove that the drug has low enough risks to justify its use as a Hep B treatment.
Disclosure: I am long AMRN.
Additional disclosure: I also trade AMRN options