Small Pharmaceuticals With Near Term Catalysts Offer Investment Opportunities

by: Chemistfrog

In what can be considered to be one of the most catalyst-filled sectors for investors, development phase pharmaceuticals often offer many share-price moving events. The remainder of 2012 and Q1, 2013 present many possibilities that investors may research for short-term and longer term consideration. For many investors, and me in particular, stocks with near-term catalysts are the preferred securities for investment consideration. When uncertainty hits the markets, it is often the development phase speculative companies with few or no near term catalysts that appear to suffer the most significant share price drops. It is for this reason that much of my trading portfolio consists of what I perceive to be good investments with upcoming catalysts. The following are some promising companies that investors may consider with near term catalysts. I intend for this article to only be the beginning of the research process and advise all interested investors to perform much additional research before opening a position in either of these development phase companies.

Supernus Pharmaceuticals (NASDAQ:SUPN) has had an exhilarating year culminating with the FDA's approval of its epilepsy drug, Oxtellar XR on October 19th. The news had a modest effect on the company's common shares, as it appears that approval had already been priced into the company's share price. The announcement was not a "sell on the news" event, but rather, the shares traded in the $14 range for much of the day and at elevated levels for over a month afterward. On November 23rd, shares closed at $12.05, with little notice of what was coming. Shares began a gradual downtrend with a November 28th's $10.98 closing. November 29th's additional drop with a close at $9.81 signaled that bad news for investors was apparently on the way. An afterhours announcement by the company of a stock offering confirmed investors' fears, as the company announced a $28 million offering to be priced at $8.0 per share, an 18.5% discount on the day's close and down 33% from the $12 share price just four days earlier. Shares are still trading in the low $8.0 range, at a deep discount to where they were just under a week ago.

Although the share price suffered, current levels may offer good entry for new investors looking to invest in a development phase company with a bright future likely. The catalyst for Supernus occurred just last week, and is not an upcoming event. Nonetheless, upcoming catalysts are likely, as the company begins its transition from a development phase company to a marketing phase pharmaceutical. Interested investors are advised to consider the company's pipeline and review its most recent quarterly report, as well as perform additional research before opening a position in this company's "down but not out" security.

Biodel Inc (BIOD) had tremendous investor interest in 2009-2010 as it was pursuing FDA approval of Linjeta™ as a rapid-release insulin for diabetic patients. The approval never came, and the company instead received the dreaded complete response letter [CRL] for the drug citing "comments related to clinical trials, statistical analysis and chemistry, manufacturing and controls." After meeting with the FDA later, Biodel decided to scrap Linjeta™ and pursue other formulations in its arsenal.

The company initiated a phase 2 trial for BIOD-123 on September 13th of this year, which will likely be a primary focus for the company moving forward, with topline data expected at the end of 2013 on the trial. Another major catalyst comes in the form of a new drug application [NDA] it intends on submitting on Q1, 2014 for BIOD-Stable Glucagon, a sublingual insulin therapy. Investor interest may come back to Biodel yet again, with potential large share price moving events in the coming months as the company possibly reemerges and potentially takes the spotlight yet again due to the phase 2 enrollment completion and topline results in Q3 and Q4 2013, respectively.

In terms of near-term catalysts, Biodel expects to report results on its phase 1 trial evaluating its analog-based ultra-rapid-acting insulin in Q1 2013. Although not a significant event, promising results there may begin turning more heads towards Biodel due to the data and the additional catalysts ahead as mentioned before. Early entry into Biodel's common shares at this point could be a solid investment going forward with a host of catalysts in the upcoming weeks and months.

A recent stock offering of $18.5 million provides enough money to develop the company's pipeline through Q1, 2014, according to the company's Q3 2012 filing. The company's common shares are trading at $2.48, just at the $2.50, and then $2.25 support levels. Interested investors are advised to pick a solid entry with an exit plan ahead of time in the event support levels fail. Although there is a near term catalyst, this may be a better mid to longer term investment depending on how events unfold.

AcelRx Pharmaceuticals (NASDAQ:ACRX) has had a good year with three phase 3 trials for its lead product candidate, ARX-01, wrapping up in Q4. ARX-01 is the company's proprietary version of Sufentanil, an opioid analgesic currently marketed for IV and epidural anesthesia. Sufentanil is an effective analgesic, but its currently-approved intravenous administration causes its activity to be short-lived. The first of the company's phase 3 topline data sets, for its NanoTabTM system, was announced on November 15th with impressive results. Data indicated the therapy was "statistically superior to IV PCA morphine for the PGA (patient global assessment) endpoint (p=0.009)." Shares soared on the news, with a new 52-week high of $5.25 reached.

The stock has since settled down at an elevated range, trading just above $4.0. The additional two phase 3 data sets are to be presented in Q1, 2013 and represent the next known major catalysts for the company. AcelRx plans on submitting an NDA to the FDA in mid 2013, another major event for this growing and evolving company. The NDA and the subsequent wait for the decision date and any possible accompanying FDA panel will keep the company in the spotlight for much of 2013. Interested investors should watch the company's share price in the coming days and ascertain an entry point. I believe the psychological $4.0 support level will hold due to the upcoming phase 3 data presentations. With solid data already being presented, the company could be entertaining offers for marketing or licensing the drug. Such an announcement is possibly on the way, but should only be construed as a speculative possibility at this time.

Inovio Pharmaceuticals (NYSEMKT:INO) is a microcap biotech that is attempting to target the large indications of cancers and infectious diseases. The company's novel pipeline is based on its SynCon® synthetic vaccine development platform. It is currently developing vaccines to address large areas of need, most notably cervical dysplasia/cancer, prostate cancer, hepatitis C virus, HIV, influenza, malaria and other tropical diseases. Not only are the developed vaccines novel in nature, but the administration of the therapies themselves is unique as it utilizes an electroporation platform, described here in an earlier article. Inovio's most recent major news came in the form of phase 1 results of its VGX-3100 vaccine announced on October 10th. The announcement vaulted the company's common shares with opening trades up over 20% while closing at $0.70, up over 12% from the previous day's close.

The data helped to more fully validate much of the company's synthetic vaccine platform and will likely keep more investors' eyes on it in the coming months. The press release noted impressive results in a phase 1 clinical trial using VGX-3100 to trigger an immune response against antigens present in human papillomavirus [HPV] affected cells that had transformed into precancerous cervical dysplasias. Results of the 18-patient trial indicated 100% of them responded by showing "antigen-specific antibody responses to Inovio's vaccine, while 78% showed T-cell responses in the validated ELISpot assay."

Inovio already has a phase 2 trial underway for VGX-3100 for cervical dysplasia. The trial is expected to yield data in late 2013, an increasingly promising and share-price moving catalyst due to the October 19th phase 1 data unveiling. In terms of immediate catalysts, two of Inovio's collaborators, the University of Southampton and ChronTech Pharma AB, are expected to report interim data from phase2 studies of its DNA vaccines for leukemia and the hepatitis C virus in December. A possible "under the radar" catalyst in wait, positive news in the form of good interim data could be yet another share price moving event for the company according to the company's Q3 financials.

An additional announcement is expected on Q1, 2013, with results from an ongoing trial of the company's H1N1 influenza "construct" vaccine. Earlier data indicated that the therapy "generated protective immune responses in humans against the nine key H1N1 flu strains of the past 100 years, including the 1918 pandemic flu strain." In other words, the vaccine appears to be universal in nature and able to treat many different flu strains at once. Current problems that large pharmaceuticals must contend with each year are the many different strains of the influenza virus that are changing from year to year. The companies may be successful from time to time, but the vaccinations are often not for the current strain needing to be addressed and offer little help if not chosen properly. A more universal vaccine could have a huge market, although Inovio is still in the early development stages for this indication.

Interested investors should perform much research before considering a position in Inovio Pharmaceuticals. Although the company appears to have a great future ahead of it, the investment does have some risk as this is a development-phase entity that is fairly cash-strapped with cash and equivalents plus short-term investments in certificates of deposit, mutual funds, and municipal bonds of $15.2 million on September 30th relative to $30.3 million as of December 31, 2011. However, the additional risk does have its perks as many investors are not willing to currently invest in the company which keeps Inovio's market capitalization low at $75 million with good upside potential if the pipeline continues to develop positively.

Disclosure: I am long BIOD, ACRX, SUPN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. I may initiate a long position in INO over the next 72 hours.

About this article:

Problem with this article? Please tell us. Disagree with this article? .