The biotech sector revolves around two things, FDA decisions and EPS announcements. In this article I wanted to focus on two companies who have announced significant drug-related developments in the last 24 hours.
Astex Pharmaceuticals (ASTX) which is based in Dublin, California, currently "engages in the discovery and development of small molecule therapeutics with a focus on oncology and hematology. It develops small molecule therapeutics using its fragment-based drug discovery platform, Pyramid". (Yahoo! Finance)
On Monday, shares of ASTX were moving much higher after the company presented it's Phase I clinical results of lead drug candidate, SGI-110, which is a novel second generation hypomethylation agent. Data from the trial showed that patients with acute myelogenous leukemia that have applied the drug demonstrated a differentiated pharmacokinetic profile resulting in an extended half-life and exposure to decitabine. If the company can continue to demonstrate significant strides when it comes to SGI-110, especially in upcoming Phase II clinical trials of the drug, potential investors could see some very nice upside. The transition from Phase I to Phase II opens the door for a number of possibilities that include but are not limited to a joint-venture or possible acquisition by of the bigger drug-makers.
Acura Pharmaceuticals (ACUR) which is based in Palatine, Illinois is "a specialty pharmaceutical company engages in the research, development, and commercialization of pharmaceutical product candidates utilizing its proprietary Aversion and Impede technologies". (Yahoo! Finance)
On Monday, shares of Acura were up almost 60% after the company launched Nexafed. Nexafed is a pseudoephedrine product that provides nasal-congestion relief with a unique technology that disrupts the conversion of pseudoephedrine into the dangerous drug, methamphetamine. By breaking down this process, and removing the methamphetamine, Nexafed becomes readily available as an over-the-counter medication and with such a classification could see projected sales numbers increase exponentially.
Are there any negative catalysts potential investors should consider before establishing a position in either company? As is the case with any biotech company, potential investors need to keep in mind some of the negative catalysts that go hand-in-hand with both Astex and Acura. On one hand, any negative indication by the FDA with regard to Astex's SGI-110 or Acura's Nexafed could result in the sell-off of either stock. On the other hand, weaker than expected earnings at any point over the course of the next 12 months, could also send shares down a very unfavorable path.
For potential investors looking to establish a position in either Astex or Acura, I'd take a closer look at each company and keep in mind the primary positive and negative catalysts moving forward. Given the fact that both companies are making considerable strides I'd look to establish a small to medium position at current levels and add to that position as future developments are announced.