Seeking Alpha
, stockmatusow (979 clicks)
Long/short equity, deep value, value, research analyst
Profile| Send Message|
( followers)  

Trading biophama stocks 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 list a few small-cap companies and their respective catalyst events for traders to consider. Small-cap biopharmas can experience very volatile price moves, so it's wise to take this into consideration before engaging into a trade with them.

Synta Pharma (SNTA)

Catalyst 1: Synta expects results from its Phase I compassionate use trial, where a single patient was treated with Elesclomol.

The study was designed as a dose-escalation of Elesclomol sodium in a single patient with relapsed or refractory acute myeloid leukemia (AML). The primary objectives of the study are to characterize safety, tolerability, and pharmacokinetics.

According to the company;

Elesclomol is a first-in-class, investigational drug candidate that triggers programmed cell death (apoptosis), in cancer cells by disrupting cancer cell energy metabolism. This is done by selectively targeting the electron transport chain in cancer cell mitochondria.

In some ways, Synta reminds me of Ariad Pharma (NASDAQ:ARIA), which is working on a similar leukemia drug, Ponatinib. Ponatinib is an BCR-ABL inhibitor designed for heavily pretreated patients with resistant or intolerant CML or Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ ALL).

On Monday, Ariad announced the following updated molecular response data from its Phase I and pivotal Phase II trials of Ponatinib:

The data showed that 51% of chronic-phase CML patients in the Phase 1 trial achieved a major molecular response (MMR) with a median follow-up of 30 months, and 34% of chronic-phase patients achieved MMR in the PACE trial with a median follow-up of 15 months.

Ariad's stock price has soared over the last three years from about $0.45 to over $25 on mainly strong speculation surrounding Ponatinib's future success. I feel speculation in Elesclomol's future monetary prospects could propel Synta to see a similar stock run that Ariad has seen, if not higher. Elesclomol, if proven successful in trials, can end up being a front line treatment, whereas Ponatinib might end up being a 2nd or 3rd line treatment. A positive result here could mean a pivotal Phase II/III for Elesclomol, so this catalyst might have the biggest influence on the stock price.

Catalyst 2: In September, Synta provided an update from an interim analysis of the Phase IIb portion of its GALAXY trial:

This trial is a global, randomized, multi-center Phase IIb/III study designed to evaluate the efficacy and safety of the company's lead Hsp90 inhibitor, ganetespib, as second-line treatment for advanced non-small cell lung cancer (NSCLC). The results showed good tolerability for the combination of ganetespib and docetaxel, as well as meaningful improvements in overall survival in adenocarcinoma patients receiving both drugs compared to those receiving docetaxel alone.

The company expects to complete enrollment in the trial by the end of this year, and also expects the final progression-free survival (PFS) primary endpoint data in the first half of 2013. Synta also plans to meet with the FDA for transition to the Phase III portion of the GALAXY trial before the end of this year.

Catalyst 3: Preliminary results from the Phase II CHIARA trial are expected by the end of this year. The trial is evaluating ganetespib monotherapy for the treatment of Anaplastic Lymphoma Kinase (ALK) + Non-Small Cell Lung Cancer (NSCLC) patients not previously treated with a direct ALK inhibitor such as crizotinib.

Catalyst 4: Data from Phase II proof-of-concept trial of single-agent ganetespib in HER2+ or triple negative breast cancer patients is expected in by the end of this year.

With 4 near-term catalysts approaching for Synta, I consider this one to be the best trade of the bunch, notwithstanding its strong speculation investment value. I believe the stock price could easily be touching the $10 mark within the next 4 to 6 weeks, if not higher.

To date, the company has met its goals in all of the above programs. I see no reason why things should change now. Investors might want to keep a close eye on this company a year or so down the road, as Synta might become the next Ariad, making for good long-term investment vehicle.

Keryx Biopharma (KERX)

Catalyst: Zerenex, the company's oral, ferric iron-based drug candidate for the treatment of hyperphosphatemia in end-stage renal disease patients on dialysis, is currently in Phase III clinical development pursuant to a Special Protocol Assessment (SPA) agreement with the FDA. The Zerenex Phase III registration program is comprised of an already completed Phase III short-term study, and an ongoing Phase III long-term study.

The data results are set to be announced by the end of this year, with a planned NDA filing for the first quarter of 2013.

In the U.S., according to data from the U.S. Renal Data System:

there are approximately 485,000 patients with end-stage renal disease, or ESRD. The number of ESRD patients is projected to rise 60% to approximately 785,000 by 2020. The vast majority of ESRD patients, over 350,000, require dialysis. Phosphate retention and the resulting hyperphosphatemia in patients with ESRD on dialysis are usually associated with secondary hyperparathyroidism, renal osteodystrophy, soft tissue mineralization and the progression of renal failure. ESRD patients usually require treatment with phosphate-binding agents to lower and maintain serum phosphorus at acceptable levels.

Obviously, there is large market potential for Zerenex, but the company needs the drug to show positive data since earlier this year, Top-Line Data from its clinical drug Perifosine, failed to meet its endpoint in treating patients with refractory advanced colorectal cancer versus placebo.

If Zerenex fails to show positive data here, this would be a death blow to the company. However, positive results should rally the stock, potentially surpassing its 52-week high.

Hemispherx Biopharma (HEB)

Catalyst: The FDA has scheduled an Advisory Committee Members Meeting (ADCOMM) to discuss the Ampligen New Drug Application for Chronic Fatigue Syndrome (CFS) which is currently under review by the FDA. The date of the ADCOMM review has been tentatively set for December 20, 2012. The PDUFA goal for the FDA to complete its review is February 2, 2013.

Currently, there are no approved treatments for CFS and patient advocacy groups are pushing hard to have one available that is both a safe and effective treatment.

However, as many point out, Hemispherx's Phase III studies here might not be up to what the FDA wants to see in order to approve the drug. I do think it's entirely possible the agency might make an exception in this case because as mentioned prior, there are no Rx treatments for CFS. A recommendation for approval of Ampligen by the ADCOMM would surprise many. This surprise would lead to a huge gap up as much as 200% in my estimation, if the ADCOMM does end up giving the drug the green light.

Hemispherx is the riskiest trade out of five mentioned in this write-up, but might have the greatest short-term reward. I feel Synta has the least risk per the potential reward, especially in the long term, while the other trades fall somewhere in between.

Source: Tuesday's Small-Cap Biopharma Catalyst Trade List

Additional disclosure: 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 adviser.