When it comes to the biotech sector, many stocks that trade under $10/share are considered to be very speculative, and as a result I wanted to focus on two that could benefit from developments within their specific markets. In this article I've chosen two companies that have met the follow criteria:
- Each company must trade below $10/share
- Each company must have a Market Cap under $200 million
- Each company must have announced significant strides in terms of recent clinical trials in the last 24 hours
Durata Therapeutics (DRTX) which is based in Morristown, New Jersey operates as "a pharmaceutical company, focuses on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses. Its principal product is the dalbavancin, an intravenous antibiotic product candidate, which is in Phase III clinical trials for the treatment of patients with acute bacterial skin and skin structure infections". (Yahoo! Finance)
Fundamentally speaking shares of Durata currently carry a market cap of $160 million, have traded down 2.65% since July 1st and are currently trading at a 9.20% premium to their 50 DMA and at a 3.10% discount to their 200 DMA.
DRTX data by YCharts
On December 11th it was announced that the company's Phase III study of dalbavancin, which is under investigation for the treatment of acute bacterial skin infections, achieved its primary endpoint within 48-72 hours after initiation of therapy.
According to the company's most recent press release regarding the study, "In the clinical trial, the treatment-related adverse event rate for dalbavancin was 12.3% and for vancomycin/linezolid was 18.3%. Adverse events reported in the 3% of patients receiving dalbavancin in this trial were nausea, diarrhea, headache, and pruritus. Discontinuations due to treatment emergent adverse events were 1.8% and 2.1% for dalbavancin and vancomycin/linezolid, respectively. This adverse event profile is consistent with results from prior Phase 3 studies of dalbavancin". If the company can continue to make significant strides in terms of Dalbavancin, I see no reason why a position should not be established at current levels, especially ahead of what could be a very positive FDA decision.
AEterna Zentaris, Inc. (AEZS) which is based in Quebec City, Canada operates as "a late-stage biopharmaceutical company, engages in the discovery, development, and commercialization of drugs for oncology and endocrine therapy primarily in the United States, Switzerland, and Japan. It provides Cetrotide, a luteinizing hormone-releasing hormone (LHRH) antagonist treatment for in vitro fertilization". (Yahoo! Finance)
Fundamentally speaking shares of AEterna Zentaris currently carry a market cap of $55.4 million, have traded down 28.42% since July 1st and are currently trading at a 9.20% premium to their 50 DMA and at a 3.10% discount to their 200 DMA.
AEZS data by YCharts
It was announced on Tuesday, that final Phase II data demonstrated that its oral AKT inhibitor perifosine, when combined with sorafenib, was well tolerated by heavily pretreated lymphoma patients. As per the company's press release, "For the 36 patients treated with combination therapy, 8 (22%) PR, 15 (42%) stable disease ("SD") and 13 (36%) PD were observed. Median time to achieve PR was 4 months (range 1-8) and median duration of response was 4 months (range 1-12). Median overall survival ("OS") and progression free survival ("PFS") for all patients were 16 and 5 months, respectively. For the 25 patients in the HL subgroup also receiving combination therapy, the overall response-rate was 28%, with 7 PR; for HL patients, median OS and PFS were 16 and 5 months respectively, as it was for all patients".
As the company graduates from Phase II to Phase III, it is important to keep in mind that significant strides regarding the company's AKT oral inhibitor have demonstrated very strong results. If AEZS can continue to make strides during the company's Phase III trials, I see no reason why investors shouldn't establish a position at current levels.
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 Durata and AEterna Zentaris. On one hand, any negative indication by the FDA with regard to Durata's phase III trials of dalbavancin or AEterna Zentaris 's AKT inhibitor 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 an unfavorable path.
For potential investors looking to establish a position in either Durata or AEterna Zentaris, 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.