The catalysts to push a biotechnology stock higher are few and far between. These catalysts are dependent upon a variety of factors and/or questions, such as, whether or not the company has an approved product, the upside of its pipeline, valuation, and the importance of future announcements. With that being mentioned, I am looking at several stocks that present the potential for large gains heading into the new-year; stocks that could rally throughout 2013.
Just as the catalysts to move a biotechnology stock higher can vary, the stocks on this list are all quite different. The companies included are in all different phases of development, and have traded in different directions over the last year. However, all share a common trait, none have valuations that have appropriately priced in upcoming catalysts for 2013. All companies have either a product or a late stage candidate with large revenue potential that will either grow in 2013 or will become the center of a data announcement. Thus, each has a product(s) that could move its stock higher in 2013, and trade with very attractive valuations that should produce gains in the year that lies ahead.
The first stock to monitor is Amarin Corporation (AMRN). The stock is priced well headed into 2013, a year when it will launch its newly approved product, Vascepa. The product is expected to reach peak sales in excess of $1.0 billion, and potentially $300-$500 million in its first year after launch.
Last week the stock lost more than 20% of its value after announcing that it was raising funds and would be hiring a sales force to independently launch Vascepa. Originally, investors had been anticipating a partnership or buyout, and had valued the company accordingly.
Amarin's announcement and its upcoming launch value the company attractively to trade considerably higher in 2013. The company is trading at less than four times first year's sales, which is appealingly- priced for a company that should see several years of extensive growth. Also, despite its latest news, I still wouldn't rule out the possibility of a partnership.
It is very possible that Amarin's finance and sales team announcement was done in an attempt to rush a potential partner. In a way it gives the company an upper hand; it shows potential partners that Amarin is willing to launch and market the drug alone. This might actually result in a better offer and a more competitive landscape for companies wanting to partner with Amarin. Either way, the company is now priced better if it does market the drug alone-or should return a better gain if it's bought out.
After a four month rally of 160% between April and August, NeoStem (NBS) has since pulled back and found a steady trading range between $0.61 and $0.68. In the process, the company has had one positive announcement after the other, and was pushed higher because of these announcements. Now, with several looming catalysts in 2013 and a stock that is priced attractively, it is very possible that this stock will break its range and trade higher.
There is no particular reason that NeoStem has pulled back and traded flat for the last four months, except for the fact that all stocks eventually find a trading range after a large rally. These trading ranges provide investors with a good safe buying price, as almost always such stocks will trade higher with the appropriate catalyst, which NeoStem has into 2013.
Looking forward to next year, investors will be anticipating data for its Phase 2 product, AMR-001. A couple of months ago the company announced a very favorable reaction for those who received more than 10 million cells (no patient seeing deterioration of heart function) versus those who did not (30-40% of patients seeing a deterioration). This speaks to the potential of this product, a product that is believed to have a market potential of more than $1.2 billion.
The company is also seeing top line revenue growth of more than 100% thanks to its manufacturing business. As cell therapy companies (stem cell and immunotherapy) continue to advance in trials the need for manufacturing will rise, thus increasing NeoStem's revenue further in 2013. As a result, this is a stock worth watching in 2013, a stock that will eventually break its trend with pending catalysts.
After a 75% decline from the end of January to the end of October, Dendreon (DNDN) has since rallied more than 30%. Last week the immunotherapy company saw a rare weekly gain of over 12%, as investors began to embrace a company with consistent top line revenue growth and efficient cost- cutting measures.
Looking into 2013, we already know that Dendreon has seen a drastic decline and is oversold as a stock. It is expected to see continued growth, but analysts and investors might worry that sales will slow or stall heading into 2014. However, much of the stock's recent gains have been a result of an upcoming study using Provenge in combination with two other cancer-fighting drugs.
This combination is yet to be tested on humans, but increased survival studies resulted in a 50% complete tumor regression in mice. If approved this could open new doors for the company, and as Dendreon continues to test the vaccine, it is possible that it could be used on other indications to greatly increase total sales. If the company can advance its studies, and show progress towards increasing Provenge's total sales, then it could see significant gains in 2013.
On Monday shares of Geron Corporation (GERN) rallied more than 30% after announcing positive data for its Phase 2 product, Imetelstat, for treating essential thrombocythemia, a chronic blood disorder characterized by increased numbers of platelets in the blood. Much like Dendreon, Geron has lost massive value, but over a course of two years. On December 3rd the company noted its biggest setback yet, the failure of its Phase 2 candidate, GRN1005, to effectively treat brain cancers. Thanks to the Imetelstat news, the fallen stock is recovering and investors are trying to value the company accordingly to a product that might actually work.
Much of Geron's loss in the past has been due to the amount of time and money it has spent to develop Imetelstat. Since it is a new form of treatment, the company has faced challenges, but now it seems the hard work is being rewarded. In its thrombocythemia study, the response rate was 100%, accompanied by a molecular response rate of 86% in the targeted patient subgroup. The results are good and, although more testing is needed, the stock might now trade higher as investors embrace the company's innovation and brace for further data in the next year.
After the announcement of final Phase 2 data for CDX-011 for the treatment of breast cancer, Celldex Therapeutics' (CLDX) stock exploded on Monday with a 25% gain. But with 2012 gains of 167% and a stock that is now priced for approval, it still has a long road ahead. Nonetheless, any major questions in regards to this company's promising breast cancer therapy were tentatively answered when CDX-011 delayed tumor growth in the 122-patient trial. The promising news indicated that CDX-011 not only delays tumor growth, but also prolongs survival in breast cancer patients with the GPNMB expression. The study was small, and now the company will have to run a larger study to validate the drug's benefit. If successful then this is a product with sales potential north of $600 million and that could become a major catalyst for large returns.
The company also has a late-stage brain cancer drug, rindopepimut, that is in a Phase 2 trial and a Phase 3 trial for recurrent and newly-diagnosed glioblastoma, respectively. Investors are anticipating an accelerated approval if final results are promising, but if it does not occur or a larger-than-expected trial is required, the stock could pullback. Accordingly, I expect solid gains in the month of December and then the potential for a billion dollar valuation in 2013, pending a successful regulatory path.
Each of the stocks on this list has a lot of upside heading into the next year. Amarin and Celldex look to continue with large gains while Geron and Dendreon look to regain losses. NeoStem is somewhere in the middle. It is a stock that has seen strong gains in the second half of the year, but is yet to trade or be valued at a price that correctly considers its potential or near-term catalysts. As a result, I suggest keeping an eye on these stocks, and researching further to determine if any have risks that outweigh the potential rewards in your portfolio.
Disclosure: I am long NBS.