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 $20/share
- Each company must have a Market Cap under $1 billion
- Each company must have announced significant strides in terms of recent clinical trials in the last 48 hours
Celldex Therapeutics (CLDX) which is based in Needham, Mass. operates as "a biopharmaceutical company, focuses on the development, manufacture, and commercialization of novel therapeutics for human health care primarily in the United States. The company markets Rotarix to treat rotavirus infection. Its lead drug candidate, rindopepimut (CDX-110), is an immunotherapeutic vaccine in Phase III clinical trial to target the tumor-specific molecule, epidermal growth factor receptor variant III, as well as in Phase II clinical trial for the indication of recurrent glioblastoma". (Yahoo! Finance)
From a fundemental perspective shares of Celldex currently carry a market cap of $426 million, have traded up 25.59% since July 1st and are currently trading at a 16.87% premium to their 50 DMA and at a 21.65% premium to their 200 DMA.
On December 11th the company announced positive results from its Phase I studies of CDX-301, saying the drug has been well-tolerated and can safely and effectively mobilize hematopoietic cell populations in healthy volunteers. The data also supports future development in a number of indications, including hematopoietic stem cell transplant and cancer immunotherapy. If CDX-301 can continue to demonstrate key toleration levels and meet specific endpoints moving forward I see no reason why potential investors should not establish a position at current levels.
Alnylam Pharmaceuticals (ALNY) which is based in Cambridge, Mass. operates is "a biopharmaceutical company, engages in discovering, developing, and commercializing novel therapeutics based on RNA interference (RNAi). Its core product programs under clinical or pre-clinical development include ALN-TTR, a Phase I clinical trial program for the treatment of transthyretin-mediated amyloidosis; ALN-APC, a Phase I clinical trial program for the treatment of hemophilia; ALN-PCS for the treatment of severe hypercholesterolemia". (Yahoo! Finance)
By examining the fundementals of Alnylam shares of the company currently carry a market cap of $943 million, have traded up 48.31% since July 1st and are currently trading at an 8.56% premium to their 50 DMA and at a 9.16% premium to their 200 DMA.
ALNY data by YCharts
On December 10th the company reported encouraging pre-clinical data for its RNAi therapeutic program to treat of hemophilia and other bleeding disorders. The drug candidate produced as much as a four-fold increase in thrombin - a protein that plays a role in blood coagulation - in testing with non-human primates. If Alnylam can find success in the administration of the program in human-primates and eventually human patients, I think the data is quite promising. That being said, I'd begin with a small to moderate position at current levels considering the fact the program is still in its pre-clinical stage.
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 Celldex and Alnylam. On one hand, any negative indication by the FDA with regard to Celldex's Phase II trials of CDX-301 or Alnylam's RNAi therapeutic program 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 Alnylam or Celldex, 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.