The biotech sector revolves around two things, FDA decisions and EPS announcements. In this article, I wanted to focus on two companies within the sector that have not only announced significant developments but also meet the criteria of my recent screen. The following three criteria were met by both companies:
- Each Company Must Trade Below $30/share
- Each Company Must Have A Market Cap Under $800 Million
- Each Company Must Have Announced A Significant Development In The Last 24 Hours
Sarepta Therapeutics (SRPT), which is based in Bothell, Washington, currently operates as "a biopharmaceutical company, focuses on the discovery and development of RNA-based therapeutics for the treatment of serious and life-threatening rare and infectious diseases. Its lead clinical candidate is Eteplirsen, which is in Phase II clinical stage for the treatment of Duchenne muscular dystrophy. ". (Yahoo! Finance)
From a fundamental perspective, shares of SRPT currently carry a market cap of $621 million, have traded up 492% since July 1, and are also trading at a 6.96% discount to their 50-DMA and at a 54.90% premium to their 200-DMA.
SRPT data by YCharts
On December 21st it was announced that the company had entered into a Clinical Trial Agreement with the National Institute of Allergy and Infectious Diseases to conduct a Phase I study with its experimental flu vaccine and lead drug candidate, AVI-7100. The drug has the potential to address a broad-spectrum of influenza viruses, including Tamiflu-resistant virus strains. If the drug can successfully address and combat against such strains shares could in fact move much higher.
Halozyme Therapeutics (HALO), which is based in San Diego, California, is "a biopharmaceutical company develops and commercializes various products for patient care. Its research focuses on human enzymes that transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefits". (Yahoo! Finance)
From a fundamental perspective, shares of HALO currently carry a market cap of $796 million, have traded down 26.10% since July 1, and are also trading at a 26.71% premium to their 50-DMA and at a 3.23% premium to their 200-DMA.
HALO data by YCharts
On Friday, December 21st the company announced it was joining forces with Pfizer (PFE) to develop and market products combining Halozyme's rHuPH20 with Pfizer's proprietary biologics. Halozyme receives an upfront payment of $8 Million, and future payments of up to $507 Million will depend on Pfizer's reaching of certain targets. If Pfizer can meet the criteria set forth by certain endpoints, the $507 Million should be well within reach.
Are there any negative catalysts potential investors should consider before establishing a position in either Sarepta or Halozyme? 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 Sarepta Therapeutics and Halozyme Therapeutics. On one hand, any negative indication by the FDA with regard to Sarepta's AVI-7100, or Halozyme's rHuPH20 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 12-18 months could also send shares of these companies down an unfavorable path.
For potential investors looking to establish a position in Sarepta or Halozyme, 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 once future developments are announced.