A large part of investing in the speculative sector involves staying one step ahead of the game - finding the next big thing - the latest fad, brightest technology or newest bull market - before the other guy does.
For instance, those who dabbled in the 3D printing market before the hype hit the market hard could have made huge gains by jumping into 3D Systems Corp (NYSE:DDD) before it tripled from its lows and - taking the healthcare spin - Organovo Holdings (NYSEMKT:ONVO), which also posted a triple at point leading up to the bubble. Although the bubble burst and those companies have now seen their share prices retreat rather significantly, the point was made that 3D printing is here to stay and the strength of the sector should be taken seriously. Those who figured that out before the market made bank.
In the healthcare and biotech sectors, staying one step ahead of the game may be a bit tougher, as an epidemic of any type could hit at any given time with little or no notice.
That said, finding next-generation drugs while they are still in development can pay off handsomely for those with the patience to wait the story out, while maybe trading a few shares here and there to make sure at least some profits are had along the way. Dendreon's (NASDAQ:DNDN) Provenge can be viewed as just such a present-day, but next-generation product, as it targeted an existing disease, prostate cancer, and then effectively ushered in the next generation of the cancer immunotherapy treatment. The DNDN share price, as a result, jumped from roughly three bucks to well over forty at one point along the way.
Searching for the newest trends can help investors, who need to have a little time on their hands, find the next bullish market before those markets hit overdrive. The sub-sector of diabetes treatment is one such market that looks like it could be lining up for take off, given the trends we will discuss below, although it's arguable that this sector has been heating up for years now, as more and more humans survive on fast food, sugary drinks and exercise that only includes couches, office chairs and golf carts.
Below we'll take a look at a disease that is quickly becoming one of the greatest burdens on the global health care system and a few companies that could play a large role in the sector for years to come, but may still be trading relatively below the radar.
Diabetes Is A Growing Burden On The Global Health Care System
Investors of the healthcare sector should take note of the magnitude with which diabetes treatment is burdening the global healthcare industry.
One of the fastest-growing diseases in the world, diabetes is becoming such a huge burden that, in fact, some of the most recent statistics indicate that it is a dilemma that can only be measured in the hundreds of millions of dollars. Twenty-two million people in the United States alone have been diagnosed with diabetes and it is speculated that millions more have it and are yet-to-be diagnosed. The diagnosed global numbers are much more severe, yet also much more undiagnosed. The burdens placed on national and private health care systems are obvious, especially in a time when governments around the globe are streamlining costs and looking for more efficient and less-intrusive ways to treat common diseases and ailments.
While there are many established players already out there and still evolving their own respective treatments, there are a few lesser-known players developing technologies or treatments that could play a large role in future treatment.
Here are just a few of them to keep on the radar...
AntriaBio Positioning For Launch Of Human Trials
Specifically, AntriaBio is prepared to advance to the clinical stage a once-weekly basal insulin shot, known as AB-101, that could replace the current standard-of-care treatment, which includes a once-daily shot. The improved quality of life of such an advancement, should it eventually make market, is undeniable and the targeted sector is valued in the billions of dollars annually.
Having pulled back from recent highs of over two dollars on relatively light volume, ANTB could be positioning and consolidating before multiple catalysts unfold during the remainder of the year. Those catalysts include the initiation of human trials in Russia, the expected release of some of that human data by the end of the year, and the search for potential partners, whether they be regional or international. According to a presentation posted on the company's website, the goal is to find already-established regional partners in targeted areas.
In addition to the above-mentioned catalyst events, FDA milestones could be forthcoming, as well, as the company plans to proceed with the IND process in the US while simultaneously conducting trials overseas. Emphasis has been put on the overseas trials first, however, due to significant costs benefits of conducting trials elsewhere, while patient recruitment is often easier, too. Once some human data is established, then it makes the FDA process at home a little bit easier.
When the planned trials are initiated and (IF) positive data starts rolling in, ANTB's relatively modest market cap - in terms of speculative potential - could start inching higher. Catalyst traders could also jump on board in anticipation of milestone events and potentially add volatility - and trading opportunities - to the mix, too.
The time to build a trading and/or accumulation base, however, may be when the company is still hovering below the radar, as it may be right now, although some increased attention has been noted and there may be more to come as the above-mentioned developments unfold.
Beyond AB101, AntriaBio is also establishing a secondary pipeline product, which helps a company still establishing itself to keep from being considered a 'one trick pony.' As Keryx Biopharmaceuticals (NASDAQ:KERX) demonstrated last year, and AEterna Zentaris (NASDAQ:AEZS) just about last night, a company almost has to have a backup plan in the event 'Plan A' hits a snag or outright fails.
AntriaBio's secondary product is AB-201, a long-acting Glucagon-like peptide-1 that is approaching the pre-clinical stages and will be tested as a once-monthly replacement for the current standard of care. While the bulk of attention is destined to be paid to AB101 over the coming months, the potential of AB-201 should not be ignored, in regards to potential valuation over the mid to long haul. That said, this product candidate will likely gain more credence once it is established in the clinical stage.
MannKind's Inhaled Insulin Could Provide A Non-Needle Alternative
Of the companies discussed in this write-up, MannKind Corporation (NASDAQ:MNKD) is undoubtedly the best known, but may have just as much a chance at upside as the others, if not more - even after another five percent price spike on Tuesday. That rise followed numerous days of notable upticks since the opening bell of the week prior.
Although MannKind is still considered a speculative play because the Phase III inhaled insulin product Afrezza has already been brought before the FDA and denied, the current trials have been designed in a manner that has the company and investors enthusiastic about its prospects for success. The problem with the trial from a couple of years ago, for example, was not related to the effectiveness of the treatment, rather it was the fact that the company utilized one inhaler for the trial, while intending to market Afrezza with the next-generation device. The FDA requested the additional trials to confirm efficacy with the next-generation device and that is what the company is now doing.
With trial results slated for release over the course of the coming quarters and an NDA filing also expected this year, MNKD has plenty on tap to keep investors interested. Financing is no longer a major concern thanks to a deal struck last fall, so these upcoming milestone events have the potential to allow the MNKD share price to appreciate in value unabated, aside from the expected routine volatility, profit taking and consolidation of the sector. It also helps the financing cause that company CEO and founder Alfred Mann has put his money where his mouth is and invested over a billion dollars of his own personal fortune into the development of Afrezza.
Another aspect that may be a driving force behind the company's fifty percent gain since the post-financing lows is the ongoing speculation of a buyout or partnership. Such discussions could add instant fuel to the fire, as we saw last week, and may become even more heated later in the year around the time results are expected to be released, especially if those results are positive. Big pharma is well aware of the growing need for new and innovative treatments for diabetes, noting the epidemic discussed in the open, and Afrezza could potentially be considered a billion dollar product in itself, if it ever garners approval, based on the size of the target market - that could be enough to attract a buyout offer or two.
Just recently, volume rolled in at roughly five times the trading norm as partnership rumors made their rounds, although the consummation of any deal is unlikely to come before results are slated for release.
That said, there are still quite a few hurdles that Mannkind has to negotiate before investors again become true believers. Not only does Afrezza have to prove it can make it through trials, it then has to prove it can make it through the FDA, and that's been tried twice before. They say the 'third time is a charm,' although a skeptical investing crowd out there feels like it has seen this story before. The recent trading action could be an indication that investors are starting to accumulate positions again, but it's also likely that investors buying in at these levels would be inclined to bank some profits into any major bump higher, which would invite volatility over the coming weeks and months - but that's nothing new to the sector.
Headlines have speculated that MNKD could become one of the better plays of 2013 and there is a good chance that could be the case if the trial results are positive enough to attract big pharma interest. Either way, a pre-results runup is likely, but expect some skepticism to prevail, given the drama surrounding Afrezza's development thus far.
SanuWave Health Preparing For Late Stage Trial In Highly Lucrative Market
In assessing the market size of diabetic treatment as a whole and the potential of an investment in the sector, it's important to emphasize that there are many other aspects to diabetes treatment than just insulin delivery that add zeroes to left side of the decimal point - there are numerous conditions that result from diabetes itself that exponentially expand the market.
That's where another still-developmental company called SanuWave Health (OTCQB:SNWV) comes into play.
SanuWave has developed a technology that could greatly alter the standard-of-care for one such diabetic foot ulcers, a major complication of diabetes mellitus that - if left untreated - could lead to severe infection and even amputation. Through its Pulsed Acoustic Cellular Expression (PACE), SanuWave has developed a portfolio of shockwave therapies intended to treat a variety of chronic wounds and plans to initiate a Phase III trial in the foot ulcer indication in the near-term future.
The company's Shockwave therapy encompasses sending 'shockwaves' through damaged cells, an action that stimulates them to heal themselves - not unlike the process in which muscle tissue heals itself and recuperates after being beaten down during workout session with weights. The most advanced of these shockwave therapies is dermaPACE in the treatment of the aforementioned chronic foot ulcers. Beyond this indication, however, the company plans to expand further into the chronic wound market, adding significantly more long term potential to the story.
Patient recruitment for the upcoming foot ulcer trial is expected to commence within the current quarter and the trial itself was designed in conjunction with the FDA, since an earlier trial proved successful, but did not quite meet its targeted endpoint. Although the overall endpoint was eventually met, it was not achieved in as timely a fashion as expected, potentially due to inconsistencies resulting from patient availability for the desired treatment. With that in mind, discussions with FDA led to an agreement that some of the data from the previous trial could be used to support data from the upcoming trial, too, and that patients will be administered treatment in a more consistent and effective manner than previously. That fact may significantly help to streamline the results and hasten the expected duration of the trial while also conserving finances and resources along the way, always an important factor for still-developing companies.
With the advancement of the new trial, SanuWave made some changes on the business front, too. Joseph Chiarelli was announced last week as the new CEO. Mr. Chiarelli is a noted industry veteran with a pronounced history of developing emerging companies, such as SNWV, and will usher in the new era of dermaPACE and its sister therapies. The cash burn rate under the previous CEO was such that operations were hardly sustainable, especially when confronted with the depths of the recession that dried up funding for developmental companies, so investors will look for more responsible spending with the new administration in place.
The reinvigorated development at SanuWave and the potential of dermaPACE in the treatment of foot ulcers and other chronic wounds has slowly started to attract the interest of the investment community. Zack's covered the SNWV developments last week and a recent spurt in volume also indicates growing investor attention. That said, volume is still not rolling in at the pace that would indicate mass awareness, but that could change as the upcoming catalysts unfold.
Given the changes made to the trial design based on the lessons learned from before, chances are rather decent that this trial could return the desired results. That said, investors should always be aware of the potential risks of the sector. As most recently demonstrated by AEterna Zentaris, unwelcome news can hit at any time, which is important to keep in mind when devising entry and exit strategies. As we've discussed before, it's always wise, in my opinion, to utilize a handful of trading shares to augment a core position of long shares in order to bank at least some profits when the opportunities present themselves in the form of catalyst and/or milestone-based spikes. This allows investors to potentially come out ahead of the game, or on 'house money,' well before the story plays out in full.
That said, those with the inherent nature to accept risk and who also have the ability to sleep easy while understanding the volatile nature of the sector can do pretty good over the long run. All it really takes is one winner out of a couple hand-fulls of picks to come out ahead for good - if the sell orders are utilized at the opportune times. SanuWave's current market cap is a testament to the highly speculative and 'under the radar' nature of the stock right now, but also proves that the potential for significant upside exists.
Roundup: As noted in the open, the diabetes epidemic is growing at an alarming rate, especially when considering the health of humankind along with the fiscal implications on the global health care system. Whether the epidemic is due to poor diet, excessive consumption of fast food or the lack of exercise - or a combination of all three - the need for new and more effective treatments is not debatable. With that known, investors looking to take advantage of emerging treatments and therapies while they are still in the developmental phases could potentially reap significant rewards, aside from knowing that novel new technologies are hitting the market.
AntriaBio, as discussed above, could greatly enhance the currently delivery methods of basal insulin while SanuWave may eventually take its technology into the full spectrum of treating chronic wounds. MannKind is banking on its third try to finally receive the nod from the FDA.
All three companies come with risk, but also come with great potential - and best of all, all three have multiple catalysts pending over the coming quarters.
Disclosure: I am long MNKD, OTCQB:SNWV, OTCQB:ANTB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.