When a biotech company experiences a setback, the bad news often spreads through the investor community like wildfire. The panic that engulfs investors can sometimes send the beleaguered company's share prices plummeting to new lows. This "crash" is the perfect time to take a second look at the potential of any biotech that has experienced such a fall from grace. If the company's pipeline is still loaded, cash position still favorable or even the guidance remains clear and unchanged, the devaluation in share price might simply play into the hands of the bargain hunting investors. The following four companies have experienced rather significant drops in share prices, however, have plenty left to offer at their current valuations. These companies still have something safe or enticing to offer investors like a solid cash position, a productive pipeline still intact or the experience of already earning FDA approval with at least one major drug candidate.
One of the four biotechs that recently saw share prices take a tumble is the largest company of the bunch, Spectrum Pharmaceuticals (SPPI). Spectrum still has the cash to burn and even a pipeline with some productive candidates, but leadership has come under question after misleading investors with revenue projections. New, lowered sales projections for its approved product, Fusilev, have clobbered the share price. Fusilev demand has not met expectations at the same time Sagent Pharmaceuticals (SGNT) has acted to increase production of their generic version of Fusilev, leucovorin, to further crimp Fusilev sales. The stock recently lost 34% of its value because of the potential 40-50% reduction in Fusilev revenues that Spectrum is sure to encounter. On top of that, leadership at Spectrum has left investors wondering why previous revenue projections were so misleading. Last September share prices peaked at $13.05 a share after statements were made notifying investors that Fusilev sales would remain stable and leucovorin would not have such a big impact. Spectrum now faces a class action lawsuit on its hands and the potential for more of a stock devaluation in the future.
All that negativity aside, Spectrum is still flush with over $140 million in cash and short term investments, did make over $94 million in profit last year and still has several pipeline candidates to consider. Zevalin, Folotyn and many more candidates like apaziquone that is in a Phase III trial for non-muscle invasive bladder cancer are very worthwhile considerations. The current valuation of $7.25 a share (March 19th) might be fair baring any fallout from litigation. However, if the lawsuit gains some serious traction a fall below $7 a share might be unavoidable. At this point, Spectrum has plenty to offer at its current valuation, but the mess with the lawsuit and flaky leadership makes this a stock to watch for a little while longer.
Last week was unkind to AEterna Zentaris (AEZS) as share values plunged despite an event that came as no real surprise to investors who have been following them. Their phase III trial with Perifosine, Takeda Pharmaceutical's (TKPYY.PK) Velcade and dexamethasone in treating patients with multiple myeloma drew a recommendation from the Safety Monitoring Board to discontinue the study. This recommendation was more about the lack of potential for achieving meaningful results over any safety concerns. Perifosine already had disappointing results for the treatment of Colon cancer and partly because of this, multiple myeloma results did not surprise many investors. AEterna does still have a phase III trial for endometrial cancer along with phase II trials for another drug candidate AEZS-108 for breast, prostate and bladder cancers. As an added bonus, AEterna has an NDA filing for AEZS-130 as an oral diagnostic test for growth hormone deficiency and also has high hopes for AEZS-120 for prostate cancer which is in early stages right now. What remains to be seen is whether Perifosine has a viable future or whether more of a case should be made for the remaining pipeline candidates.
AEterna is currently priced at $1.91 a share (March 19) and has very little traction above its 52-week low of $1.75 a share. Fourth quarter and year end results for 2012 will be out on March 21st which could initiate some kind of movement. Until then, it might be best to watch this stock and keep it in mind if results send the stock diving down any further. The pipeline still has a lot to offer and any success with AEZS-108 will bring plenty of hope and huge potential for shares of AEZS at its current valuation, which seems to be priced to the potential of Perifosine alone. The pipeline alone warrants consideration at any valuation under $2 a share. Even without Perifosine, AEterna has lots of upside potential.
Taking less of a plunge and more of a steady ramp downward is Peregrine Pharmaceuticals (PPHM). Last year, poor execution of its phase II trial for bavituximab produced results that sent share prices plummeting 80% from highs above $5 a share. Peregrine, now at $1.33 a share (March 19th), has since re-evaluated the data for this non-small cell lung cancer involving bavituximab. Another setback for Peregrine occurred when less than appealing data was released for bavituximab's Phase II pancreatic cancer trial. Despite these setbacks with bavituximab, Peregrine finally came out with somewhat positive results for the Phase II (NSCLC) trial and made the designation to proceed with stage III testing. On the other hand, it has ran into more questions than answers for the bavituximab pancreatic cancer trial due to concerns regarding the study's endpoint which failed to achieve meaningful results. Peregrine does have additional cancer trials with bavituximab and any positive results with just one trial could be all the news necessary to send share prices soaring back into the $5 a share range once again. Aside from bavituximab, Peregrine does have the pipeline candidate, Cotara, in a phase II trial for the treatment of recurrent glioblastoma multiforme and also has some stable revenue from its Avid Biosciences arm. Avid Biosciences provides contract manufacturing of antibodies, recombinant proteins and enzymes, cell culture development, process development and testing of biologics for biotechs in the industry. Avid has helped Peregrine revenues beat the street's expectations and revenues have been on a steady rise for the last four quarters causing some investors to take notice lately.
As bavituximab goes so will Peregrine, at least for the time being. Despite all the problems in the trials, Peregrine remains hopeful that it has something in bavituximab. Investment in Peregrine right now is likely an agreement with this assertion. Peregrine managed revenues in excess of $7 million last quarter with a loss of just under $5 million while having a market cap currently just under $180 million. The cash reserves of just over $26 million (January 30th) bode well for future operations, but the cupboard is going to be quite bare if bavituximab fails. If you are a believer, the stock is currently value priced.
As recently as last year, VIVUS Inc (VVUS) shares were trading at levels well above $20 a share even breaking $30 at one point. Currently at $10.72 a share (March 19th), VIVUS is close to a 52-week low of $9.86 a share and is showing no signs of changing this low valuation any time soon. The epic loss of over $56 million last quarter coupled with a yearly loss to the tune of almost $140 million chased many investors away. VIVUS just released Qsymia, an obesity drug, last September but Arena Pharmaceuticals (ARNA) is joining the fray with its FDA-approved obesity drug Belviq any time now. Fortunately for both companies, the Centers for Disease Control and Prevention estimate that over 35% of adult Americans are considered obese today and with childhood obesity on the rise, there is a big marketplace. One major issue with Qsymia seems to be its cardivascular risk factors that make it much harder to prescribe to obese patients who more than likely already have cardiovascular issues brought on by the obesity condition itself. VIVUS also has trials with Qsymia for obstructive sleep apnea and type-2 diabetes along with another product candidate Stendra for the treatment of erectile dysfunction. In addition, they have an agreement with Mitsubishi Tanabe Pharmaceuticals for development and commercialization of Avanafil, a PDE5 inhibitor compound for treatment of male and female sexual dysfunction.
Although Qsymia has passed over most of its hurdles and has a secure pipeline, the simple question remains. Is Qsymia worthy of making up the market cap of VIVUS that currently stands at over $1 billion, or is this current valuation still based on better performance from Qsymia sales? As it stands now, about $2 million in quarterly revenue realized from over $50 million in sales related costs has to change or VIVUS will probably not see better days ahead. Despite all this, obesity continues to be the epidemic du jour and this alone warrants some attention in VIVUS. The question seems to be more of proper valuation and seeing more results from the costly marketing efforts might help determine its worth. Any significant market correction might see shares drop down to under $10 a share and at that price, you might want to consider jumping in.
All four of these stocks mentioned can surely jump at any positive event, but the wait can be a frustrating thing when the overall market is on the rise. Each of these four companies have seen better days with major investor interest but on the other hand many of these same investors have been burned by the failures that got them to this point. AEterna can still offer hope if Perifosine fails and VIVUS at least has something that has been proven in Qsymia. It's just a matter of the bottom being reached and whose pipeline packs better potential to lure more of these investors back.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.