Today, I have compiled a small list of some biopharmas I feel offer strong upside potential in the short and midterm. Some have event catalysts quickly approaching, while others are strong speculation investments. As we draw closer to "sell in May and go away," the market will become more stock picker orientated. Making the right trades and investments during this period will be crucial for portfolio appreciation.
Aveo Pharma (AVEO)
A Food and Drug Administration (FDA) Advisory committee will convene on May 2nd to vote for or against recommending tivozanib for approval. Tivozanib is a low-molecular-weight inhibitor of the VEGF receptor designed for the treatment of metastatic renal cell carcinoma (RCC), which is more widely known as kidney cancer.
In January of this year, the company reported positive Phase III results from a study of 517 patients with RCC. The study compared tivozanib to sorafenib, which is the current front line treatment for RCC. Sorafenib is marketed by Onyx Pharmaceuticals (ONXX) under the trade name of Nexavar - global Nexavar net sales topped over $1 billion in 2011.
Tivozanib should receive a positive recommendation from the FDA Adcomm, so I would expect to see a stock price of $8.50 or higher as we get closer to the Adcomm date in May. AVEO is also a strong acquisition target for a larger pharma as tivozanib might eventually be approved to treat such diseases as triple negative breast cancer and colorectal cancer.
Sarepta Therapeutics (SRPT)
On Monday April 15th, the FDA asked Sarepta to provide additional information on the drug, eteplirsen, to consider early approval. Eteplirsen is an antisense PMO-based therapeutic for the treatment of individuals with Duchenne Muscular Dystrophy (DMD).
After shares initially gaped up on the news, they slid back down to the mid $30 dollar range. Many investors took this news as a negative. I take the news as actually positive. If the FDA had no intention to grant an early approval for the drug, the organization would not be asking for more information from the company. To date, every study shows that the drug is successful, and being that DMD is so debilitating, and effects only children, it's a good bet the FDA will in fact grant early approval. By asking for more information from the company, the FDA wants to be sure they are doing the right thing in granting early approval, in my opinion.
There is no question in my mind that once the drug gains early approval, the stock will gap up at least 50% from its current levels, so Sarepta at its current price range, offering a nice entry point for both investors and traders. This delay in early approval should allow for a longer period of slow price appreciation, which I believe offers a great midterm investment opportunity.
ACADIA Pharmaceuticals (ACAD)
On Thursday April 11th, ACADIA announced that the FDA has agreed to allow the company to file a New Drug Application (NDA) for the treatment of Parkinson's disease psychosis (PDP). The FDA agreed that the data from the pivotal Phase III -020 study, together with supportive data from other studies with pimavanserin, were sufficient to support the NDA filing.
On the news, the stock gaped up from a prior session's close of $7.97 to close the next trading session at $13.10. Since then, the stock has pulled back a bit, currently trading around $12 a share.
PDP is a large unmet need market, and could bring the company billions in revenues, which would support a much higher valuation from the current levels. It is also possible the FDA will allow an expediated review based on the fact that there are currently no treatments on the market for PDP. A stock price north of $20 a share is possible this year if everything pans out for the company, and I think it will.
Antares Pharma (ATRS)
I continue to maintain that Pfizer (PFE) will acquire Antares sometime before the end of this year.
Pfizer and Antares already have a working relationship in the form of a "secret deal" that I speculate is an Advil gel based formulation. Company CEO Paul Wotton mentioned last year that Pfizer came to Antares to inquire about one of Antares products, but company Vice President Jack Howarth said that Antares sought out Pfizer for the same deal. Someone is obviously "mistaken" here. I first heard the buyout rumors surrounding Antares in December of 2011, well before the company "appointed" Jack Howarth as a Vice President. Jack is not an official "insider" at Antares, yet has informed some Antares investors that he holds over 400,000 shares of the company. So who does Jack work for? Jack's last official job was with King Pharma, a company Pfizer acquired a few years ago.
The main reason I believe Pfizer will acquire Antares is for its patent profile it holds in regards to biosimilars.
Biosimilars/biobetters, or follow-on biologics, are terms used to describe officially approved subsequent versions of innovator biopharmaceutical products made by a different sponsor following patent and exclusivity expiry on the innovator product (biosimilars being "similar," biobetters being "better").
Follow-on manufacturers do not have access to the originator's molecular clone and original cell bank, the exact fermentation and purification process, or to the active drug substance.
In other words, companies do not need to wait for patent expiration of a biologic to get its hands on the formulation. In fact, because biosimilars/biobetters do not use the exact composition of the biologic drug it is "following after," it is not considered a "copy," therefore, it is not a generic, but a new composition capable of its own unique patent protection. Many large pharmas are gearing up for what I believe to be the wave of the future in biopharmas - biosimilars and biobetters.
Antares has been locking down patents for the past few years with biosimilars, and many speculate the company has a raftload of these patents secured. Since biosimilars are likely to be the future of biopharma, Antares has placed itself as a strong acquisition target, and as mentioned, I believe Pfizer will be the buyer.
Also, starting in June, there will be warrant expiration occurring. Last year I predicted that Antares would see a pop in its stock price to over $5 a share when the stock was selling for around $3. I based my prediction primarily on the fact of warrant expiration at the time.
I am predicting a similar occurrence this year, and expect a price approaching $5 by the middle of this summer. Afterwards, I believe the company will be acquired for a price between $7 to $9 a share. Therefore, I have taken a position in Antares for a midterm investment.
Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.