This year's surge in investor activity has been kind to many biotechnology companies that have received good news during this same period of time. These three stocks have shot up on good news, but the question is more about whether the ceiling has already been reached. These companies offer great hope and potential and have pretty much received all the necessary clearance from the FDA. There is enough money to get through trials, marketplaces with great need and drugs or treatments that look able to outperform any competitors already out in the market, but how much higher can their stocks climb? Is there still room for more investors to jump on board? These are the questions left for investors to ponder as these companies embark on their paths to achieving profitability.
Acadia Pharmaceuticals (ACAD) - $19.31/share, 1162% 52-week increase
Acadia Pharmaceuticals has had plenty to crow about in 2013. There is a whole bunch of news for investors to get excited about when it comes to Pimavanserin which has proven to be quite effective in the treatment of Parkinson's disease. Phase III trials have shown Pimavanserin to have the ability to reduce psychotic episodes when compared to placebo while also exhibiting no negative impact on motor function. This alone has many investors in a buying mood as likelihood for FDA approval could lead to the drug being available to market by late 2014 or early 2015.
The problem is that plenty can happen between now and then yet all of a sudden the market cap of Acadia has been pushed to an inflated $1.53 billion. Many can argue that the potential for Pimavanserin extends well beyond the $300-400 million annual sales expected for treating Parkinson's disease with hopes for treating indications like bi-polar disorder, schizophrenia and other diseases as well. Many investors believe that Pimavanserin is capable of realizing $1 billion in sales if other indications besides Parkinson's disease are considered. There have been many drugs before that have offered similar hopes and yet have fallen short of projections and expectations. It is still early in the game. There have, however, been even more catalysts contributing to Acadia's 2013 rise.
Interest in Acadia comes from many investors, but it is the Baker Brother's reported interest in Acadia that has created quite a buzz. The same biotechnology-focused hedge fund that had early success with investments in Pharmacyclics and Seattle Genetics has now disclosed that it has acquired a 22.6% stake in Acadia. Acadia also has the support of the FDA in granting approval for the filing of a NDA for Pimavanserin and this act alone led to a 65% rise in Acadia's shares. Even the money looks good as Acadia ended 2012 with a cash position of $108.5 million that still stands at a respectable $103 million at the close of the first quarter in 2013.
All this news has been nothing short of spectacular, but a market cap of $1.53 billion? The positives might outweigh the negatives, but they have all come together pretty fast and there is still plenty of ground to cover. How much room does the stock have to move in the next two years? One bad event could become magnified when so much good news has already been priced into this stock. It might be hard to substantiate a valuation greater than $2 billion and that is why it might be safer to look elsewhere or look for a dip before buying.
Celldex Therapeutics (CLDX) - $16.05 a share, 262% 52-week increase
Celldex certainly has great potential upside in its drug for treating advanced metastatic breast cancer, CDX-011, and even has plenty to interest investors with rindopepimut for glioblastoma. These two drugs have gained enough investor interest to push Celldex up to a market cap of $1.30 billion. Does Celldex still have gas left in the tank?
Taking a closer look at CDX-011 makes it appear that Celldex has the FDA in its corner with a fast track designation and results to support such a measure. CDX-011 also has the favorable position of being able to treat breast cancer patients that have not responded to a median of six prior therapies adding even more potential to what appears to be certain FDA approval. The effectiveness of CDX-011 is also quite eye-popping considering the difficulties that these patients have had with prior treatments. About 33% of the patients responded positively to the treatment, while tumor growth was at least slowed in 100% of the 120 patients in phase II trials. This treatment works on GPNMB which is a protein that is expressed in more violent cancers including melanoma and glioma which offers even more potential for Celldex investors.
Rindopepimut is a glioblastoma treatment that uses immunotherapy to direct antibodies to target receptors on cancerous cells. The vaccine targets the epidermal growth factor variant III or EGFRvIII receptor that is found to be present in about 25-30% of all patients who have GBM or glioblastoma multiforme. Targeting this receptor then trains the immune system, or t-cells, to attack the cancerous cells. This therapy combined with Temodar resulted in a 70% progression-free rate for newly diagnosed patients that was presented at the 2010 annual ASCO meeting.
These are great drugs but 25-30% of GBM patients does not represent a huge marketplace and CDX-011 still has a ways to go in order to fulfill all its true potential. There is no doubting the potential in Celldex as even the $182 million in cash at the end of the first quarter is plenty to advance both drugs through trials. It is just hard to see this stock continue marching so much higher without either of these drugs reaching market yet. Right now the $1.30 billion market cap is based purely on potential alone and any bad news with either drug could create a better buying opportunity for this very worthy stock. Probably better to view Celldex from the sidelines for the time being.
Keryx Biopharmaceuticals (KERX)- $7.30 a share, 320% 52-week increase
Zerenex is looking like a hit for Keryx as updated safety and efficacy data from phase III trials have indicated that Zerenex is performing and appears to be meeting safety requirements necessary to gain FDA approval. Zerenex does look like it has answers for patients with end-stage renal disease (ESRD) on dialysis and chronic kidney disease (CKD) who have not yet progressed to dialysis. Keryx stock shot up at the end of January and has kept a steady higher valuation ever since.
Getting to know the value of Keryx is about getting to know Zerenex. Zerenex has shown solid results in phase III trials for its phosphate binding properties to go along with anemia benefits for dialysis patients.
Zerenex has proven to be very effective at controlling serum phosphate levels, validating its phosphate binding capabilities with significant results. These high serum phosphate levels often occurring in patients with ESRD lead to complications with calcification in the arteries and heart problems that can be very serious. Zerenex proved to be very effective even when compared to competitors, Renelva (Sanofi (SNY)) and Fosrenol from Shire (SHPG). It even promises to have a lower pill burden when compared to Renelva, meaning fewer pills per day. The safety profile for serious adverse events was even demonstrated to be more favorable for Zerenex in these phase III studies. Possibly an even bigger benefit was witnessed in the increased levels of Ferritin and TSAT in patients treated with Zerenex.
Zerenex is capable of raising iron levels while also reaching a statistical plateau that will keep the iron levels form reaching high levels that lead to iron overload. IV iron use dropped by about 52% in these treated patients and after 6 months 58% of the patients treated with Zerenex were off IV iron therapy. These better hemoglobin levels witnessed in these patients also contributes to less of a need to use ESA in treating patients with Zerenex. Zerenex could lead to a cost savings for dialysis providers of over $800 million per year in the treatment of ESRD patients due to its ability to keep iron levels stabilized.
These results offer plenty of good news for Zerenex for patients and treatment providers alike. Approval might be certain, but Keryx is a small company that will have to spend a good amount of money to bring Zerenex to market. Since there is just over $87 million in cash and a pipeline that is pretty bare, this will be quite a burden. Any partnership will help get Zerenex to market faster, but what will that mean for profitability and valuation when the market cap of Keryx is already close to $600 million. It is hard to say Keryx is still a value despite all the positive hype.
It is fun to get excited about all the good news and plenty of investors have had no shortage of excitement with these three stocks. A robust bull market has certainly helped get even more investors involved with these nicely performing stocks. When is the party over? Following such nice gains to these stock valuations, this is anybody's guess. You have to consider how much there is left to gain. Sometimes it is better to stay on the sidelines and wait for any form of negativity before making a buy. Don't forget the lessons learned from Celsion, Spectrum and Dendreon to name a few. It isn't really a sure thing until the profit starts coming in.