Sometimes having drugs earn FDA approval or even having some good trial results to go along with good cash positions simply aren't enough to keep investors entertained. When investors lose faith or question when they will ever see a return, it can initiate selling that leaves the door open to great opportunity. For these five stocks, there has recently been more selling than buying and yet not much seems to have changed. There are some approved products that have great potential, some products in trials with some positive results and even some pretty sound cash positions to consider. The time is now right to take a second look at what they each have to offer.
Sucampo Pharmaceuticals (SCMP)
Sucampo hit a slide in May despite experiencing over $51 million in revenue during the last two quarters and over $10 million in profit during the same time period. Sucampo has had Amitiza out since 2006 to treat patients with idiopathic constipation and has since added treatment for irritable bowel syndrome with constipation in 2008 and opiod-induced constipation in patients with chronic, non-cancer pain in April of this year. Approvals seem to have come easier than sales as Sucampo has had issues with marketing partner Takeda Pharmaceuticals (OTCPK:TKPHF) with lagging distribution in the U.S. as Sucampo has a planned stepwise launch in Europe. Following a lawsuit against Takeda that Sucampo initiated that resulted in an arbitration ruling in favor of Takeda, it might have at least prodded Takeda to put a little more effort into marketing Amitiza, especially with pressure from Forest Labs (FRX) marketing a competing drug Liniclotide. This should help, as well as the 31% increase in Amitiza's U.S. sales in the fourth quarter of 2012 that totaled $74.6 million validating a more effective sales effort from Takeda.
Sucampo's royalties are considered to be about 20% of U.S. sales, which are estimated to potentially reach about $500 million. Sucampo also has Rescula for intra-ocular pressure and ocular hypertension in glaucoma patients that could be worth up to $100 million by 2017. Two approved products, plenty of cash in case sales efforts continue to lag and yet the stock is still down 1.45% from 52-weeks ago. The 50-day moving average is $8.35 and the 52-week high is $10.48, which gives Sucampo's stock plenty of room to rise. Better times appear to be ahead for Sucampo and despite issues with marketing and Takeda, Amitiza's marketplace doesn't appear to be shrinking. Liniclotide could be a determining factor as the potential to reach $500 million will depend on how Forest performs and if Takeda's push tapers off. The downside might already be factored in, but how much of an upside Sucampo has is the question that remains.
Infinity Pharmaceuticals (INFI)
Since about mid-April, Infinity Pharmaceutical's shares have taken a dive of considerable proportions going from $50 a share territory to drop below $17 a share at the beginning of June. All this negativity was based on positive data from Phase I trials for Infinity's drug, IPI-145, which showed the drug to be effective and well tolerated in patients with a broad range of indications of B-cell or T-cell lymphomas. A Phase II study for patients with indolent non-Hodgkin lymphoma (iNHL) has already started enrolling patients. There were big safety issues that were said to have been experienced from the trials primarily due to some deaths that occurred during the trials. These were more likely due to the overall condition of the patients that were enrolled in the study that were seriously ill and immune compromised to begin with, according to trial investigator, Dr. Steven Horowitz. Another issue seems to be related to competitors who some analysts believe are ahead of Infinity. One of those, Gilead Sciences (GILD), has idelalisib, which has produced significant tumor shrinkage in half the patients involved in an early-stage trial. Despite all this RBC Capital, for one, seems to think Infinity Pharmaceuticals still has a superior product and has initiated an outperform rating on its stock.
Infinity does have more to offer with IPI-504 in trials with Docetaxel in patients with non-small cell lung cancer and with Everolimus for non-small cell lung cancer patients with a KRAS mutation. There are also studies for IPI-145 with mild, allergic asthma and rheumatoid arthritis as well as preclinical trials with another compound IPI-443. The stock of Infinity might have been overpriced earlier, but the market cap of $900 million has room to grow if IPI-145 continues achieving success. The stock is currently well below its 50-day moving average of $24.45 and 200-day moving average of $35.03 a share and has a mean target price of $37.75 a share according to analysts. The stock might settle even more before results of Phase II trials start to come in, but at this current valuation with over $300 million in cash at hand and zero debt, Infinity's is in a relatively good position, but IPI-145 has to outperform idelalsib or else pushing Infinity's already high market cap above $1B is not going to be a likely event.
Corcept Therapeutics (CORT)
Corcept Therapeutics has taken its share of knocks lately primarily because the marketing of its approved drug Korlym has failed to deliver anticipated results with revenue. Korlym is approved for controlling hyperglycemia associated with Cushing's syndrome and represents the first FDA-approved oral therapy for the treatment of patients with this rare disorder. Since being launched in April of 2012, revenue growth has been slow to develop. Now Korlym faces competition from Novartis (NVS) and its competing drug Signifor which also was approved for treating patients with Cushing's syndrome in December. There is more for Corcept to prove with Korlym in treating psychotic depression and there is more marketing left to do for Cushing's syndrome in order to realize some of Korlym's potential. Some hope that Novartis and their entry into the Cushing's syndrome marketplace might actually work to Corcept's favor with their first-mover advantage with Korlym and the marketing might of Novartis educating patients and physicians alike.
Corcept has been struggling to make money, but at least has experienced increasing revenue since April of 2012 up from $875K in 2nd quarter of 2012 to $1.7 million in the 1st quarter of this current year. Corcept even has plenty of cash reporting about $81.5 million at the end of the first quarter of this year. The $11-12 million cash burn might appear to be pretty extreme, but opening up a marketplace for Korlym to treat psychotic depression should really get things going for Corcept and its stock. The stock is down 59.3% from a year ago, now at $1.79 a share, and is a little above its 52-week low of $1.27 a share. If Novartis can help educate practitioners and patients alike to further the understanding of Cushing's disease, this could be all Corcept needs to finally break out of its slump. On the other hand, if Novartis does too well or doesn't do enough, Korlym's hopes and Corcept's too will depend on the ability to treat psychotic depression. After a nice 5.9% gain on last Friday it might be a signal that some investors think it can.
Synta Pharmaceuticals (SNTA)
Synta Pharmaceuticals has been reeling from mid-stage clinical trial results of its lung cancer drug, ganetespib. Ganetespib showed improvement in overall survival rates, but the results did not move investors who were expecting better results that were more in line with those presented from earlier findings. Despite the earlier fall, Synta's stock just shot up over 12% on Friday as evidence of insider buying, that has been going on over the last month or so peaked following the release of Thursday's SEC filing. This filing notified investors that a Synta director, Bruce Kovner, bought 200,000 shares for a $799,160 stake in the company. This big purchase and the others by members of Synta indicate that the leaders of Synta still believe in Ganetespib. In addition to trials with patients having non-small cell lung cancer (NSCLC), Ganetespib is in trials for the treatment of breast cancer, colorectal cancer and hematologic malignancies. This potent Hsp90 inhibitor has the potential to be disruptive to numerous signaling pathways in cancer cells that appear to be more reliant on the active form of Hsp90. Disrupting multiple pathways allows Ganetespib to potentially be more effective than therapies that target a single oncogene driver, like ALK or HER2 and just maybe these insiders know even more.
Analysts have a mean target price of $15.40 for Synta's shares and Synta does have about $90 million in cash to see things through. The stock is down over 44% from a year ago and is now priced ($4.33 a share) well below the 50-day moving average of $6.24 a share and way below the 200-day moving average of $8.71 a share. Since Synta's 52-week low is $3.76 a share, the stock has room to move before it even comes close to the 52-week high of $11.88 it experienced at the end of this January. The cash burn has been running at about $20 million a quarter, but in the eyes of the insiders there will be enough cash to get Ganetespib through trials and successfully too. However, that success can be elusive and there is time still left to go. Often results in the lab don't necessarily mean the trials will be the same. If the trials have to be repeated, these insiders could very well wince. The stock is currently well priced if you believe in the potential of Ganetesib and that it can do much more.
Ariad Pharmaceuticals (ARIA)
Ariad Pharmaceuticals is a pretty big company ($3.08B market cap) to make this list, but Ariad's stock is close to its 52-week low and yet it has at least one of its drugs approved, Iclusig. Iclusig was approved for treating patients with chronic, accelerated or blast phase chronic myeloid leukemia and Philadelphia chromosome-positive acute lymphoblastic leukemia where patients with both indications happen to be resistant to prior tyrosine kinase inhibitor therapy. While this doesn't represent a huge marketplace for Ariad, it is also testing Iclusig with solid tumors and more indications like gastrointestinal stromal tumors. One big positive for Iclusig has to do with imatinib and patients that are resistant to the drug that is manufactured by Novartis AG (NVS) and has been approved since 2001. In about 15% of the patients that are treated with imatinib, there is a resistance to the drug that is experienced due to a mutation (T315i) that only Iclusig appears to have the answer for. That alone can command a huge price tag for Iclusig and positive results with more indications just adds to the value of both Iclusig and Ariad. Ariad also has a small molecule compound, AP26113, which is another potent tyrosine kinase inhibitor that has the ability to act on three different targets. AP26113 is being tested with trials involving patients with non-small cell lung cancer.
Ariad has started to see some sales revenue from Iclusig with over $6.4 million in revenue last quarter, but this should continue to rise to offset a cash burn that has been running around $60 million a quarter. The good news is that Ariad has over $398 million in cash to get them through most of these trials as Iclusig sales close this gap. Right now Ariad's stock is down 2.3% from last year and below the 50-day moving average of $17.74 and 200-day moving average of $19.33 a share. Ariad only has $10.68 million in debt and should be able to turn things around for a stock that once experienced a high of $25.40 a share last October. If Iclusig can achieve some success with gastrointestinal stromal tumors, this share price could very well be experienced and even exceeded once again. However, with a market cap already over $3B, any failure with Iclusig or traction by a host of competitors could mean the stock could fall down even more. Ariad might be one to watch as results come out for AP26113 and if some positive news comes in its trials, Ariad at this current valuation might then be well worth the buy.
Investing in the biotechnology sector still carries great risk. As these companies prove, getting the nod from the FDA does not ensure that there will be money in the bank. Somehow, if the product is effective even poor marketing efforts usually can't hold the drug back for too long. These five companies have not exactly had the FDA shoot down their hopes and efforts and that fact alone makes them attractive options for investors looking to lower their risk.