(Editors' Note: This article discusses micro-cap stocks. Please be aware of the risks associated with these stocks.)
What are the key data announcements in the next six months that could create the most stock movement, both before and after data is released? This is an important question for biotechnology investors, who seek opportunities that arise from data. While there are many such announcements, there are several that could be more impactful than others.
Seeking Validation of Cancer Platform
NewLink Genetics (NASDAQ:NLNK) has already experienced a nice 40% run-up in 2013, but if its Phase 3 HyperAcute Pancreas study increases overall survival in pancreatic cancer patients, the gains could be much larger.
After a 69 patient study, where 86% of patients lived one-year compared to 20% with standard of care, investors are very excited about the company's Phase 3 722 patient trial. Interim results are expected "mid-year", but more than likely, we won't learn anything meaningful.
After half of the expected number of deaths have occurred, NewLink will present interim analysis, and only if half of the treated patients show a survival improvement to the control arm will the study be stopped early for efficacy. If not, the study will continue until final data next year, which is the major catalyst.
Following interim analysis, NewLink could trade considerably higher over the next year prior to final data. If the Phase 3 study shows an improvement in survival, NewLink's vaccine is estimated to reach sales over $600 million by 2019. Then, NewLink's platform "HyperAcute" would gain quite a bit of notoriety on Wall Street for the treatment of lung, melanoma, and prostate cancers. Hence, NewLink becomes a stock to watch over the next year with a current market cap of just $450 million.
Big Potential, But A Long Way to Go
Alcobra (NASDAQ:ADHD) is a small $130 million biotech that has appreciated 70% since its IPO in May. The company's lead product, MG01CI, is being used to treat ADHD, but many believe its upside lies in its presumed best-in-class safety profile and the potential to treat other diseases such as Parkinson's and Alzheimer's disease. Essentially, Alcobra longs believe the company might be the next Acadia Pharmaceuticals.
Aegis Capital has stated that MG01CI could produce peak sales in excess of $1 billion, but before such sales are earned, the company must follow the appropriate clinical protocol and excel in every step of the way. Currently, the company is testing its product in a 36 patient study, having just enrolled the first patient in late August. The goal of Alcobra's current study is to compare various dosage levels. Then from that data the company will plan two, Phase 3 trials reporting data in 2014.
The company is very busy right now, trying to find the best dosage and then plan larger studies. In the process, data will be plentiful over the next year, and if Alcobra can spark some excitement into investors then we could see this small cap stock appreciate with large peak sales potential, although it is still too early to draw any conclusions about whether the product will or won't work. I consider Alcobra to be risky, but one that should be on investors' watch list.
Partnerships Spark Excitement
Halozyme's (NASDAQ:HALO) technology is used to improve the absorption of certain drugs. The company is already partnered with Roche, Pfizer, and Baxter on various projects, including Herceptin and HyQvia.
Most notably, there are two major catalysts for Halozyme. First, there is the decision from EU regarding Herceptin-SC, which uses Halozyme's technology. Back in June, Herceptin-SC received a positive opinion, but an approval would give Halozyme a mid-single digit royalty on a drug (Herceptin) that did $7 billion in sales last year.
Herceptin-SC is believed by many to be favorable over Herceptin, as Herceptin is administered via IV drip at a hospital, while Herceptin-SC can be taken from home by injection. Clearly, this preference could become very lucrative for Halozyme in royalties. Thus, investors will watch the EU's decision very closely, and with a market cap of $940 million, fundamental speculation or rumors of a takeover could propel the stock higher.
Then, Halozyme's partner Baxter will submit data to the FDA later this year for HyQvia, meaning an FDA approval could come sometime next year. With HyQvia already approved in Europe, many feel confident about its chances of approval. Hence, I'd watch Halozyme to trade higher in the year ahead.
Unknown, Yet Exciting
Next, we have a small under-the-radar company, OncoSec Medical (OTCQB:ONCS) with many pending catalysts over the next year. The company uses a device called the OncoSec Medical System (OMS), which incorporates electricity to deliver local IL-12 DNA plasmid, a very potent immunotherapy. With OMS, temporary pores are created, thus allowing for better delivery, and fewer side effects with less of the product being used.
Currently, OncoSec is testing the OMS/IL-12 combination, called ImmunoPulse, in three different Phase 2 trials. The largest is in metastatic melanoma, where the company has achieved a best-in-class 45% local response on treated lesions. It is also treating ImmunoPulse on an orphan indication called Merkel cell carcinoma (NYSE:MCC), an aggressive disease with no treatment options. The MCC study will enroll 15 patients, but during the last interim data on three patients, all had elevated IL-12 levels at three weeks, suggesting an increased uptake. Finally, the company has a trial that's treating cutaneous T cell lymphoma, but no interim data has been announced.
In the following year, OncoSec will once more present interim data (within few months) on melanoma, MCC, and also cutaneous T cell lymphoma for the first time. The company will also present final data on its melanoma and MCC programs (within year) and begin larger final studies. Like NewLink, if just one of the programs are successful it validates the technology and the company's approach, meaning significant value could be added to OncoSec's stock.
Investors seem most preoccupied with the melanoma study, as its revenue potential could exceed $600 million annually. However, MCC is equally important. With there not being a treatment for MCC, if OncoSec shows any benefit whatsoever, ImmunoPulse could be approved. And with it being an orphan indication, Phase 3 testing may not be needed. There are a lot of possibilities looming and with a $30 million market cap (50% gain in last six months), and nothing but positive data to-date, the upside looks quite high. The risk associated with a microcap stock such as OncoSec must be factored into an investors' decision, as historically these companies trade with higher volatility.
In a very short period of time, a relatively unknown biotech can become the hottest name in the industry (i.e. Sarepta Therapeutics). Each of these companies have different levels of momentum and excitement surrounding their products, with market caps ranging from $30 million to $1 billion. Yet, each of these stocks have outperformed the S&P 500 in 2013, and the prime reason is likely due to upcoming data presentations or other catalysts. While one or more of these companies could trade significantly lower in the next year, with a negative news announcement; the mere upside opportunity and importance of noted catalysts, make each stock worth watching in the near future.