Journalists tell us that some of the main characteristics of a newsworthy story is that it has to be something "new." That makes sense; it is after all, news. Other distinguishing features include the timing of the story, as in not submitting a story about Valentine's Day in June. Finally, they tell us that a newsworthy story is one that informs and educates the readers. Some recent notable news that is new, timely, and informational is the recent reports on three interesting biotech companies. These include Cellceutix Corporation (CTIX.OB), Amarin Pharmaceuticals (AMRN), and Inovio Pharmaceuticals, Inc. (INO). All three have been busting at the seams with newsworthy stories that reflect positive implications for the stocks.
The Arbitrage Play
A biotech company making headlines is Cellceutix Corporation. Headed by CEO Leo Ehrlich, Cellceutix has practically doubled its already formidable product line overnight with the recent announcement that it has acquired all of the assets of the now bankrupt PolyMedix, Inc. This gives the company a boost in potential revenue and adds to the company's arsenal of products of the promising compound called Brilacidin. The company plans to immediately advance Brilacidin into a Phase 2b clinical trial for acute bacterial skin and skin structure infections, or ABSSSI. Another Phase 2 clinical trial is planned for Brilacidin as a new therapeutic for oral mucositis. Under the initiatives of the GAIN Act (Generating Antibiotic Incentives Now) passed in 2012, the company intends to pursue expedited regulatory review processes, which can include Fast Track or Orphan Drug designations for Brilacidin. Since Polymedix was working with the FDA on moving Brilacidin into a Phase 2b study, the trials may begin shortly providing a catalyst for Cellceutix stock price.
Other good news is that Cellceutix received an approval from the FDA for a 505(b)(2) designation of their anti-psoriasis compound Prurisol earlier this year. This is basically an approval of a New Chemical Entity (NCE)/new molecular entity (NME) or an approval for changes in previously approved drugs. A Phase 2/3 trial is planned which should be a substantial catalyst for shares given the great need for cures in Psoriasis.
In addition to Brilacidin and Prurisol, Cellceutix's anti-cancer drug Kevetrin, is reaching advanced stages of its Phase 1 trial at Harvard's Dana-Farber Cancer Institute and Beth Israel Deaconess Medical Center. Kevetrin has demonstrated the potential to be a major breakthrough in cancer research by inducing activation of p53, often referred to as the "Guardian Angel Gene" due to its crucial role in controlling cell mutations. Dosing has escalated near levels where maximum tolerated dose is expected to be established.
The company's clinical pipeline reveals an impressive and ambitious effort to get needed cancer-fighting and antibiotic drugs to market. Prior to the Polymedix asset acquisition the company had an approximate $2 share price the same as it is now with the Briliciden asset acquisition. This presents an excellent arbitrage opportunity. One pays no premium for an asset acquisition that once had a market value of greater than $200 million. Eventually the markets will realize this imbalance or inefficiency.
Shorters took a run at Cellceutix starting in November 2012, with most getting cooked as the stock rose to all-time highs of $2.47 late in December. The short interest peaked in March with the stock hitting $2.42 and has been slowly dissipating since as shorts had to cover. However, the short interest increased at the end of August following the acquisition news. An understanding of intrinsic value will likely lead once again to the shorts not being able to keep a thumb on CTIX shares, which, I believe will result in a run to new record highs when they get squeezed. The company's stock has a 52-week range between $.77 and $2.47 and in my opinion is an exciting biotech that is worthy of investment.
Play the Bouncing Ball
Amarin is a cardiovascular-focused biotech company that has a FDA-approved fish-oil-based drug to lower triglycerides known as Vascepa. This is one of those companies that if you bought early, and then took a long trip to a part of the world that had no access to news, you would be pleased when you came back to reality. You would have missed out on the rise in the company's stock only to have it slide quickly back down again. Company shares took a 50% dive in the past 12 months mainly due to the delay in classifying Vascepa as a New Chemical Entity (NCE). In addition, the fish oil market took a hit as controversy surrounding the use of it to help reduce cholesterol and increase heart efficiency may also contribute to prostate problems.
But the company is experiencing a bounce back and is beginning to show signs of renewed energy. At the end of the second quarter, 7,300 clinicians have written prescriptions for Vascepa. The drug had normalized prescriptions rising from 10,484 in the first quarter to 47,335 in the second quarter generating $5.5 million in sales last quarter. Clinical studies of patients with high triglyceride levels revealed that Vascepa reduced those levels by 27% while the placebo group's triglyceride levels actually increased by 10%. The really good news coming from the studies is that Vascepa didn't raise the bad cholesterol (LDL) level, which was reported to have happened with studies with the competitor Lovaza, made by GlaxoSmithKline plc (GSK), which also uses omega fatty acid products. Increasing the company's commercial potential, Amarin recently received its 30th patent for Vascepa. This drug has generated unimpressive sales of $7.8 million so far this year, but gets the company leaning in the right direction and many investors like the momentum.
At about $6.00 it is still a reasonable investment play that is rising from yearly lows of $5.12 with plenty of upside. I believe because of the safety profile of Vascepa and the potential of the company's better sales numbers, Amarin is an interesting trading investment mainly to ride the newly developing upward trend off lows.
The Partner Play
Immunotherapy vaccine maker Inovio Pharmaceuticals recently announced a global partnership with Roche (OTCQX:RHHBY) to develop and commercialize Inovio's therapies aimed at treating hepatitis-B and prostate cancer. Under the terms of the deal, Roche will pay Inovio $10 million upfront as well as receive development and commercial licensing milestones of up to $412.5 million. The agreement gives Roche immediate licensing access to INO-5150 for prostate cancer, INO-1800 for hep-B, and Inovio's proprietary Cellectra electroporation technology for the delivery of these vaccines. This partnership adds to Inovio's creditability as a pharmaceutical player.
Prostate cancer is the most common non-skin cancer in men, accounting for14% of all cancers in men worldwide back in 2008. Fighting it with traditional treatments such as chemotherapy, and radiation carries the risk of collateral damage by destroying healthy surrounding tissues along with cancerous cells. Thankfully, Inovio's INO-5150 is unique in the sense that it is immunotherapeutic and focuses on eliciting an immune response to boost the body's inherent capacity to fight disease, making it a popular choice.
Inovio's pipeline of synthetic vaccines for cancer, hepatitis B and C, influenza, and HIV could significantly improve the quality of care for patients. Though there are still ongoing clinical tests, the pipeline of products carries a potential market cap of over $24 billion. The Roche agreement isn't Inovio's first dealings with a great joint venture. In 2004 the company had a deal with Merck (MRK) that gave worldwide non-exclusive rights to use Inovio's electroporation technology for intramuscular delivery of certain proprietary DNA vaccines. These types of constructive agreements add more money to Inovio's coffers for more research and for bringing drugs to market.
Shares of INO trade at about $2.00 and have a 52-week high of $3.03 and low of 44 cents.
As with many biotechs, you can hit one out of the park or you can go bust trying. With CTIX and INO, I believe the chances for hitting homeruns is greater than with most. It is not just that they made news, but that the news is exciting and promising for the future of medicine as well as the future of these companies. Now is the time to ride the success of these innovators.
Disclosure: I am long CTIX.OB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
