Seeking Alpha
What is your profession? ×
Long/short equity, deep value, value, research analyst
Profile| Send Message|
( followers)

Written by Scott Matusow

Today, we will list five biopharmaceutical companies with upcoming catalysts. We expect these companies stock prices to appreciate significantly in the short term as they draw closer to their respective catalysts. Smaller cap biotechs have been on a tear lately, with 50% to 100% gains occurring at a substantial rate. However, just because a biotech has an upcoming catalyst event, it does not mean the event will have a positive result. At StockMatusow, we occasionally hedge our stock trades via the option chain by buying puts to protect against downside, should we choose to hold our stock position through the catalyst event.

Chelsea Therapeutics (CHTP) focuses on the acquisition, development, and commercialization of pharmaceutical products. It is primarily developing Northera (droxidopa), a therapeutic agent that is used for the treatment of symptomatic neurogenic orthostatic hypotension (Neurogenic OH) in patients with primary autonomic failure, dopamine-ß-hydroxylase, and deficiency and non-diabetic autonomic neuropathy.

Chelsea faces an FDA Advisory Committee (ADCOM) to Review Northera on January 14, 2014. In 2012, the FDA issued the company a complete response letter (NYSE:CRL) rejecting the drug, although the drug is widely approved and used in various other countries.

The FDA has been a bit harsh on Chelsea. First it suggested the company engage another costly study, which the company complied with. Then, they decided the study was not enough, asking for further studies to be conducted on the drug. However, the FDA changed its position yet again, accepting the new study as adequate for a re-filing of new drug application (NDA) from the company. Subsequently, the FDA requested the ADCOM on January 14th.

It's worth noting that there has been heavy call buying in the option chain lately, with over 8000 $5 strike price call contracts purchased over the last two days. This appears to be a bullish bet to us in addition to the fact we believe the ADCOM will give a positive recommendation for Northera.

Ampio Pharma (AMPE) engages in the discovery and development of pharmaceutical drugs and diagnostic products to identify, treat, and prevent metabolic disorders, eye diseases, kidney diseases, acute and chronic inflammation diseases, and male sexual dysfunction.

Ampio expects to release data from a Phase IIb trial of Optina for Diabetic Macula Edema in the current quarter. Optina is a low dose version of danazol, designed to prevent leakage from small blood vessels caused by inflammation in many diseases including Diabetes Mellitus.

Type 1 and type 2 diabetes mellitus affects 26 million people in the United States. One of the many symptoms of diabetes is the local and systemic inflammation of the microvascular system. Diabetic retinopathy is a complication of diabetes and is characterized by damage to the blood vessels of the retina and can either be proliferative or non-proliferative.

If data is good with Optina, and we believe it will be, Ampio's stock price should increase significantly.

Synergy Pharmaceuticals (SGYP) is a biopharmacetuical company that focuses on developing drugs to treat gastrointestinal (NYSE:GI) disorders and diseases. The company's two leading products are Plecanatide (SP-304) and SP-333.

Synergy has two catalysts upcoming for Plecanatide:

Phase II Data IBS-C Trial: Top-line phase II data is expected to be released in the earlier part of Q2 2014, and Phase II Data SP-333 for OIC: A 4 week phase II study which was initiated last month should be completed early first quarter with topline data to follow shortly after in the same Q1.

When considering Ironwood's (NASDAQ:IRWD) drug Linzess uses a similar mechanism of action, we think it's a good bet Synergy's Plecanatide eventually receives FDA approval. If approved, we believe Synergy's market cap of around $500M should eventually triple to around Ironwood's current market cap of $1.5B

Avanir Pharma (AVNR) develops and commercializes novel therapeutic products for the treatment of central nervous system disorders primarily in the United States.

Avanir is expecting to file an NDA of AVP-825 for acute migraines in early 2014. AVP-825 is being developed using OptiNose's novel breath powered intranasal delivery system in conjunction with sumatriptan to treat migraine headaches. This is a novel approach Avanir is working on here, and if ultimately approved by the FDA, could bring in substantial revenue for the company.

Furthermore, the company is expecting to hear a decision in the next few months concerning its patent infringement lawsuit for its drug Nuedexta, which is designed to treat the Pseudobulbar affect (NYSE:PBA).

PBA refers to a neurologic disorder characterized by involuntary crying or uncontrollable episodes of crying and/or laughing, or other emotional displays. PBA occurs secondary to neurologic disease or brain injury.

A positive ruling in the case would mean the company and its stock would take off. However, a negative ruling could have a devastating impact on the company. Avanir is definitely one company to watch for both a long and short position, depending on cumulative results of the lawsuit and eventual FDA acceptance or denial of AVP-825.

Endocyte, Inc. (ECYT) develops targeted therapies for the treatment of cancer and inflammatory diseases. The company uses its proprietary technology to create novel small molecule drug conjugates (SMDCs) and companion imaging diagnostics.

Endocyte expects to release Phase IIb data of vintafolide (EC145) for Non-small-cell lung carcinoma (NSCLC), which is due in the current quarter.

According to the company,

Vintafolide (EC145) delivers a very potent vinca chemotherapy directly to cancer cells by targeting the folate receptor expressed on cancer cells, but not on most normal cells. Approximately 80-90 percent of ovarian and lung cancers express the receptor, as do many other types of cancer.

Endocyte has completed three single arm studies of vintafolide (EC145) in patients with advanced ovarian cancer, non-small cell lung cancer, and solid tumors. Vintafolide (EC145) has also been evaluated in the PRECEDENT study, a randomized phase II trial comparing vintafolide (EC145) + DOXIL vs. DOXIL alone in women with platinum-resistant ovarian cancer. While this study has completed enrollment, a phase III study named PROCEED, also in women with platinum resistant ovarian cancer, is now accruing patients.

NSCLC is very hard to treat meaning there would be a huge valuation for the company moving forward if ultimately successful. However, it is still early in the developmental stage of this drug. Positive Phase II data here would be a step in the right direction obviously, and would have a large impact on the company's stock price and market cap to the upside.

Disclosure: I am long SGYP, . 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.

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.