These dirt cheap biotech companies all have interesting products in the pipeline which could become major catalysts in the future. The lower priced stocks tend to have more risk, but far more potential reward. The stocks below are trading at valuations that appear to be a buying opportunity that could provide for very substantial gains. Many of these stocks fell from their long term highs, on clinical disappointments, analyst downgrades, product concerns or other issues. Others have just been seemingly ignored by the stock market and do not appear to be fully valued.
There is nothing better than buying a biotech stock at a very low price and watching its value become worth several times your initial investment. One great biotech stock for me has been Inhibitex, Inc. (INHX). I bought INHX a couple years ago, when it was trading for about 70 cents, now it trades for about $4.50. Those are the kinds of gains that keep me and other biotech investors looking for the next great stock.
Most of these companies discussed here are potential takeover targets but all of them have tremendous upside potential, whether or not they are acquired. Below, I detail why these biotech stocks could be poised for major gains in the near future. Here are the stocks that have huge potential:
Chelsea Therapeutics (CHTP) is trading around $4. CHTP is a biotechnology company, based in North Carolina. These shares have traded in a range between $1.94 to $8.20 in the last 52 weeks. The 50 day moving average is $4.29 and the 200 day moving average is $4.69. CHTP is estimated to lose about 86 cents per share in 2011. Insiders have been buying CHTP shares. One insider bought 40,000 shares in March, which you can see here. According to Yahoo Finance, CHTP has about $47.5 million in cash and basically no debt. The cash balance is equal to about 77 cents per share. Yahoo Finance data can be seen here.
Why Chelsea shares could surge higher: Chelsea is pursuing an orphan drug strategy for a drug called Northera (Droxidopa) which is for the treatment of hypertension. This treatment has been approved and marketed in Japan for over 15 years, and generates about $50 million in revenue in that country. You can read more about this and other key products in their pipeline here. Chelsea is expecting to ask the FDA for approval on its Northera drug in the next couple quarters.
Talon Therapeutics, Inc. (TLON.OB) is trading at close to $1 per share. This stock has all the stars lining up for it now, and is very likely to produce explosive gains. This company received a large investment from Warburg Pincus several months ago. Warburg is a highly respected investment firm with expertise in life sciences and biotech companies. This company changed its name from Hana Biosciences to Talon Therapeutics no long ago. Just before this name change, Zacks Investment Research issued a very bullish report on this company and laid out a case for this stock to be trading for about $5 per share in the future. Talon has received orphan drug and fast track designations for Marqibo for the treatment of adult ALL (acute lymphoblastic leukemia) from the U.S. Food and Drug Administration. Marqibo has also received orphan drug designation in adult leukemia from the European Medicines Evaluation Agency.
Why Talon shares could surge higher: This stock is deeply undervalued as the Zacks report points out, compared to other companies with similar potential, this stock should be closer to $5 per share than $1. This company has drug candidates in the pipeline that have huge potential and it plans to file with the FDA soon. Marqibo is Talon's lead cancer therapeutic candidate and Talon is expected to file a new drug application (NDA) in the near future. The Zacks report states: "We estimate peak sales of Marqibo for the ALL indication only could be well above $100 million per year. In addition to ALL indication, Hana is also expanding Marqibo label into other indications including front line aggressive NHL, front line elderly Ph (-) ALL, front line non-elderly Ph (-) ALL, pediatric cancers and multiple myeloma. If all of, or even part of these label expansions are successful, Marqibo could represent a $5 billion market opportunity." This company also has other promising candidates which reduces the risks, but when you see that Marqibo has the potential to be up to a $5 billion opportunity, it's easy to see why these shares could soar, as more investors become aware of Talon's potential.
Human Genome Sciences, Inc., (HGSI) shares are trading at $29.44. HGSI is a biopharmaceutical company based in Maryland. These shares have a 52 week range of $20.56 and $33.50. The 50 day moving average is $26.54 and the 200 day moving average is $26.27. Earnings estimates for HGSI are for a loss of $1.54 per share in 2011, and a loss of 64 cents for 2012. The book value is $3.10. The chart below shows these shares are trading well above the 50 and 200 day moving averages and the chart shows a new Golden Cross Formation. See Yahoo Finance data here.
Why HGSI shares could surge higher: Analyst estimates for revenues are seen at about $164 million in 2011 and are expected to surge to about $477 million in 2012. That type of growth is hard to find, so it's easy to see continued investor interest in these shares. Some analysts believe HGSI could be a takeover target and any buyout deal could push these shares much higher. One investment manager said he believes HGSI could be acquired.
Vanda Pharmaceuticals, Inc. (VNDA) is trading around $7.30. Vanda is a biotechnology company, based in Maryland. These shares have traded in a range between $6.04 to $11.55 in the last 52 weeks. The 50 day moving average is $7.36 and the 200 day moving average is $7.53. VNDA is estimated to lose about 2 cents per share in 2011 and make a profit of 13 cents per share for 2012. See Yahoo Finance data here.
In the product development pipeline, Vanda has "Tasimelteon" which is an oral compound for sleep and mood disorders. It also has Fanapt, which belongs to a class of medications for schizophrenia. You can learn more about its pipeline here.
Why Vanda shares could surge higher: Vanda recently announced trials have started for its schizophrenia drug. For more analysis on Vanda read this article, which also notes Vanda as a potential takeover target:
Orexigen Therapeutics, Inc. (OREX) is trading around $2.92. Orexigen is a biotechnology company, based in California. These shares have traded in a range between $2.47 to $11.15 in the last 52 weeks. The 50 day moving average is $3 and the 200 day moving average is $5.33. OREX is estimated to lose about 73 cents per share in 2011 and post a loss of about 74 cents per share for 2012. According to Yahoo Finance, OREX has about $92 million in cash and very little debt. In the product development pipeline, Orexigen has two candidates for obesity, Contrave and Empatic. You can learn more about its pipeline here.
Why Orexigen shares could surge higher: Orexigen shares plunged in February when the company received notification from the FDA about its Contrave obesity candidate. You can read more about that here. While additional tests will take time and money, this is only a setback. The shares plunged from about $9 to under $3 and now could be a good time to buy on the disappointment.
Synta Pharmaceuticals, Inc. (SNTA), is trading around $5.49. Synta is a biotechnology company, based in California. These shares have traded in a range between $2.55 to $6.93 in the last 52 weeks. The 50 day moving average is $5.22 and the 200 day moving average is $4.14. SNTA is estimated to lose about $1.08 per share in 2011. According to Yahoo Finance, SNTA has about $51 million in cash and about $15 million in debt. Insiders have been buying shares repeatedly.
Why Synta shares could surge: This company is working on HSP90 inhibitors, (Ganetespib) which has shown up to 100 times greater potency in killing cancer cells and an improved safety profile when compared to other treatments. You can read more about its pipeline here. Between its product pipeline and the insider buying, this stock looks promising.
Vical, Inc. (VICL) is trading around $3.25. Vical is a biotechnology company, based in California. These shares have traded in a range between $1.7 to $4.05 in the last 52 weeks. The 50 day moving average is $2.54 and the 200 day moving average is $2.51. VICL is estimated to lose about 41 cents per share in 2011 and post a loss of about 40 cents per share for 2012. According to Yahoo Finance, VICL has about $52 million in cash and basically no long term debt. See Yahoo Finance data here. In the product development pipeline, Vical has a number of interesting candidates including Allovectin-7, which is now in phase 3 trials. You can learn more about the company's pipeline here.
Why Vical shares could surge higher: Allovectin-7, which is a treatment for melanoma, could provide good news from the phase 3 trials. Also, Transvax which is a vaccine designed to prevent reactivation of latent cytomegalovirus (CMV) is in phase 2 trials. With a strong balance sheet and two promising candidates in phase 2 and 3, these shares appear undervalued. Read Theodore Cohen's article on Vical for more details on this company.
The data is sourced from Yahoo Finance, and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for educational purposes only.
Disclosure: I am long TLON.OB.
Additional disclosure: I may buy shares in all of these companies soon.