Beat Up 'Biotechs' To Buy: Part 3

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 |  Includes: ANIP, EPRS, IONS, RIGL
by: StockMarketPundits

This is part three of our "Beat Up” Biotechs to Buy trilogy. As we noted in parts one and two, our approach to biotech investing is to do the research and then “cherry pick” your favorites and then buy a “basket” of your favorites.

Our final four candidates are as follows:

BioSante Pharmaceuticals, Inc. (BPAX)

BioSante is a clinical stage biopharmaceutical company focused on the development of products for female sexual health and oncology. The company has a market cap of $303 million and the stock has an average daily trading volume of over 2.8 million shares. Its lead product candidates are LIBIGELL (transdermal testosterone gel) for the treatment of female sexual dysfunction and ELESTRIN (estradiol gel) for the treatment of moderate to severe vasomotor symptoms associated with menopause.

LIBIGEL is in Phase 3 clinical development under ad FDA special protocol assessment. ELESTRIN has received its FDA approval and is now being marketed in the US as a treatment for hot flashes associated with menopause. The company is focusing on LIBIGEL and expects to file an NDA in early 2012. LIBIGEL is patented through 2022.

The company completed a secondary on August 2, 2011 which resulted in +/- $45 million net proceeds which should allow BioSante to be fully funded all the way through the LIBIGEL approval process. Being fully funded should put the company in a position of strength when it negotiates with potential partners. The stock is down from its 52 week high of $4.02.

Isis Pharmaceuticals, Inc. (ISIS)

Isis is a biopharmaceutical company involved in the discovery and development of antisense drugs using an antisense drug discovery platform. The company has a market cap of $708 million and the stock has an average daily trading volume of 673,000 shares. The company’s lead product candidate is mipomersen which is partnered with Genzyme.

In July of this year Genzyme filed for approval of mipomersen in Europe and the plan is to file an NDA in the U.S. in Q4. The plan is to receive approval and be able to market mipomersen in both Europe and the U.S. in 2012. The company will market mipomersen under the brand name of KYNAMRO and will target cardiovascular disease. Isis also has collaborations with Bristol-Myers Squibb and GlaxoSmithKline.

Isis is well funded with $395 million of cash at the end of the last quarter. We would further note that BMO Capital (NYSE:BMO) recently initiated Isis with an “out perform” rating. The stock is down from its 52 week high of $10.63.

Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL)

Rigel is a clinical stage biopharmaceutical development company engaged in the discovery and development of small molecule drugs for the treatment of inflammatory and autoimmune diseases as well as muscle disorders. The company has a market cap of $534 million and the stock has an average daily trading volume of 513,000 shares.

At the close of the last quarter Rigel had cash of $279 million which is expected to be sufficient to fund operations into 2014. The company is designing a Phase 2 clinical study program for its R343 candidate (asthma) and has fostamatinib (rheumatoid arthritis) progressing well in a Phase 3 clinical study conducted by AstraZeneca. The first set of data is expected in the second half of 2012 and AstraZeneca expects to remain on track to meet the planned US and European NDA filing dates in 2013.

We would note that AstraZeneca paid $100 million as an upfront payment tp partner on a worldwide basis on fostamatinib. The stock is down from its 52 week high of $10.21. BMO Capital also recently initiated Rigel with an “out perform”.

Zalicus, Inc. (ZLCS)

Zalicus is a biopharmaceutical company engaged in the discovery and development of drug candidates focusing on the treatment of pain and inflammation. Prior to the name change last year the company was known as CombinatoRx, Inc. The company has a market cap of $124 million and the stock has an average daily trading volume of slightly over 1.5 million shares.

The company has collaboration agreements with Novartis, Mallinckrodt, Fovea and Amgen among others. Their first approved product is EXALGO which is partnered with Covidien. Zalicus received $55 million in upfront and milestone payments plus development funding from Covidien and will now be receiving tiered royalties on sales. The product was launched April 26, 2010 and Covidien projects peak annual sales of $200-300 million.

Its next potential product is SYNAVIVE which targets rheumatoid arthritis and is in a Phase 2b study that was initiated in June of this year. Data is expected mid-2012. The company had $56 million in cash as of June 30, 2011 and according to the company this should fund operations into 2014. The stock is well off its 52 week high of $3.21. Zalicus was recently initiated by Canaccord Genuity with an out perform rating.

We would expect that some of our “Dirty Dozen” biotechs will prove to be spectacular performers while some will prove worthless, however, in the long run we suspect that this group as an aggregate will out perform the market largely because its late stage phase 3 candidates and/or recently approved products have mitigated some of the risks associated with the drug development process.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.