7 Healthcare Stocks With January Catalysts

by: Spencer Knight

As the new year begins investors can expect much of the same from the FDA. Investors can expect to see small cap biotech stocks crumble after rejection and/or soar after an FDA approval. Also, the possibility of a blockbuster treatment from large cap pharmaceutical giants will bring traders to the table. This month we will see five small cap companies face the FDA including two PDUFA action dates as well as one Advisory Committee. Instead of simply outlining the FDA events, I will discuss what investors should expect.

The first scheduled event is a PDUFA action date for Insys's (NEOL.PK) Subsys Spray on January 4. Subsys is a delivery system that delivers the opioid fentanyl underneath the tongue for transmucosal absorption. Subsys is designed to treat patients with breakthrough cancer pain. There are positives and negatives surrounding Subsys. The primary positive is the treatment is relatively clean and there are not any serious issues regarding Subsys during the company's trials.

On the other hand, however, the FDA approved two treatments that use fentanyl for cancer pain in 2011, one of which is a nasal delivery system. Therefore the FDA may be more strict regarding Subsys. Also, the FDA rejected Nupathe's Zelrix in August of 2011; which was designed as a transdermal pain reliever for migraine pain. This indicates the FDA is cautious towards treatments designed to travel through the outer cells prior to entering the blood stream.

On that note, the FDA may in fact give Insys its second FDA approved treatment. The primary hiccup will be a chemistry, manufacturing, and controls issue; which often times plagues micro cap companies.

In mid January Delcath (NASDAQ:DCTH) will meet with the FDA to discuss Delcath's future NDA for a chemosaturation system. The treatment has been designed for patients with metastatic melanoma in the liver. This meeting will be a catalyst for Delcath's share price because Delcath will essentially give the FDA the information that will be reviewed in the NDA. Therefore if the FDA hands down negative feedback the share price will plummet. Similarly if the FDA informs Delcath the treatment is outstanding and no immediate problems persist, investors and traders will send the share price substantially higher.

The chemosaturation treatment for metastatic melanoma has proven to be effective via the company's Phase 3 efficacy trials. Also, the treatment was approved by the EU in April. It is important to keep in mind this meeting is to discuss a possible NDA filing; not an already filed NDA. Therefore longer term investors need to remember Delcath is looking at an end of 2012 PDUFA date at the earliest.

On January 20 an FDA Advisory Committee will meet to discuss Columbia Laboratory's (CBRX) Prochieve. Prochieve has been designed to lessen the rate of preterm birth. Prochieve will be intended to treat women with a single child and a short cervix. One important note to make regarding Prochieve is the fact that the same progesterone gel is approved to treat women with fertility deficiency. Therefore the overall safety of Prochieve should not be of the utmost concern to investors.

It is surprising the FDA is having an Advisory Committee for Prochieve because the clinical trials show Prochieve had similar adverse effects to the placebo gel. Also, in a separate study, Prochieve reduced preterm births by 45%; thus increasing survival rate of the child. Investors should expect to see a positive recommendation from the Advisory Committee; which will give Columbia's share price plenty of room to run over the next seven weeks prior to the PDUFA date in February.

One of the most anticipated PDUFA action dates this month is for Bydureon. Bydureon has been designed by Eli Lilly (NYSE:LLY), Amylin (AMLN), and Alkermes (NASDAQ:ALKS). The FDA will render a decision regarding Bydureon on or before January 28. Bydureon is a once a week exenatide injection for patients with type 2 diabetes. Exenatide is the same active ingredient found in Amylin's Byetta.

This will be Bydureon's third round with the FDA. The previous two ended with CRLs in March 2010 and October 2010. Therefore Amylin should be getting close to an application the FDA is willing to approve. Continuing with the positives, Amylin reported Bydureon showed strong results during a three year trial as well as an 84 week trial. Also, Bydureon's phase 2 efficacy, safety, and tolerability study did not present any disastrous results.

However, investors need to keep in mind Bydureon received two prior CRLs. In the first CRL the FDA asked for details regarding the Risk Evaluation and Mitigation Strategy section of the NDA. In the second CRL the FDA asked for a QT study as well as more information from Bydureon's efficacy study. The final issue with the Bydureon saga comes from a recent termination of alliance between Eli Lilly and Amylin; which gives Amylin the rights to Bydureon and future exenatide projects. This may indicate Eli Lilly is not willing to invest more time in Bydureon. If this is true, this would be a bearish sign weeks before the PDUFA action date.

The final event is the Pediatric Advisory Committee meeting being held January 30-31. At this meeting the FDA will discuss 15 different treatments intended for pediatric use. There are, however, two major implications that can come from this meeting. The first effects AstraZeneca (NYSE:AZN). The Advisory Committee will discuss Seroquel and Atacand; which accounted for about $5.5 billion of AstraZeneca's 2010 revenue. Therefore if the FDA gives any restrictions regarding these two treatments we will see the share price slip a bit. It is also important to note Seroquel will be losing its patent later in 2012.

Pfizer's (NYSE:PFE) Prevnar 13 is another treatment that will be looked at by the Advisory Committee. Prevnar 13 accounted for roughly $3.7 billion in revenue in 2010. Therefore Pfizer cannot afford to lose the marketability of Prevnar 13 and any restrictions will sink the stock.

January is filled with micro cap biotech FDA decisions. Therefore investors will see some serious share price increases and/or decreases. Also, with the Pediatric Advisory Committee meeting at the end of the month investors could see a surprise if the FDA has been receiving complaints from physicians and patients regarding adverse effects from the treatments to be discussed. Whichever the case, the healthcare and biotech sector will begin 2012 with a bang.

Disclosure: I am long PFE.