One biotech stock that is currently on its way back up is Dendreon (DNDN). Dendreon is a growing player in the biotech industry with a 1.5 current ratio reported, although this number inspires less confidence than that of other biotech companies such as Jazz Pharmaceuticals (JAZZ), and Cell Therapeutics (CTIC), with current ratios of 4.2 and 3.1, respectively. Of course, these numbers are subject to change based on what each of the aforementioned companies have coming down the pipeline and past successes.
While Dendreon's current ratio is disheartening, the company has a number of different drugs in the pipeline, as evidenced by the last report of $74 million in research and development (16% of the company's total operating expenses). One of the drugs being developed is DN24-02, a preventative drug for the recurrence of invasive urothelial carcinoma post-surgery, which is designed on the same platform as one of Dendreon's current drugs, Provenge. An estimated 73,000 adults are diagnosed with urothelial carcinoma each year, and many of the patients require surgery to remove the malignant tumors (which is where Dendreon's new drug comes into play.) DN24-02 will also be used as a treatment for patients with other solid tumors displaying HER2/neu (an overproduction of the HER2 protein, which causes overproduction of cells.)
With the current recursion rate of 50% for bladder cancer after surgery, DN24-02 will have a market that covers nearly all bladder surgery patients as a preventative measure. If the current phase II trials for DN24-02 show positive results, expect to see an increase in interest of Dendreon-- something we have already been seeing within the past week. Of course, there are other companies in the biotech industry to consider for potential, and many seem much better, with greater price to earnings ratios than Dendreon's current 4.8, that pales in comparison to other companies. When it comes to buying Dendreon-- even without looking at other companies-- I would suggest avoiding the biotech company at present, as the reliance upon the success of a drug treatment for a relatively obscure issue that is still in a relatively early testing phase (such as DN24-02) is simply too risky.
One smaller biotech company that is competition for Dendreon right now is Jazz Pharmaceuticals. With the aforementioned current ratio of 4.2 and a price to earnings ratio of 16.36, at a quick glance, Jazz is definitely a better option for an investor's portfolio as opposed to Dendreon. As of right now, Jazz lists no drugs in its pipeline set for any sort of future testing, but it plans to expand FazaClo (a treatment for patients with schizophrenia) to include more dosage options (according to the company's website). The expansion of FazaClo is expected to greatly increase the current revenue that Jazz acquires from the drug from its current point of $17 million.
Jazz has seen a rise in revenue in each of its quarters up until this point (culminating in a very strong annual report of $277 million in revenue in the latest reports) and the trend is expected to slow as the company is not set for release of any testing of drugs at the moment. Of course, with 12% of the company's total operating costs going into research and development, expect to see some drug announcements from Jazz relatively soon.
When it comes to keeping the company afloat, expect Xyrem (a treatment for narcolepsy) to continue to generate well over 50% of the company's revenue as Jazz works through its current down time. As far as picking up Jazz, I would purchase some shares in the company simply based on its ability to make money through quality decisions, as evidenced by its recent and current cash flow sheet. Compared to Dendreon, Jazz simply comes out better in every aspect-- namely numerical, in both the past and present-- so it is a much safer purchase that will surely bring more gains in the coming years over Dendreon.
Another serious competitor in the biotech industry is Human Genome Sciences (HGSI). As of right now, the company is facing some serious issues due to its negative earnings per share statistic. While this number is quite worrisome for anyone looking into HGSI, I would suggest picking some stock up in the company. Two of the biggest drugs in HGSI's pipeline, Darapladib and Albiglutide, are in phase III trials. If all goes well, these will bring HGSI (or whatever company owns it) some decent gain.
Darapladib, a treatment for coronary heart disease, could help to save the lives of the 2,200 people who die from coronary heart disease every day. The market for Albiglutide, which treats type 2 diabetes (one of several forms of the disease that affects 25.8 million people every year), is definitely just as big, if not bigger, than that for Darapladib. Due to the potential of these two drugs, and HGSI's investment of 51% of its operating expenses into research and development, I would suggest being there for the decent chance that the two treatments will make it through phase III trials. Now, comparing HGSI to Dendreon, the latter may be doing much better right now, but the potential that HGSI possesses now is just too much to pass up.
Cell Therapeutics, another biotech company comparable to Dendreon, has experienced some positive news recently which will hopefully show a turnaround from the company's current negative earnings per share statistic. The company recently purchased Pacritinib (a myelofibrosis treatment) for $15 million in cash and $15 million in stock. While the drug has yet to hit phase III trials, it is expected to be a hit. The company will face the issue of capital availability to continue the research of this new drug. With the average cost to bring a drug onto the market being $1.3 billion, and the current $42 million in Cell's bank account, expect to see the company selling of a whole lot of stock soon to fund the newest drug to in the company's arsenal.
Simply put, the price of the company shares-- if it can even generate enough revenue to complete the drug for market submission-- is only going to get lower as Cell sells off more and more hold in the company and dilutes the current shares by an estimated 30%, making the prices drop even further. Simply put, I'd stay far away from Cell right now, as it will soon see huge decreases that may or may not pay off due to dilution of stock that will give a negative outlook on the company for years to come. I would suggest investing in some of the other aforementioned companies to ensure one does not lose money, as will happen with Cell over the next months to years.
A primary competitor to Dendreon is Johnson & Johnson (JNJ). The company has a direct competitor drug to Dendreon with Zytiga, a prostate cancer treatment that is for men who have received chemotherapy. The drug's testing was recently ceased to edit the testing, but all in all, the study seemed to show the drug slowing progression without total cancer regression. This positive news meant a lower stock price for Dendreon due to the Zytiga vs. Provenge debate. Johnson is already showing gains in Zytiga-- with $200 million in sales, as opposed to the last report of Provenge revenue of $77 million. As Zytiga continues to uproot Provenge, expect to see Johnson's price be inversely proportional to that of Dendreon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.