6 Best Biotech Stocks With More Upside Potential

by: StockPandit

So far, 2012 has been the best year for the Biotechnology and Drugs industry. So many stocks have surged in the last four months based on clinical trial results, U.S. Food and Drug Administration (FDA) approval, FDA Advisory Committee's recommendation, European commission approval, recommendation from independent committees, partnership with big pharmaceuticals, acquisitions, and so on. In this article, I will focus on six best biotechnology & drug companies based on this year price performance. Even though, these stocks already performed well in 2012, these stocks also has more upside potential based on pending approval from the FDA and European Medical Agency (EMA) on their pipeline drugs.

Biotech stocks are high risk-reward stocks and hence considerable analysis is required before trading. Use this list as a potential starting point for your analysis. I have screened these 6 best biotechnology stocks based on the following criteria:

  • Security Type: Common Stock
  • Sector: Health Care
  • Industry: Biotechnology or Pharmaceuticals
  • Market Cap: Greater than or equal to 300 Million
  • YTD Stock Price Performance: Greater than or equal to 50%

The following chart provides the best 6 biotechnology & drugs stocks based on 2012 price performance:

(Click to enlarge)

1. THRESHOLD PHARMACEUTICALS INC (NASDAQ:THLD): Threshold Pharmaceuticals, Inc. is a biotechnology company focused on the discovery and development of drugs targeting the microenvironment of solid tumors as novel treatments for patients living with cancer. Its clinical development efforts are focused on TH-302, for which it has worldwide marketing rights.

In March 2012, Threshold Pharmaceuticals has received Orphan Drug Designation from U.S. Food and Drug Administration (FDA) and European Commission for TH-302 drug for the Treatment of Soft Tissue Sarcoma.

Threshold Pharmaceuticals signed a global agreement with Merck KGaA (NYSE:MRK), Darmstadt, Germany, to co-develop and commercialize TH-302, Threshold's small molecule hypoxia-targeted drug. Under the terms of the agreement, Merck will receive co-development rights, exclusive global commercialization rights and will provide Threshold an option to co-commercialize the therapeutic in the United States. In exchange, Threshold will receive an upfront payment of $25 million and could receive up to $35 million in additional development milestones during 2012. Threshold is also eligible to receive a $20 million milestone payment based on positive results from its randomized Phase 2 trial in pancreatic cancer.

At this time of announcement Threshold Pharmaceuticals' market cap was $145 million and this stock had a huge rally after this announcement in February since this agreement can yield upto $525 million potential milestone payments, comprised of $280 million in regulatory and development milestones and $245 million in sales-based milestones.

On April 11, 2012, Threshold Pharmaceuticals announced that it has earned a $20 million milestone payment from Merck KGaA for achieving a statistically significant progression free survival benefit in its 214-patient randomized controlled Phase 2 clinical trial ("404 trial").

Threshold Pharmaceuticals has several ongoing clinical trials of TH-302, including the most advanced "406 trial", a pivotal Phase 3, randomized, controlled trial in combination with doxorubicin in patients with metastatic or locally advanced unresectable soft tissue sarcoma. The "407 trial" is a Phase I monotherapy trial in patients with advanced leukemias. The "408 trial" is a Phase I/II trial exploring TH-302 monotherapy and in combination with bortezomib in patients with multiple myeloma. The "410 trial" is a Phase 1/2 trial in combination with sunitinib in patients with renal cell carcinoma, gastrointestinal stromal tumors or pancreatic neuroendocrine tumors. To date, across all clinical trials, TH-302 has been administered to more than 600 patients with cancer.

The current pullback is very good entry point for investors as the stock has more room to grow based on positive earning results, successful sales of TH-302 drug followed by payments from Merck KGaA and positive results from other drugs in the pipeline. Threshold Pharmaceuticals has a market cap of $335.22M and it is currently trading around $6.25 with a 52 week range of $1.18 to $9.07. Projected EPS growth for this year is 87.5% when compared to last year. The stock has 412% price performance for the year 2012.

2. VIVUS INC (NASDAQ:VVUS): VIVUS is a biopharmaceutical company developing therapies to address obesity, sleep apnea, diabetes and male sexual health. The company's lead investigational product in clinical development, Qnexa, has completed Phase III clinical trials for the treatment of obesity and is currently being considered for approval by U.S. and EU regulators.

On February 2012, U.S. Food and Drug Administration Endocrinologic and Metabolic Drugs Advisory Committee recommended Qnexa be granted marketing approval by the FDA for the treatment of obesity in adults. The Committee voted 20 to 2, on the recommendation for an approval based on a favorable benefit-risk profile. After the FDA news announcement, VVUS stock price went up from $10.55 to $23.78 within 6 days.

On April 19, 2012, U.S. FDA extended PDUFA date for its review of the Qnexa New Drug Application from April 17 to July 17, 2012. The three-month extension is a standard extension period.

On April 27, 2012, U.S. FDA also approved STENDRA (avanafil) tablets for the treatment of erectile dysfunction (ED), marking the first new prescription agent approved in nearly a decade for the condition that afflicts as many as 30 million men in the U.S. VIVUS is currently in discussion with potential partners to commercialize STENDRA in the U.S. and in its territories in the rest of the world. In March 26, 2012, VIVUS also submitted the Marketing Authorization Application to European Medicines Agency for the review of avanafil.

VIVUS has more upside potential in the upcoming months based on pending FDA approval on Qnexa and EMA approval on avanafil. VIVUS has a market cap of $2.31 billion and currently trading around $23.13 with a 52 week range of $6.13 to $26.75. The stock has 137.23% price performance for the year 2012.

3. REGENERON PHARMACEUTICALS INC (NASDAQ:REGN): Regeneron is an integrated biopharmaceutical company, which discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions. Regeneron markets two products in the United States, one for the treatment of neovascular (wet) age-related macular degeneration and another for the treatment of a rare inflammatory condition. Additionally, Regeneron has three regulatory applications pending before the FDA and 10 drug candidates in clinical development.

On March 8, 2012, Regeneron and Bayer HealthCare announced that Bayer HealthCare has received marketing approval from the Australian Therapeutic Goods Administration for EYLEA (aflibercept) Injection for the treatment of patients with neovascular age-related macular degeneration (wet AMD) at a recommended dose of 2 milligrams via intravitreal injection per month for three consecutive months, followed by 2 milligrams via intravitreal injection every two months. Regeneron also submitted regulatory applications in the European Union, Japan, and other countries for EYLEA injection approval. U.S. FDA granted a Prescription Drug User Fee Act date of September 23, 2012 as the target date for a regulatory decision on the sBLA in central retinal vein occlusion.

Regeneron also submitted regulatory applications for the marketing approval of ZALTRAP (aflibercept) in patients with metastatic colorectal cancer previously treated with an oxaliplatin-based regimen to the European Medicines Agency and FDA. The U.S. Biologics License Applications was granted Priority Review status with a PDUFA date of August 4, 2012.

There are so many drugs in the pipeline with pending FDA and EMA approval, Regeneron has more upside potential in the upcoming months. Regeneron has a market cap of $12.5B. Regeneron is currently trading around $131.4 with a 52 week range of $42.83 to $145.04. The stock has 137% price performance for the year 2012.

4. AMYLIN PHARMACEUTICALS INC (AMLN): Amylin is a biopharmaceutical company focusing on the diabetes and other metabolic diseases through the discovery, development and commercialization of medicines. Amylin is marketing two medicines to treat diabetes, BYETTA (exenatide) injection and SYMLIN (pramlintide acetate) injection. It is also marketing a diabetes treatment, BYDUREON. BYDUREON is an extended-release medication for type 2 diabetes that provides continuous glycemic control in a once-weekly dose.

On Jan. 27, 2012, U.S. FDA has approved BYDUREON - the first once-weekly treatment for type 2 diabetes.

On March 23, 2012, European Commission has granted marketing authorization to BYETTA as an adjunctive therapy to basal insulin, with or without metformin and/or Actos (pioglitazone), for the treatment of type 2 diabetes in adults who have not achieved adequate glycemic control with these agents.

Amylin also completed the Biologics License Application submission to the U.S. FDA for the use of metreleptin to treat diabetes and/or hypertriglyceridemia (high levels of triglycerides in the bloodstream) in pediatric and adult patients with rare forms of lipodystrophy, a life-threatening, ultra-orphan rare disease. Amylin also requested Priority Review, a designation given to drug candidates that offer major advances in treatment, or provide a treatment where no adequate therapy exists.

Approval of metreleptin is another catalyst for Amylin to increase the stock price. Amylin Pharmaceuticals has a market cap of $4.03B and it is currently trading around $24.92 with a 52 week range of $8.03 to $26.87. The stock has 119% price performance for the year 2012.

5. HUMAN GENOME SCIENCES INC (HGSI): Human Genome Sciences is a biopharmaceutical company. HGSI received their first product approval in the United States from FDA on March 9, 2011 - when BENLYSTA (belimumab) became the first new approved drug for lupus in more than fifty years. HGSI's other product is raxibacumab for inhalation anthrax.

On April 2012, GlaxoSmithKline plc announced that it made an offer to the Board of Directors of Human Genome Sciences Inc on April 11, proposing to acquire all of the outstanding shares of Human Genome Sciences for $13.00 per share in cash, representing a 81% premium to previous day closing share price. However, HGSI announced that it was reviewing strategic alternatives, including the sale of the Company but reiterated that Glaxo's $13 per share offer or $2.6 billion was not sufficient and failed to account for the inherent value of the Company's pharmaceutical assets. After the initial announcement from GSK, the share price of HGSI moved from $7.17 to $14.17.

HGS has retained Goldman, Sachs & Co. and Credit Suisse Securities LLC to assist in this process, with Skadden, Arps, Slate, Meagher & Flom LLP and DLA Piper LLP (US) serving as legal counsel.

If GSK increase the offer price to buyout HGSI, then obviously there is a huge upside potential in this stock. HGSI has a market cap of $2.86B. HGSI is currently trading around $14.37 with a 52 week range of $6.51 to $28.38. The stock has 94.45% price performance for the year 2012.

6. AFFYMAX INC (NASDAQ:AFFY): Affymax is a biopharmaceutical company focuses on discover, develop and deliver innovative therapies that improve the lives of patients with kidney disease and other serious and often life-threatening illnesses.

The company's first marketed product, OMONTYS (peginesatide) Injection, was approved by the U.S. FDA in March 27, 2012. OMONTYS is the only once-monthly erythropoiesis-stimulating agent for anemia available to the dialysis patient population in the United States.

OMONTYS is co-marketed by Affymax and Takeda Pharmaceuticals USA (OTCPK:TKPHF) and distributed by TPUSA. Affymax has received a $50 million development milestone payment from Takeda as part of the exclusive global agreement to develop and commercialize OMONTYS Injection. After the FDA approval news, AFFY stock price reached $14.31 and followed by drop in share price, as investors took the profit from this stock.

On March 27, 2012, John Orwin, Chief Executive Officer, Affymax said:

For over two decades, doctors have relied primarily on one erythropoietin-based treatment in the dialysis setting. With OMONTYS, doctors and patients will have access to a once-monthly alternative for the treatment of anemia in adult CKD patients on dialysis.

In February 2012, Takeda announced that European Medicines Agency accepted the Marketing Authorization Application for peginesatide. The application is currently under review by that agency.

Affymax has a market cap of $$452.2M. Affymax is currently trading around $12.58 with a 52 week range of $3.93 to $16.25. Projected EPS growth for this year is 23.8% when compared to last year. The stock has 90.32% price performance for the year 2012. The stock price is expected to go north once European Medicines Agency approves OMONTYS.

Sources: Some of the data is sourced from Google Finance, Yahoo Finance and Fidelity.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in THLD, REGN, AFFY, HGSI, AMLN, VVUS over the next 72 hours.

Disclaimer: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to the investors to make the correct decision after necessary research.