Today I will focus on a few bio pharma companies with higher short interest that also have potential catalysts associated with them as well. These stock with higher short interests are excellent short squeeze candidates when they are also coupled with potential catalyst price moving events; let's take a look.
ZIOPHARM Oncology (ZIOP) 5/21/12 pps: $4.73
ZIOPHARM engages in the development and commercialization of small molecule and synthetic biology approaches to cancer therapies in the United States. The company's clinical programs include Palifosfamide, a DNA cross-linker, which is in a phase III clinical trial for the treatment of metastatic soft tissue sarcoma in the front-line setting. ZIOPHARM is also developing Palifosfamide in combination with etoposide and carboplatin in phase I clinical trial to determine safety for initiating a pivotal, adaptive phase III trial in front-line.
|% Held by Insiders:||21.80%|
|% Held by Institutions:||34.50%|
|Shares Short (as of Apr 30, 2012):||9.19M|
|Short Ratio (as of Apr 30, 2012):||24.90|
|Short % of Float (as of Apr 30, 2012):||16.20%|
|Shares Short (prior month):||9.24M|
ZIOPHARM has a rather high short interest coming in over 16%, but does it have a catalyst that can squeeze the shorts?
The upcoming PICASSO III Trial Results (due Q4 2012) - ZIOP's PICASSO III trial is attempting to use Palifosfamide (an ifosfamide derivative) as a treatment in soft tissue sarcoma (STS). Recent FDA actions in the disease indicate that progression free survival (PFS) is now a viable approval metric for STS treatments.
The below is excerpted from the recent Griffin Securities March, 2012 update (authored by Chrystyna Bedrij):
FAVORABLE FDA/ODAC RULING PRECEDENT PROVIDES A CLEAR PROGRESSION FREE SURVIVAL ENDPOINT-DRIVEN REGULATORY PATHWAY TO APPROVAL FOR PALIFOSFAMIDE IN SOFT TISSUE SARCOMA . The Oncology Drugs Advisory Committee of the FDA met on March 20, 2012, to review GlaxoSmithKline‟s (GSK) Votrient®, chemically known as pazopanib, for the proposed indication of treatment of patients with advanced soft-tissue sarcoma. The ODAC voted 11-2 in favor of approval of pazopanib. Importantly, Progression Free Survival was utilized as a primary endpoint, and the resulting improvement in median PFS of 3 months was considered a clinically-meaningful improvement by the panel. The overall impact on Overall Survival was not significant in the pazopanib trials, but the FDA's recommendation shows their consideration for the PFS endpoint in a disease such as soft tissue sarcoma with significant unmet need. We believe the findings of ODAC and this new regulatory precedent set in soft tissue sarcoma is monumental and provides a clear PFS endpoint-driven regulatory pathway to approval for palifosfamide in front-line metastic STS. ZIOPHARM previously reported a favorable Phase II PFS improvement of 3.5 months, which, combined with the ODAC decision, builds momentum for the Phase III PFS data expected to be reported in the 2H 2012. We believe that the current clinical and regulatory risk profiles of palifosfomide bode well for ZIOPHARM as palifosfamide's data, including impact on PFS, and safety profile to date both match closely with pazopanib.
Analysts at Griffin Securities raised their price target to $12 a share for ZIOPHARMin April of this year.
Also, Ziopharm's announcement that they will soon commence a pivotal Small Cell Lung Cancer (SCLC) trial under the direction of Dr. Larry Einhorn has increased the odds on ZIOPHARMA landing a lucrative deal in my opinion.
Furthermore, billionaire Randal Kirk took a stake in Ziopharm Oncology a little over a year ago, to push forward a novel DNA therapy that he thinks will be far bigger than cancer vaccines. As part of a deal, Kirk's synthetic biology company Intrexon will get a 12.5% stake in Ziopharm for $11.6 million. That stake could increase to almost 20% If Ziopharm brings any drug based on Intrexon's DNA therapeutics into a second-stage trial.
"This technology is considerably more powerful and considerably broader" than cancer vaccine technology behind such products as Dendreon's (DNDN) provenge, says Kirk, who made his $1.7 billion fortune largely through New River Pharmaceuticals, which he sold to Shire plc (SHPGY) in 2007 for $2.6 billion. "This is by far the best thing I have ever seen." (as a biotech investor.) He predicts the Intrexon technology will be "world-changing."
Dendreon continues to have issues with provenge, as demonstrated in when the Dendreon Q1 earnings report released in early May, showed modest sales of provenge along with an equally uninspiring full-year outlook, once again reigniting concerns over provenge's prospects going forward. Management said it would take "time and significant education" to see higher adoption rates for provenge. Personally, I think what ZIOPHARM is working on has a lot more promise than the type of older tech being offered in a product like provenge; Kirk seems to feel the same way here.
It might be worth speculating that ZIOPHARM could very well be another company Shire could be interested in, and with an undervalued market cap coming in at around $371M, a buy out offer over $700M would be a cheap grab for Shire, potentially adding a lot of value to its already impressive company.
On May 18th, 2012, JP Morgan initiated coverage on ZIOPHARM with an overweight rating and a year end $7 dollar pps target.
JP Morgan noted:
We are initiating coverage of ZIOP with an OW rating and a YE12 target of $7. Lead asset, palifosfamide (pali), is in Phase 3 (PICASSO 3) for soft tissue sarcoma . If data is positive, we expect pali to become the new standard of care front line therapy. Top-line data are expected in 2H12, and we assign a 65% probability of success. Small cell lung cancer represents a compelling, albeit higher risk, second shot on goal.
Other factors to consider:
Over the last six months, ZIOPHARM insiders were net buyers of 1,351,460 shares, which represents about 2.53% of the company's 53.46M share float.
*Insider Transactions Reported
As we can see above, RJ Kirk has increased his position in ZIOP, buying an additional $10M dollars worth of ZIOP stock at $5.20, which is a considerably higher price than where the stock is trading at now. Hard for me to imagine he would buy a boatload of shares here without having total confidence in the long term stock price appreciation.
The potential short squeeze Armageddon scenario here is that R.J. Kirk may engage in a bit more financial engineering related to his potential Intrexon offering that would all but make the ZIOPHARM short position impossible to cover. Betting against a billionaire like Kirk is plain foolish, but as I have always maintained, short sellers of bio pharmas are among the most unwise money in the entire stock market.
|Mar 25, 2012||Canaccord Genuity||Initiated||Buy|
|Nov 21, 2011||Collins Stewart||Initiated||Buy|
|Feb 22, 2011||Barclays Capital||Initiated||Overweight|
Price Target Summary
|No. of Brokers:||3|
Short term price target opinion for ZIOPHARMA:
I think a pop to around $5.05 is in order here within 2 weeks. My long term feelings on ZIOPHARMA I will make known in a feature article I plan to release a day or 2 after this one.
Spectrum Pharma (SPPI) 5/21/12 pps: $11.43
Spectrum engages in acquiring, developing, and commercializing prescription drug products primarily in the areas of hematology and oncology.
Potential Catalyst: Sat, Jun 2 1:15 PM - 5:15 PM ASCO presentation on Belinostat for advanced or recurrent thymic malignancies Phase 1/2 data in a General Poster Session.
Belinostat (PXD 101) is an HDAC inhibitor in late stage clinical development with more than 700+ patients treated to date. Belinostat is believed to inhibit enzymatic activity of class 1 and class 2 HDACs. Belinostat is also believed to increase in acetylation of both Listor and Listor proteins, resulting in cell cycle arrest, apoptosis and a decrease in cell proliferation.
|SPPI Shares Outstanding:||59.07M|
|% Held by Insiders:||12.72%|
|% Held by Institutions:||40.70%|
|Shares Short (as of Apr 30, 2012):||21.37M|
|Short Ratio (as of Apr 30, 2012):||7.10|
|Short % of Float (as of Apr 30, 2012):||43.40%|
|Shares Short (prior month):||18.32M|
Spectrum has a huge short position, and with any kind of positive data, the stock price should see a nice pop over $12 a share. Spectrum is one of my favorite bio pharmas because I like its business model and management. I have written a few articles on the company, and feel a stock price near $30 a share is certainly possible within 3 years time.
Celldex (CLDX) 5/21/12 pps: $4.19
Potential catalyst: Rindopepimut (CDX-110) for relapsed glioblastoma (GB) Phase 2;
CDX-011, breast cancer drug candidate, Phase 2b data to be released May 23. The company is not presenting the data at ASCO due to a clerical error.
|% Held by Insiders:||0.58%|
|% Held by Institutions:||36.90%|
|Shares Short (as of Apr 30, 2012):||4.34M|
|Short Ratio (as of Apr 30, 2012):||5.00|
|Short % of Float (as of Apr 30, 2012):||7.40%|
|Shares Short (prior month):||4.24M|
The stock price has taken a bit of a hit because of this as shorts have seen this foul up as an opportunity to pile on. (The short ratio has dramatically picked up the first 2 weeks of May.)
I feel they are going to get burned on this one if they hold their shorts too long. While missing the chance to present CDX-011 at ASCO is a small negative, investors will still receive the data on time, so this is really a minor blip being blown out of proportion. I would not feel all that comfortable holding a short too long in Celldex stock.
Celldex enrolled 120 patients with advanced breast cancer that over-expresses a protein known as GPNMB (confirmed by an independent test). The patients, all of whom no longer respond to currently approved treatments, are then randomized to receive either CDX-011 or physician's choice of treatment. The primary endpoint of the study is overall response rate.
If the data confirms, the stock price could really take off. In my opinion, the dip in price offers a nice opportunity for traders/investors to load up more shares at a discount. In another article I wrote, I stated that I feel by the time this data is released, the stock could see a price nearing $5.50 a share. 2 years go, Celldex stock rallied from $4.70 to near $10 a share during ASCO. I will still maintain my price target opinion on Celldex, and I believe this week we will see a stock price nearing $5 a share here.
*Data provided by Yahoo Finance.
Disclosure: I am long ZIOP.