In Part I, four companies with upcoming FDA decision dates in Q4 were analyzed as potential investments. In this article, we'll look at three more biotechnology companies with Q4 decision dates and explore their investment worthiness as they work to improve and save the lives of individuals.
United Therapeutics (UTHR) has an October 26, 2012 decision date for oral Remodulin (treprostinil) for the treatment of pulmonary arterial hypertension (PAH). Remodulin has already been FDA approved as an injection for PAH.
The company also has 2 other FDA approved drugs: Tyvaso, which is an inhaled trepronstinil treatment for PAH; and Adcirca to improve exercise ability in patients with PAH. United also has eight drugs in various stages of development to treat infectious disease, cardiopulmonary conditions, and cancer.
UTHR looks undervalued with a forward P/E ratio of 8.95, a PEG of 0.39, and a price to book ratio of just 2.31. It has a high profit margin of 34.69%, operating cash flow of $234.43 million, and free cash flow of $85.7 million. The balance sheet looks strong with $409 million in cash, $268 million in debt, and a current ratio of 3.27.
The future looks bright for United as it has 12 upward earnings revisions for 2012 and 5 upward revisions for 2013. The company is expected to grow earnings annually at 24.92% for the next five years. That significant growth should allow the current stock price of $44 to grow to about $130 in five years for a total gain of 195%.
Cornerstone Therapeutics (CRTX) has an FDA decision date on October 29, 2012 for Lixivaptan for the treatment of hyponatremia.
Cornerstone also has two FDA approved drugs on the market: Curosurf for the treatment of respiratory distress syndrome (RDS) in premature infants and Zyflo CR for the prevention and treatment of asthma. The company also has two additional drugs in its pipeline under development: one for asthma and another for cough/cold treatment.
Although the company is trading under its book value per share, it has a negative cash flow of $13.74 million and negative diluted EPS of $0.17. On the positive side, the company has zero debt, total cash of $74.2 million, and a current ratio of 2.65. Although I didn't see a five year earnings projection, the company is expected to grow earnings at 281% next year. With CRTX trading with a price to book ratio of 0.77, now might be a great time to pick up the stock before the profits start rolling in.
Biogen Idec (BIIB) has an FDA approval decision date of December 28, 2012 for BG-12 to treat multiple sclerosis. Approximately 400,000 people in the U.S. have MS with 200 people being diagnosed with the disease every week.
Biogen already has four FDA approved drugs on the market: Tysabri and Avonex to treat relapsing forms of MS; Rituxan to treat non-Hodgkin's lymphoma; and Fampyra to improve walking in patients with MS who have a walking disability. In addition to the drugs mentioned, Biogen also has an extensive pipeline of about 16 new drugs being developed for various conditions.
Biogen Idec looks fairly valued with a forward P/E ratio of 18.05, a PEG ratio of 1.53, and a price to book ratio of 5. The company has a nice profit margin of 24.24%, operating cash flow of $1.67 billion, and free cash flow of $1.31 billion.
BIIB has 11 upward earnings revisions for 2012 and 5 upward revisions for 2013. It is expected to grow earnings annually at 13.85% for the next five years. This growth is enough to make the company a solid market outperformer for at least the next five years.
All of these companies have great current and future potential. Cornerstone poses a little more risk than the others, as its profit margin and cash flow is currently negative. However, with high risk comes high reward potential. Cornerstone could outperform the others if it increases its earnings at a high pace over the next several years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.