Clinical Trials and FDA Recommendations play vital roles in the life expectancy of drug companies. They also happen to be the two key variables I use when considering small-cap pharmaceutical stocks. That being said, two of the three companies reacted positively to news regarding the notion of regulatory approval and the third reacted negatively to the news that the company was suspending Phase II trials of its bone and cartilage cancer drug.
Arena Pharmaceuticals (ARNA): ARNA, which trades in a 52-week range of $1.23 (52-week low) and $9.38 (52-week high), closed trading at a new 52-week high on Monday. Shares surged nearly 12% during trading on the news that ARNA is expected to receive a favorable outcome in terms of its diet drug, Lorcaserin, when the FDA releases its ruling by June 27th.
Analysts are expecting ARNA to post a loss of -$0.12/share on revenue of $3.3 million dollars for the June 2012 quarter, and considering the last three quarters haven't been all that great, investors should still remain cautious on the company. For those looking to establish a position in the company, I'd begin with a small one and gradually add to that position once or twice prior to the FDA's decision.
Osiris Therapeutics Inc. (OSIR): OSIR, which trades in a 52-week range of $4.12 (52-week low) and $9.40 (52-week high), closed trading at a new 52-week high on Monday. Shares surged nearly 10% during trading on the news that OSIR received a second favorable outcome in terms of its stem-cell drug, Prochymal. This first approval, which came from Canada, was followed up on Friday by New Zealand based regulators. The treatment is geared toward the treatment of acute graft-vs-host disease in adolescent patients.
Analysts are expecting OSIR to post a loss of -$0.15/share on revenue of $1.57 million dollars for the June 2012 quarter, and considering the last three quarters have been pretty good, potential investors should consider moderate positions. That being said, I'd begin with a medium one and gradually add to that position if and when other nations approve the drug.
Infinity Pharmaceuticals Inc. (INFI): INFI, which trades in a 52-week range of $5.50 (52-week low) and $14.15 (52-week high), closed trading at $12.86/share on Monday. Shares fell nearly 7.5% during trading on the news that INFI was aborting its current Phase II clinical trial regarding Saridegib. Saridegib was an experimental drug Infinity was testing for both bone and cartilage cancers. The company reportedly announced that results were 'disappointing' to say the least.
Analysts are expecting INFI to post a loss of -$0.38/share on revenue of $27.52 million dollars for the June 2012 quarter, and considering the last four quarters have been dismal at beat, potential investors should steer clear of any sized position. The company is too fragile at this point and any close above $8/share should still be considered way too risky for the retail investor. The second quarter expectations will most likely not be surpassed and revenue may fall under $21.5 million.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.