Bio Pharma Momentum Movers For Today: Will Arena's Weight Loss Drug Lorcaserin Be Approved?

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Includes: AEZS, ALIM, ARNA, ATRS, PSDV
by: StockMatusow

The stocks below all had significant price moves yesterday, and could continue their moves into today's trading session.

Momentum trades in the bio-pharma sector can provide big profits if traded correctly. Often times, these stocks appear to move without any news, and for no apparent reason -- a sign that some people might 'know something.' Savvy traders are always looking for opportunities like these and take advantage of them.

It is my opinion traders and investors should consider using option trading to better hedge or lever their positions accordingly.

pSivida Corp.(PSDV) 6/26/12 pps: $2.25 Up 0.37(19.68%), market cap: $46.80M

pSivda develops tiny sustained release, drug delivery products designed to deliver drugs at a controlled and steady rate for months or years. pSivida is currently focused on treatment of chronic diseases of the back of the eye utilizing its core technology systems, Durasert, BioSilicon, and ILUVIEN, for the treatment of Diabetic Macular Edema (DME).

Volume on PSDV picked up substantially yesterday, with 136,611 shares traded. The volume the prior 2 trading sessions was on the light side:

Date Open High Low Close Volume Adj Close*
Jun 25, 2012 1.87 1.88 1.78 1.88 14,600 1.88
Jun 22, 2012 1.81 1.89 1.80 1.89 17,100 1.89
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Almost 10 times the shares changed hands over the prior days' trading.

PSDV'S price and volume increase seems to be connected with Alimera Sciences (NASDAQ:ALIM), 6/26/12 pps: $3.40 Up 0.19 (5.92%), market cap: $106.87M

Alimera engages in the research, development, and commercialization of prescription ophthalmic pharmaceuticals. The company focuses on diseases affecting the back of the eye or retina, and licenses ILUVIEN from PSDV.

ILUVIEN (190 micrograms fluocinolone acetonide intravitreal implant in applicator) is a sustained release intravitreal implant used to treat chronic DME. Each ILUVIEN implant provides a therapeutic effect of up to 36 months by delivering sustained sub-microgram levels of fluocinolone acetonide. ILUVIEN is inserted in the back of the patient's eye to a position that takes advantage of the eye's natural fluid dynamics. The applicator employs a 25-gauge needle, which allows for a self-sealing wound.

On June 5th, 2012, The National Authority of Medicines and Health Products granted marketing authorization to ILUVIEN for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies.

This marketing authorization follows the completion of the Decentralized Regulatory Procedure in the European Union, in which the Medicines and Healthcare products Regulatory Agency in the United Kingdom, serving as the Reference Member State, delivered a positive outcome for ILUVIEN along with six Concerned Members States , specifically Austria, France, Germany, Italy, Portugal and Spain. The Portuguese authorization is the third national approval in the EU, preceded by Austria and the U.K.

In each country, pSivida receives 20% of net profits on a country by country basis. However, should Alimera license the marketing to a partner in any of the countries, then pSivida is entitled to 1/3 of any upfront fee and 20% of whatever royalty stream Alimera collects.

In my opinion, PSDV gets the better end of these deals. PSDV does not lay out expenses, but simply licenses its tech for royalty numbers mentioned above. It is also my opinion that PSDV's market cap of $46.80M is very undervalued and should be more around $100M, based on its ILUVIEN deal with Alimera, its deal with Pfizer (NYSE:PFE), and its clinical stage pipeline. Perhaps Pfizer sees value in PSDV as well, because it owns roughly 7% of PSDV stock.

I suspect both stocks are seeing action because news is coming that should tell us that ILUVIEN has received additional marketing authorization in the 3 remaining European countries who have not to date, granted the marketing authorization of ILUVIEN. I especially think PSDV could see a very large move upwards once investors catch on to the fact that PSDV might be in a better position as a company moving forward than Alimera is.

Antares Pharma (NASDAQ:ATRS), 6/26/12 pps: $3.71 Up 0.11(3.06%), market cap: $386.85M

Antares engages in the development and marketing of self-injection pharmaceutical products and technologies, and topical gel-based products.

The trading in Antares stock was rather volatile yesterday, with the stock hitting a 52 week high of $3.94, before pulling back to close at $3.71. This type of volatility was to be expected as Antares has 4 million warrants at $2.00 that expire July 1st. Couple this factor with the end of the quarter window dressing that normally occurs that tend to see some stocks become a little more inflated, the stock price should reach over 4 dollars a share sometime between now and next week in my opinion.

Antares also announced yesterday that positive results from a human factors usability study for VIBEX Methotrexate (MTX), a proprietary auto injector product designed to self-administer a rapid subcutaneous weekly injection of methotrexate for the treatment of rheumatoid arthritis. The company also remarked that it expects to file a new drug application (NDA) to the FDA in Q1 of next year. I maintain that Antares could actually file the NDA much sooner, as soon as the company's last study is complete, which might conclude at the end of this summer.

Once the application is submitted, the FDA has 60 days to conduct a preliminary review which will assess whether the NDA is "sufficiently complete to permit a substantive review". If the NDA is found to be insufficiently complete (and reasons for this can vary from a simple administrative mistake in the application to a requirement to re-conduct much of the testing), then the FDA rejects the application with the issue of a Refuse to File letter which is sent to the applicant explaining where the application has failed to meet requirements.

Assuming that everything is found to be acceptable, the FDA will decide if the NDA will get a standard or accelerated review and communicate the acceptance of the application and their review choice in another communication known as the 74-day letter. A standard review implies an FDA decision within about 10 months while a priority review should complete within 6 months.

Being a long time investor with the company, personally holding 86,200 shares, I have seen that Antares has a history of under promising and over-delivering.

I estimate that The Vibex MTX platform alone could bring over $400 million dollars a year annually to Antares from USA sales alone.

Aeterna Zentaris (NASDAQ:AEZS), 6/26/12 pps: $0.5399 Up 0.0831(18.19%), market cap: $60.08M

Aeterna Zentaris engages in the discovery, development, and commercialization of drugs for oncology and endocrine therapy primarily in the United States, Switzerland, and Japan.

The company announced yesterday that final Phase 3 results for its oral ghrelin agonist, AEZS-130, show that the drug is safe and effective in diagnosing adult growth hormone deficiency. Jose M. Garcia, MD, PhD, of the Baylor College of Medicine and the Michael E. DeBakey VA Medical Center, disclosed these data during an oral presentation yesterday at the 94th ENDO Annual Meeting and Expo currently being held in Houston, Texas.

AEZS-130 is a novel synthetic small molecule, acting as a ghrelin agonist, that is orally active and stimulates the secretion of growth hormone (GH). In addition to the diagnostic indication, AEZS-130, based on results of Phase 1 studies, has potential applications for the treatment of cachexia, a condition frequently associated with severe chronic diseases such as cancer, chronic obstructive pulmonary disease and AIDS.

The company saw its share price get clobbered on April 2nd, 2012, losing roughly 75% of its value from a closing price on March 30th of $2.14, to a closing price of $0.73, on news that the experimental colorectal cancer drug Perifosine did not meet the main goal of a late-stage trial, raising doubts on the drug's future as a treatment for a type of blood cancer.

Yesterday's positive news provides a glimmer of hope for AEZS shareholders, as shares closed significantly higher on 4 times the average daily volume, to $0.54, up $0.0832 (18.19%).

Is this the start of a turn-around for AEZS? Time will tell the real story here, and I wish the long-suffering AEZS share holders good fortune in this one!

Arena Pharma (NASDAQ:ARNA), 6/26/12 pps: $8.85 Down 0.34(3.75%), market cap: $1.62B

Arena engages in discovering, developing, and commercializing oral drugs that target G protein-coupled receptors in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases. The company’'s advanced stage drug candidate includes Lorcaserin for the treatment of weight management, including weight loss and maintenance of weight loss.

Today is the expected decision by the FDA on whether to approve or reject Lorcaserin. Lorcaserin is intended for weight management, including weight loss and maintenance of weight loss. There are currently limited pharmaceutical treatment options to help patients lose weight.

The stock has been trading sharply downwards from its recent 52 week high of $11.99 a share. Let's take a look at the action from the last few trading sessions:

Prices

Date Open High Low Close Volume Adj Close*
Jun 25, 2012 9.35 10.33 9.03 9.20 36,145,500 9.20
Jun 22, 2012 11.96 11.99 7.80 9.88 89,068,400 9.88
Jun 21, 2012 10.75 11.71 10.65 11.68 60,021,500 11.68
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Yesterday's trading action saw a further decline:

Day's Range: 8.65 - 9.76
Volume: 37,663,188
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Will Lorcaserin be rejected by the FDA for the 2nd time in 3 years? I do not think so - I think we are seeing profit taking ahead of today's expected decision. On approval, I expect the stock price to take a large leap forward, perhaps even getting close to $12 a share. This would not be good news for those who are holding a short position in the stock, as this would result in most short positions receiving an instant margin call with a forced buy-in. We should know the FDA's decision not too long after this article is released, so good luck to all the Arena longs, I hope you win on this one!

Disclosure: I am long ATRS.