The euphoria around Arena Pharmaceuticals' (ARNA) and Vivus' (VVUS) obesity drug approvals reached feverish levels with huge returns possible for those making early entries into the common stocks. For example, closing prices for ARNA and VVUS on February 1st of this year were $1.95 and $11.96, respectively. At Friday's closing prices of $9.52 and $24.15, longs from those February entries would have netted 388% and 102%, respectively, even after the subsequent selloffs after the approval spikes. These levels of returns are what drive many investors to undertake the risky venture of investing in the high-risk and large-downside potential companies comprising the small pharma and biotech groups. This week, there a key clinical trial results and PDUFA dates that will give investors more opportunities at the upside and downside-potential plays that are the trademarks of small pharma investments. Investors should perform the proper amount of research into these companies before assuming the risks and ascertain what their risk/reward levels are and which, if any, of these companies are possible candidates for their portfolios.
Monday-Wednesday July 22nd-24th
OncoSec Medical (ONCS.OB) has the smallest market capitalization of about $21 million of the companies with catalysts this week. It is trading at about 100% above its 52-week low of 0.12 and well under its 52-week high of 1.02. The company has July 22-24th presentations for its phase 3 ElectroChemotherapy trial data at the 8th International Conference on Head and Neck Cancer in Toronto, Canada. Phase 2 data was impressive with data indicating a well-tolerated safety profile and efficacy comparable to that of resection (surgery) without the associated disfigurement. Success or failure in this data set could have a huge impact on the company's share price as it could validate or debunk not only the electroporation platform for ElectroChemotherapy using bleomycin, but also could cast doubt on the ElectroImmunotherapy platform's phase 2 interim data due out later this year utilizing IL-12 for metastatic melanoma and also Merkel cell carcinoma. Conversely, positive data in the phase 3 trial will help validate the company's platform and bring much investor and Big Pharma attention to this fledgling microcap company.
Thursday July 26th
Second only in hype to the obesity drug plays, Amarin Corporation's (AMRN) storied history will meet its biggest catalyst yet with this week with the July 26th PDUFA date for AMR101 for patients with very high triglyceride levels. Trading with many highs and lows so far in 2012 due to patent concerns and associated competition concerns, the company's common stock is now trading at $15.16 - 139% above January 4th's closing price of $6.35. With an assumed FDA approval in place, 12-month estimates for the common stock ranges from $19 to $27, both large upsides from the current $15.16 at market close on Friday.
Horizon Pharma (HZNP) has a July 26th PDUFA data for its rheumatoid arthritis treatment LODOTRA. A slow-release formulation of Prednisone, the drug is already approved in 16 European countries. However, the huge market potential in the United States will likely be its biggest share price mover. Closing Friday at $7.20, the stock is trading at 134% above its January 18th low of $3.07. Like the other PDUFA and phase 3 data plays, volume in the last month has been highly elevated as many eyes are on this $243 million market capitalization company.
Friday July 27th
Progenics Pharmaceuticals (PGNX) and Salix Pharmacueticals (SLXP) have a July 27th PDUFA date for the expanded labeling of Relistor for subcutaneous use for the treatment of opioid-induced constipation in patients with chronic, non-cancer related pain. The PDUFA date was rescheduled from April 27th of this year as the FDA required additional time to review the sNDA. The rescheduling was a blow to Progenics' stock as PGNX dipped to a May 18th low of $7.52 while the $3 billion market cap SLXP shrugged off the news with an already impressive product line. PGNX stock has since recovered and closed Friday at $10.10, 34% above its May 18th low.
Onyx Pharmaceuticals (ONXX) had a July 27th PDUFA date for Kyprolis (Carfilzomib) for relapsed myeloma. However, on Friday July 20th, the company announced a surprise early approval from the FDA. The approval sent share prices up to its 52-week high of $79.20, over 15.5% above its Thursday $68.40 close before settling down to close at $76.38, proving the value of a solid approval for even an almost $5 billion market capitalization company.
The above mentioned phase 3 data and PDUFA dates give investors a wide range of indications to chose from with a large market capitalization range from OncoSec's $21 million to Onyx Pharmaceuticals' near $5 billion. With the upside potential for the smaller market cap companies comes the large downside risks also; while the larger market cap companies with additional products in their pipelines have much smaller upside and also much smaller downside for comparable market potential drugs. Traders and investors alike should review the elevated prices for most of these companies, the downside potential for failure, and ascertain their risk tolerance before opening any types of positions. The FDA approval process is not as straight-forward as it might appear to be with risk of early approvals/rejections and the additional risk of selloff after approval often occurring as realization of market potential and production scale-up time frames become reality. Coupled with looming possible financing for those companies requiring additional money in order to convert from development phase to marketing phase, investment in this sector is certainly not for the faint of heart. This looks to be an exciting week for the pharmaceutical sector with lots of choices to be made!
Disclosure: I am long ONCS.OB.
Additional disclosure: I have no position in HZNP, but I may initiate a position in the next 72 hours.