Many growth investors who have an increased appetite for risk are attracted to the enormous potential biopharma companies bring to the table. That said, I wanted to examine how one IPO has performed compared to the performance of one of its industry counterparts, and discuss some of the variables I happen to find attractive.
Hyperion Therapeutics, Inc. (NASDAQ:HPTX) trades in a 52-week range of $9.95 (52-week low) and $11.00 (52-week high), closed trading at $10.49/share on Tuesday as the company completed only its 5th day of trading. The company's recent IPO priced 5 million shares at $10/share and began trading on Thursday, July 26.
One the things I find very attractive about HPTX is its drug Ravicti, which is designed to combat rare diseases of the liver, and lower the amount of ammonia in the bloodstream of newborns. The second variable to consider is the recent insider buying activity in terms of the company's stock. On July 31, there were two significant buys potential investors should be made aware of:
- Panorama Capital purchased 550,000 shares, bringing their ownership stake up to 12%.
- New Enterprise Associates purchased 500,000 shares, bringing their ownership stake up to 18%.
Potential investors should also be aware of the current status of Ravicti with regard to HPTX. The company has a PDUFA date with the US Food & Drug Administration scheduled for October 23 with regard to Ravicti and its application for the treatment of urea cycle disorders in newborn children. This PDUFA date will examine one of two orphan indications for Ravicti. It should be noted that the FDA has handed down decisions through the Complete Response Letter (CRL) method prior to the PDUFA date, which could result in either positive (if the drug gets approved) or negative (if the drug get rejected) behavior in the stock.
From a financial perspective HPTX has performed well since its IPO, trading up nearly 4.9%, and when compared to the performance of Tesaro, Inc.'s (NASDAQ:TSRO) recent IPO, which is down nearly 4.85%, that's pretty impressive.
I think HPTX is a pretty strong growth play, considering their current pipeline and insider buying of the stock. I'd pay very close attention to an FDA decision in terms of HPTX's Ravicti, as its dual-orphan usage could weigh heavily on the performance of the stock. Earnings are also going to play a key role, especially throughout the second half of 2012. If we see positive EPS performance, HPTX could pop; on the other hand, any negative news, such as an FDA rejection, could send the stock significantly downward. In my opinion, if the company receives both a favorable decision with regard to Ravicti and manages a string of positive EPS announcements, it could be takeover target in the not-so-distant future.
Disclosure: I am long HPTX.