When it comes to the biotech industry there are various catalysts potential investors should consider before establishing a position in what they think could be the next home-run stock. Today, I'm going to focus on two companies who have surpassed analysts' estimates in the most recent quarter and more specifically one company that was recently reiterated as a Buy, by Cantor Fitzgerald. I'm also going to highlight the secondary variables I consider to be positive catalysts moving forward.
Galena Biopharma Inc. (GALE) closed trading at $1.55/share on Wednesday as the company reported better than expected results for the second quarter. Analysts were expecting GALE to post an EPS loss of -$0.16/share, but to everyone's surprise GALE actually reported an EPS loss of only -$0.01/share. By the way that was a 93.80% surprise in terms of EPS estimates a secondary variable potential investors should always consider. There are two primary things potential investors should consider when it comes to GALE. In terms of the First and foremost, and as a result of recent earnings Cantor Fitzgerald reiterated not only its Buy rating but their price target of $4.00/share as well. The second primary variable to consider in terms of GALE is the company's Folate Binding Protein (FBP), which was recently award a patent in Japan. On August 13th the company announced, "the issuance of a patent from the Japan Patent Office for a Composition of Matter and Method of Treatment patent covering Folate Binding Protein peptide variants for use either alone or in combination with the FBP cancer vaccine, E39. The Japanese patent provides exclusivity in the country until 2022, with additional worldwide patent filings pending". In should also be noted that the company received U.S. patent approval on July 18th, with regard to its drug NeuVax, which is used as "a HER2/neu peptide vaccine, for inducing immunity to breast cancer recurrence in patients having low-to-intermediate IHC levels of 1+ or 2+ and a FISH rating of less than 2.0".
Syneron Medical (ELOS) closed trading at $9.94/share on Wednesday as the company reported better than expected results for the second quarter. Analysts were expecting ELOS to post EPS of $0.04/share, but to everyone's surprise ELOS actually reported an EPS of only $0.05/share, a 25% beat. There are two things to note with regard to ELOS's recent earnings. First, the company reported record revenues for the third straight quarter which came in at $68.1 million dollars and was up 12% year over year. Secondly, the company reported non-GAAP gross margins of 55.1%, up 2.0% from 53.1% year over year. Aside from the company's recent earnings report there is something else that should be considered a positive catalyst moving forward. On July 2nd the company received an FDA approval for its ELOS Plus™, a next generation multi-platform system featuring the company's proprietary elos technology. ELOS noted, "The new elos Plus™ leverages the Company's proprietary elos® technology of optical energy and bi-polar radio frequency to provide safe and efficacious treatments. This state-of-the-art system is customizable or upgradable utilizing a full range of up to eight in-demand aesthetic applicators, which also includes the Company's globally successful Sublative™ and Sublime™ applications".
I think both companies possess excellent long-term potential although there are a few things to consider that could result in subsequent selloffs of either stock. In terms of ELOS the biggest negative variable comes in the form of recent EPS trends which concern me, since the company has demonstrated mixed results over the last four quarters, even though the results are trending to the positive side. When it comes to GALE the next biggest catalyst to consider is the ongoing development of its drug NeuVax, and the progress it makes during the remainder of its Special Protocol Assessment with regard to the ongoing Phase III clinical trials. For potential investors looking to establish a position in either company, I'd establish a small to moderate sized position then add to that position at any positive indication from either clinical trials or further drug developments, as well as continued earnings growth.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GALE over the next 72 hours.