Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)

Pharmaceutical companies very often have a run-up leading into drug approval dates. I usually try to buy the stocks three to nine months before the anticipated catalyst date to make profit from the run-up. I screened for companies that have an European Medicines Agency (EMA)) decision date set for the next 3-12 months. These dates are only estimates by the respective companies and could still change. More information how this approval process works can be found from this article. I am only recommending these companies for run-up candidates not for long term investments. Here is a look at 5 companies that I found.

1. Avanir Pharmaceuticals (NASDAQ:AVNR) is a biopharmaceutical company focused on bringing innovative medicines to patients with central nervous system disorders of high unmet medical need.

(click to enlarge)

Upcoming EMA catalyst

Keith Katkin, President and CEO of Avanir, commented during the conference call on August 14:

Finally from a corporate perspective, we haven't spent a lot of time talking about our European filing of NUEDEXTA but we did file NUEDEXTA in Europe. We are currently working on responses to our 120-day questions. I believe that will lead to a CMHP recommendation very early next year with EMA approval following about three months after the CMHP recommendation.

Nuedexta is an innovative combination of two well-characterized components; dextromethorphan hydrobromide (20 mg), the ingredient active in the central nervous system, and quinidine sulfate (10 mg), a metabolic inhibitor enabling therapeutic dextromethorphan concentrations. Nuedexta acts on sigma-1 and NMDA receptors in the brain, although the mechanism by which Nuedexta exerts therapeutic effects in patients with PBA is unknown.

Avanir obtained FDA approval late in 2010 as the first and only FDA-approved therapy for the treatment of pseudobulbar affect and subsequently launched Nuedexta in February, 2011 in the U.S. markets.

Financials

The company reported the fiscal 2012 third-quarter (ending June 30) financial results on August 8 with the following highlights:

Revenue$10.5 million
Net loss$15.0 million
Cash$84.1 million

Upcoming other milestones

According to investor presentation dated August 15 the company has the following upcoming catalysts:

(click to enlarge)

My analysis

The stock has a $5.75 price target from the Point and Figure chart. I believe the stock could hit the price target after Nuedexta EU approval in 2013, according to Avanir. If the drug fails to gain EU approval I believe the stock could dip below $2. The stock has seen more insider selling than buying this year which could be a warning sign. Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases.

2. Curis (NASDAQ:CRIS) is a drug development company that is committed to leveraging its innovative signaling pathway drug technologies to seek to create new targeted small molecule drug candidates for cancer. Curis is building upon its previous experiences in targeting signaling pathways, including in the Hedgehog pathway, in its effort to develop proprietary targeted cancer programs.

(click to enlarge)

Upcoming EMA catalyst

During the second quarter earnings call on August 2 Daniel R. Passeri - Chief Executive Officer, President and Director commented:

Roche is working to secure approval for Erivedge in several of the territories, including Europe, Australia, Canada, Israel, Mexico and Switzerland. We're eligible to receive potential additional milestone payments upon regulatory approvals for Erivedge in advanced BCC in Europe and Australia, as well as royalty revenue in all territories in which Erivedge is sold. Roche has indicated that it currently anticipates possible European approval by the EMA in either late 2012 or early 2013. And we estimate that potential regulatory approval in Australia could occur during the first half of 2013.

(click to enlarge)

Erivedge is being developed by Roche (OTCQX:RHHBY) and Genentech, under a collaboration agreement between Curis and Genentech. Vismodegib is designed to selectively inhibit signaling in the Hedgehog pathway by targeting the Smoothened protein. The Hedgehog signaling pathway plays an important role in regulating proper growth and development in the early stages of life and becomes less active in adults. However, mutations in the pathway that reactivate Hedgehog signaling are seen in certain cancers, including basal cell carcinoma (NYSE:BCC). Abnormal signaling in the Hedgehog pathway is implicated in over 90% of BCC cases.

In January 2012, Erivedge was approved by the FDA as the first and only FDA-approved medicine for people with advanced forms of basal cell carcinoma. Curis earned a $10,000,000 milestone payment from Genentech as a result of the FDA's approval of Erivedge in this indication and the company is also entitled to receive royalties on Genentech's net sales of the product.

Financials

The company reported the second-quarter financial results on August 2 with the following highlights:

Revenue$4.4 million
Net loss$2.9 million
Cash$44.7 million

Upcoming other milestones

(click to enlarge)

Dan Passeri, Curis' President and Chief Executive Officer commented on August 2:

"In addition, we continue to focus internal resources on our ongoing Phase I clinical study in locally advanced head and neck cancer patients with our IV formulation of CUDC-101 and progressing towards planned IND filings in the second half of 2012 to begin Phase I clinical testing for both an oral formulation of CUDC-101 as well as our oral PI3K and HDAC inhibitor CUDC-907."

Curis and Debiopharm Group announced on August 15 that Debiopharm has begun treating patients in its HALO Phase I/II clinical trial of orally-administered Heat Shock Protein 90 (HSP90) inhibitor Debio 0932 in combination with chemotherapy regimens in patients with advanced stages of non-small cell lung cancer (NSCLC).

My analysis

I believe the stock could challenge the $5.5 level after Erivedge European approval either late 2012 or early 2013 according to Curis. If the drug fails to gain approval I would expect the stock to trade at $3. The stock has seen some insider selling this year. The last insider buy transaction was in May 2011.

3. Affymax (OTCPK:AFFY) is a biopharmaceutical company based in Palo Alto, California. Affymax's mission is to discover, develop and deliver innovative therapies that improve the lives of patients with kidney disease and other serious and often life-threatening illnesses. The company's first marketed product, Omontys (peginesatide) Injection, was approved by the U.S. Food and Drug Administration (FDA) in March 2012.

(click to enlarge)

Upcoming EMA Catalyst

Affymax announced on February 27 the European Medicines Agency (EMA) acceptance of the Marketing Authorization Application (MAA) for the investigational compound peginesatide for the treatment of anemia associated with chronic kidney disease (CKD) in adult patients on dialysis.

(click to enlarge)

Financials

The company reported the second-quarter financial results on August 8 with the following highlights:

Revenue$2.8 million
Net loss$32.0 million
Cash$119.2 million

My analysis

The stock has a $27.5 price target from the Point and Figure chart. The stock has seen steady insider selling this year. The last insider buy transaction was in December 2011. I believe the stock could reach $25 after EU approval of peginesatide in 2013 based on the MAA filing date. If the drug fails to gain EU approval I believe we will see sub $15 share prices.

4. Dendreon Corporation (NASDAQ:DNDN) is a biotechnology company whose mission is to target cancer and transform lives through the discovery, development, commercialization and manufacturing of novel therapeutics. The company applies its expertise in antigen identification, engineering and cell processing to produce active cellular immunotherapy (ACI) product candidates designed to stimulate an immune response in a variety of tumor types. Dendreon's first product, Provenge (sipuleucel-T), was approved by the U.S. Food and Drug Administration (FDA) in April 2010. Dendreon is exploring the application of additional ACI product candidates and small molecules for the potential treatment of a variety of cancers. The company is headquartered in Seattle, Washington.

(click to enlarge)

Upcoming EMA Catalyst

(click to enlarge)

Provenge is designed to induce an immune response against prostate cancer. Prostate cancer is the most common non-skin cancer among men in the United States, with over one million men currently diagnosed with the disease, and the second leading cause of cancer deaths in men in the United States. Dendreon owns worldwide rights for Provenge.

Financials

The company reported the second-quarter financial results on July 30 with the following highlights:

Revenue$80.0 million
Net loss$96.1 million
Cash$509.7 million

Dendreon announced a strategic restructuring to accelerate a path to profitability and future growth:

  • The company expects to reduce costs by approximately $150 million annually.
  • The company expects a reduction in headcount of more than 600 positions, including contractors, over the next 12 months.
  • The company expects to reduce its cost of goods sold (COGS) to less than 50 percent of net product revenue following the closure of the Morris Plains, NJ facility.
  • Full implementation of the restructuring is expected to take 12 months. Once implemented the company will be positioned to be cash flow positive when net product revenue reaches approximately $100 million in a quarter, a 20% improvement from prior guidance.

My analysis

There was one insider buy transaction in August 2012. There has been two insider sell transactions this year. If Provenge is to gain EU approval in mid-2013, according to Dendreon, I believe we could see the stock trading at $8 to $10 range. If the drug fails to gain EU approval we could see the stock dip below $3. The stock traded as high as $57 after the FDA approval of Provenge in 2010.

5. Arena Pharmaceuticals (NASDAQ:ARNA) is a biopharmaceutical company focused on discovering, developing and commercializing novel drugs for weight management, cardiovascular disease, inflammation and other disorders. Arena's US operations are located in San Diego, California, and its operations outside of the United States, including its commercial manufacturing facility, are located in Zofingen, Switzerland.

(click to enlarge)

Upcoming EMA Catalyst

Arena has received the 120 day assessment report as part of the European Medicines Agency review of the Marketing Authorization Application for lorcaserin. The questions and requests for additional information in this report will need to be addressed before lorcaserin can be recommended for marketing approval in the European Union. Arena plans to respond to the 120 day assessment in the fourth quarter of 2012.

Lorcaserin hydrochloride is believed to decrease food consumption and promote satiety by selectively activating serotonin 2C receptors in the brain. Activation of these receptors may help a person eat less and feel full after eating smaller amounts of food. Lorcaserin was approved by the FDA for chronic weight management under the trade name Belviq in June 2012.

Financials

The company reported the second-quarter financial results on August 9 with the following highlights:

Revenue$22.0 million
Net loss$22.1 million
Cash$143.8 million

My analysis

The stock has seen some insider selling this year. There has not been any insider buying since May 2009. I believe the stock could trade as high as $15 after the European approval of lorcaserin in 2013, according to Arena. If the drug fails to gain approval I believe we will visit $5.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AVNR, CRIS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: 5 Pharmaceutical Companies With EMA Catalysts During The Next 3-12 Months