The right catalyst for a biotechnology company can drastically move the valuation of a stock either higher or lower. On Monday there were several major developments from different companies in the space that created mass movement throughout the trading day. Then on Tuesday, the same occurred, with news that lead the sector higher. In this piece I am looking at five stocks that moved during the first two days of the week, with what could be company-changing developments. The stocks covered are of varied sizes and could see further movement in the immediate future due to recent catalysts.
The big winner on Monday was Eli Lilly (LLY). The company's market cap increased by nearly $3 billion (5.29% gain) after a secondary analysis showed that data from its Alzheimer's drug, solanezumab, might not be such a lost cause. Earlier this year the stock was under pressure, as many feared that the expensive drug may never be awarded an FDA approval. This perception was due to the drug failing to produce a significant response for patients with mild to moderate forms of the disease. However, the secondary analysis from an independent analyst found that the company's first study resulted in a 42% reduction in the rate of cognitive decline among patients with a milder form of the disease. By pooling the data, the analysts found a 34% reduction in cognitive decline for the specific group, which then energized shares to trade higher.
For anyone who's followed this particular study, you know that Eli Lilly is still, at least, one large study away from seeing an approval. The data on Monday was encouraging, but it does not guarantee that the drug will be approved as conflicting data must be explored. However, at this point no one has been successful in treating the disease. Eli Lilly is perhaps closer than any other company in the space.
It is believed that a 30-35% reduction in cognitive decline may warrant an eventual FDA approval. But like I said, there is still more testing that is needed, and it's very possible that the "search" for efficiency with this drug may turn out to be a false hope. As for now, the news is a reason for optimism, and provides a clear path for the company to eventually obtain an FDA approval if the drug works on the milder form of the disease. This is a story to watch over the next several months: if successful, Eli Lilly will enter a large market with a breakthrough (and highly profitable) drug.
Shares of VIVUS (VVUS) rallied by 10.19% on Monday after encouraging news regarding its recently approved weight loss drug, Qsymia, suggested the likelihood for higher sales. The first bit of encouraging news came when the company announced that Express Scripts, the country's largest Pharmacy Benefit Manager, has joined the Qsymia Certified Delivery Pharmacy Network. Qsymia is only available by mail order through the company's network, and now Express Scripts has been added to that network. However, the big news came later in the day, when Bloomberg reported that Qsymia's insurer payment rate rose five points in its second week to 36%. As a result, with more pharmacies carrying the product and more insurers covering the drug, it could increase the likelihood of Qsymia becoming a blockbuster product, or at least having dramatic increase in sales potential.
Prior to Monday, shares of VIVUS had traded with a monthly loss of 17% after the company stated that the European Medicines Agency was most likely going to reject its approval in the European Union. The stock has consistently traded lower since reaching highs of more than $30.00 back in July, as investors set realistic expectations for the drug. However, with more insurers agreeing to pay for the medication, it is possible that VIVUS is now presenting upside potential, and that sales could exceed revised expectations. Over the last month, sales expectations have been lowered as analysts have projected that the drug would be slow to adopt with physicians. The fact that it has to be obtained as part of a mail order program and only covered by one-third of insurers also added to the concerns. Despite this, the recent developments do suggest an increase in demand, or at least acceptance among the companies, that will dictate the success of the product. We already know that obesity is a nationwide problem, and that the size of the market is in the multi-billions. Therefore, with all things considered, including the valuation of VIVUS and its recent optimism, I believe it is presenting great upside from $20.00.
NeoStem (NBS) is a small company that rallied nearly 6% on Monday, after trading with gains of 9% throughout the majority of the day. The stock's rally was a result of a data announcement that its VSEL Technology demonstrated bone regeneration capabilities in a study that will be presented in the journal Stem Cells and Development. NeoStem is part of a new class in biotechnology companies with a focus on cell therapies to treat/cure degenerative diseases with large unmet medical needs. Its VSEL Technology has been linked to the treatment of many diseases, and the fact that it demonstrated bone regeneration capabilities is a major milestone for this company and its industry.
The idea that stem cells found in adult bone marrow could lead to bone development is an incredible concept for this company, probably deserving of much more than a 6% gain. Other cell therapy companies, such as StemCells (STEM) and Neuralstem (CUR), more than doubled in valuation after their cell therapies showed similar regenerative abilities. Interestingly enough, the VSEL Technology is NeoStem's most underdeveloped technology, as it also has a Phase 2 product for acute myocardial infarction and a manufacturing segment that provides cell therapy manufacturing services for many well-known companies in biotechnology.
The VSEL Technology has been closely monitored over the last year, as it has received a number of large grants from various institutions, and support from prominent organizations/religious groups such as the Vatican. It is a new concept in cell therapy without the ethical or moral dilemmas associated with embryonic stem cells, and is believed to have regenerative abilities for everything from glaucoma, liver, osteoporosis, to even usages for radiation exposure. Up until this point, its upside was solely based on independent studies, pre-clinical studies, and theory. But now the company has data to suggest that it does indeed promote bone regeneration, which could lead to very large upside over a period of many years. Of course more testing is needed to draw conclusions, but this is yet another catalyst and reason to be excited about the diversified presence of NeoStem in the cell therapy arena. And it is worth much more than a 6% gain.
Questcor Pharmaceuticals (QCOR) has been an impressive performer of the companies in this article during the first two days of the week, with a gain of over 12% - a huge feat for an over $1 billion market cap company. The gains occurred in anticipation of and following monthly sales figures for its lead product, Acthar gel. Keep in mind, this is a stock that has fallen by 60% during the last month after insurer Aetna (AET) cut its coverage on the drug and an investigation into the business practices of the company verified the suspicions of shorts. Nonetheless, the company did announce strong September sales, showing that perhaps the limited coverage by the third largest insurer will have a minimal effect on the company's sales.
In the month of September, Questcor shipped a total of 1,740 vials of Acthar to CuraScript SD. At first glance this looks like a loss over the previous two months. However, in the month of September there were only 19 business days, compared to 23 and 21 in August and July. Hence, the company did see gains over July and August for nephrotic syndrome and flat shipments for multiple sclerosis. The company had already stated that Aetna only accounted for 5% of Acthar vials shipped, and the company is proving its defense by posting strong monthly sales. Nevertheless, the issue is not September, but rather 2013 and long-term trends in coverage. It does appear that other insurers will keep coverage on the drug; furthermore, the company is cheap compared to its fundamental growth. I think investors should watch for large gains leading into quarterly results because more than likely the company will post strong sales and give good guidance. The company's already given investors a sign of confidence with a buyback and dividend program, but caution should still be taken. This is a company with a lot of long-term questions.
The bonus mover for this piece is OncoSec Medical (ONCS.OB), a very small company with a big idea and strong clinical data. This small company has moved the most of any biotech stock in the first two days: With a 35% gain. In part, the gains were due to the company's announcement of upcoming conferences, and the upcoming presentation of clinical data for its Merkel cell carcinoma and metastatic melanoma trials, and also because it has been undervalued for all of 2012.
OncoSec is an intriguing company. It has a diversified product line, strong data, and possible good upside due to the large area of need in its targeted indications of skin cancers and solid tumor cancers. Yet, it has continued to trade in a fairly tight range from the mid 0.10's to mid 0.20's since a late-March $7.75 million dollar offering caused the share price to plummet. However, during the first two days of this week, the stock has broken out of its shell, and may continue to trade higher now that it has exceeded top-level resistance. The data being announced is from the company's ImmunoPulse platform, which is a delivery device that helps the immune system target cancer cells. The administration platform has already been tested with DNA IL-12. Based on clinical trials, it has the ability to be used in conjunction with any melanoma therapy to decrease side effects and increase the uptake of any compound by more than 4,000 fold. In a Phase 1 study, the ImmunoPulse technology proved that 90% of treated lesions demonstrated local control and that 53% of patients with metastatic disease showed an objective response. Thereupon, the preliminary Phase 2 data will be huge for this company-and obviously, the market is expecting great results (despite the fact that its stock has been kept down for much of the year). This is a stock that could triple if clinical data is encouraging. For this reason, it is definitely a stock worth watching over the remainder of this year. This is only interim data, but positive data could be a huge share price mover for this microcap biotech. Investors should perform additional research into the company's platform and trade the events cautiously as the downside is always possible.
The five companies above represent different market capitalizations, treat different diseases, are in different stages of clinical development, and target different market groups. However, solid current and future catalysts link them by giving them an exciting first part of this week with positive news that could be a good indication of future growth. These are all companies to watch over the next few weeks, as recent developments could provide additional upside and wrap up an exciting 2012 for the pharmaceutical sector.