On Friday October 26th, two companies within the biotech sector announced significant developments that had sent shares considerably higher during Friday's trading session. The first of these companies announced a development with regard to its breast cancer drug and the second announced better than expected results for the fourth quarter.
Galena Biopharma (GALE), which is headquartered in Lake Oswego, Oregon, is "a biotechnology company which engages in discovering, developing, and commercializing innovative therapies addressing unmet medical needs using targeted bio-therapeutics. The company develops cancer therapeutics using peptide-based immunotherapy products, including its lead product candidate NeuVax (nelipepimut-S or E75), which is in Phase 3 PRESENT trial for the treatment of various cancers". (Profile: Yahoo Finance)
Shares of Galena Biopharma were up roughly 5.4% at the close of Friday's trading session due largely in part to the company's announcement regarding the clinical testing of Neuvax. According to FlyontheWall.com,
The results showed a total of 26 patients receiving NeuVax had at least two CTC measurements made during the vaccine treatment. In 16 out of 26 NeuVax treated patients, the CTCs decreased during the time of treatment, corresponding with an increase in the patients' E75-specific CD8+ cytotoxic T-lymphocytes and an increase in their delayed type hypersensitivity reactions. DTH is the measurable signal on the skin that the patient is immunologically responding to treatment. None of these patients had a recurrence of their cancer during the five year follow-up period. Data presented indicate that vaccine treated patients were more likely to show a decrease in CTCs than control patients, Galena said.
Considering the fact that breast cancer is both one of the most common forms of cancer found in women and was responsible for roughly 40,589 deaths in 2008, Neuvax is probably one of the most promising drugs to enter into clinical trials in a very long time. If Galena can continue to demonstrate significant clinical results with regard to Neuvax, I see no reason why a position should not be established at current levels.
Varian Medical Systems (VAR), which is headquartered in Palo Alto, California, "designs, manufactures, sells, and services equipment and software products for treating cancer with radiotherapy, stereotactic radiotherapy, stereotactic body radiotherapy, stereotactic radiosurgery, and brachytherapy worldwide. Its Oncology Systems segment offers products, such as linear accelerators, brachytherapy after-loaders, treatment simulation and verification equipment, and accessories; and information management, treatment planning, and image processing software". (Profile: Yahoo Finance).
Shares of Varian Medical Systems were up roughly 15.4% at the close of Friday's trading session due largely in part to the company's most recent earnings report. According to the San Jose/Silicon Valley Business Journal,
Varian noted that net income in its fourth quarter was $120.2 million, or $1.08 a share, compared with $100.7 million, or 87 cents a share, a year ago. Revenue rose about 5 percent to $756.1 million". One of the more positive catalysts to come out of the report dealt with the company's revenue outlooking in the coming months. Varian's CEO Dow Wilson noted that "revenue will increase by between 8 and 9 percent in the current quarter which works out to revenue of between $675 million and $681 million.
Analysts were previously forecasting $664 million for the first quarter.
Should potential investors consider positions in both Galena Biopharma and Varian Medical Systems based on the recent developments at each company? Yes, they certainly should. On one hand, the potential at Galena Biopharma is great since the stock trades around $2.10/share and continues to demonstrate strong clinical results in terms of Neuvax. On the other hand, the potential at Varian Medical Systems comes in the form of the company's near-term revenue outlook. If the company can demonstrate results that are in-line or exceed the $681 million dollar number, we could see a short term pop of 5%-8% on the conservative side.
Are there any negative catalysts potential investors should consider before establishing a position in either company? As is the case with any biotech company, potential investors need to keep in mind some of the negative catalysts that go hand-in-hand with both Galena and Varian. In the case of Galena, if an FDA rejection with regard to Neuvax was to occur, the stock could be doomed for years to come. From an earnings perspective, if the company were to miss the enhanced revenue numbers, we could see a significant sell-off in the stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.