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Justin M. Hall is an entrepreneur, investor and author. Hall serves as owner and founder of HiRx, LLC located in Indianapolis, Indiana. He is the author of "The Option Investors Desk Reference©" (2008). Hall invests in areas of innovative growth, such as (1) late-stage drug, device... More
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  • Five Drug Makers with Pending Catalysts 9 comments
    Aug 31, 2009 06:26 AM | about stocks: ALTH, ARIA, ENDP, MRK, QCOR, RJF, SPPI
    This is the first article of a NEW series covering select drug, device and diagnostic makers. Listed below are five select drug makers with significant events (catalysts) scheduled in the days and weeks ahead.  Outcomes from these events could produce a significant move - one way or the other - in any of underlying companies' shares.  Odds of success (%) are derived from actual historical outcomes of previously successful drugs and companies that were similarly situated to those identified below. 

    When investing in a high risk environment, investors should consider hedging all of their long positions, calls and common shares, with put options.


    SEPTEMBER 2

    Endo Pharmaceuticals (ENDP)
    When the folks at ENDP acquired Indevus Pharmaceuticals on March 23, 2009, they picked up a couple of potential best-in-class drugs. One of those drugs is testosterone undecanote (formerly Nebido®), which is indicated for male hypogonadism or low testosterone. Regulators are scheduled to decide on the Nebido resubmission on September 2. For the record, I was long Indevus at the time of ENDP’s offer and I was fortunate to walk away with very nice gain on January 6.

    Nebido is administered by injection, but ONLY five times in a given year, compared to other injection treatments requiring patients get stuck every 2 to 4 weeks or so. As the hypogonadism patient pool grows in the coming years, Nebido is an attractive solution with tremendous potential.

    Odds of a successful outcome: 74%



    Questcor Pharmaceuticals (QCOR)
    At this time last year, a close friend, who works as a financial advisor with Raymond James (RJF) in Indiana, turned me on to QCOR. The company currently markets H.P. Acthar® Gel (Acthar) for nephrotic syndrome and now seeks regulatory approval for infantile spasms. Regarding the latter, regulators are scheduled to decide the fate for Acthar’s supplemental New Drug Application (sNDA) on September 2.
     
    Acthar is currently indicated to treat Nephrotic Syndrome (specifically 'to induce a diuresis or a remission of proteinuria in the Nephrotic Syndrome without uremia of the idiopathic type or that due to lupus erythamatosus'). We are working with leading nephrologists to further study the use of Acthar in the treatment of nephrotic syndrome.

    We have also completed filing a supplemental New Drug Application (sNDA) for Acthar as a treatment for Infantile Spasms. There is currently no drug approved in the United States for the treatment of Infantile Spasms.  Source: Questcor Pharmaceuticals

    Odds of a successful outcome: 85%



    Allos Therapeuctics (ALTH)
    As I indicated in this recent article at BioMedReports, I’ve reviewed the data and still can’t seem to get my arms around the optimism that surrounds ALTH and its cancer drug pralatrexate (PTX). With that said, anything can and does happen in this industry.  The Oncology Drug Advisory Committee is expected to review PTX on September 2, and make a recommendation to the FDA on whether they should approve it. On September 24, the FDA is scheduled to hand down their decision on PTX.
     
    PTX is indicated for a rare form of non-Hodgkin’s lymphoma (NHL) called peripheral t-cell lymphoma (PTCL). Due to the low incidence of PTCL, PTX received orphan drug status. Therefore, additional marketing privileges will be available to PTX upon approval. ALTH also obtained a fast track designation for PTX from the FDA. Under the fast track designation, PTX could be approved early. To the best of my knowledge, PTX has only completed a single Phase 2 trial. Surprisingly, ALTH has not yet found a partner to help them market PTX.

    Odds of a successful outcome: 47%



    LABOR DAY, SEPTEMBER 7

    Spectrum Pharmaceuticals (SPPI)
    On or before Labor Day, September 7 (next Monday), the FDA is scheduled to review SPPI’s supplemental application for Zevalin. Zevalin is already approved in the US for refractory non-Hodgkin’s lymphoma (NHL). SPPI hopes to get Zevalin approved as a first-line consolidation therapy for the treatment of NHL. For more details on Zevalin, refer to this August 20 article.

    On Monday, August 31, SPPI closed at a fresh multi-year high of $8.50.

    Odds of a successful outcome: 85%



    SEPTEMBER 30

    Ariad Pharmaceuticals (ARIA)
    The folks at ARIA are scheduled to release the first interim analysis from a Phase 3 study of their cancer drug ridaforolimus (rida) on or before September 30. Rida is indicated for rare soft tissue and bone sarcomas. The company expects to provide the results from a second interim analysis in Q1 2010 or no later than March 31, 2010. With positive results from the second interim analysis, the company will file an NDA requesting early approval for the drug. If granted priority review from regulators, then rida could be approved as early as Q4 2010.

    Like ALTH’s drug PTX, ARIA’s rida is also an orphan drug. Unlike ALTH, however, ARIA has a collaboration agreement with Merck (MRK), which is valued at or near $1 billion. For more details on ARIA, please refer to this August 14 article.

    Odds of a successful outcome: 70%



    OCTOBER 8

    Spectrum Pharmaceuticals (SPPI)
    SPPI has yet another drug that will be reviewed by the FDA, Fusilev®, on October 8. Here, SPPI is seeking to get Fusilev approved for use in combination with 5FU for the treatment of colorectal cancer. Fusilev is already approved in the US for combination treatment of osteosarcoma.

    It should be noted that it is very rare for a small cap drug maker to have two drugs reviewed in one year. From my research, I could not find another drug maker who had previously received approval for two cancer drugs in the same year. SPPI is very rare case and is worth paying some attention.  For more details on Fusilev, check out this June 19 article.

    Odds of successful outcome: 85%


    Table: Summary of Events
    Date
    Symbol
    Odds of
    Success
    Sept 2
    ENDP
    74%
    Sept 2
    QCOR
    85%
    Sept 2
    ALTH
    47%
    Sept 7
    SPPI
    85%
    Sept 30
    ARIA
    70%
    Oct 8
    SPPI
    85%


    Disclosure: Long ARIA and SPPI.
    Themes: Small Cap, Biotech, Drug Manufacturers, Healthcare, Long Ideas, Options Stocks: ALTH, ARIA, ENDP, MRK, QCOR, RJF, SPPI
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This post has 9 comments:

  •  
    You may remember me as lymezhome. Contrary to how you may feel about my opinion in one area, I have learned a lot from your articles. You're talking about hedging these positions with 'puts'. I honestly just picked up a book yesterday on options. Is there any advice you can offer for the novice investor on options?

    That being said, like you, I've had a very succesful year. However, unlike you, I have much to learn. I've just liquidated most my current holdings and am in cash aside from SPPI (long).
    Aug 31 09:26 AM | Link | Reply
  •  
    Lyme3M:

    Thank you for the question! I'm glad you have decided to learn about options and purchased a book! If I've helped you to learn anything, then I have done my job.

    Check out Optionetics.com and OptionsXpress.com (online broker). Some have also found Optionsmonster.com.

    I purchase both calls and shares and hedge them with puts. Regarding calls, I buy far out, i.e. January 2010 and beyond. I buy puts to hedge my calls and shares in the month closest to a significant catalyst. For example, I might by $5 or $7.50 puts in either October or November to hedge my position in shares and January 2010 $7.50 to $10 calls. Make sense?

    I hope this helps get you started! I do wish you the best of luck!

    Justin

    Just so you know, I view the past as the past. We move forward from here. Seriously, keep me posted on your progress and good luck!
    Aug 31 09:42 AM | Link | Reply
  •  
    It should have read,
    "Check out Optionetics.com and OptionsXpress.com (online broker). Some have also found Optionsmonster.com helpful."
    Aug 31 12:48 PM | Link | Reply
  •  
    Hi Justin,

    You mentioned that QCOR result will come on 2nd sep. we dont see any news till now.....
    Sep 02 02:51 PM | Link | Reply
  •  
    I relied on the company's press release from 12/2/08 stating that they (QCOR) had actually filed a supplemental New Drug Application. Generally, the FDA only reviews sNDAs 10 months after filing.

    I thought it was clear. It was not. From my view, it seems apparent that the company has not clearly communicated what is going on with their Acthar sNDA. With that said, I should have not reported it. That is my fault.

    Setting that aside, QCOR is trading a little over 9 X earnings. I stilll like the play as a longer-term investment. The company is solid financially. I would be a buyer on any dips.

    I hope this helps.

    Justin
    Sep 02 05:10 PM | Link | Reply
  •  
    Thanks for responding.
    Sep 02 08:31 PM | Link | Reply
  •  
    Navneet:

    You are welcome. I make it a point to respond to most, nearly all, comments and questions. If folks take the time to ask a question or make a comment, then I will make the time to provide them with an honest answer or response.

    Please continue to stay in touch and good luck!

    Justin
    Sep 02 09:45 PM | Link | Reply
  •  
    Justin,

    I'm a big fan of your articles..they're very helpful and informative. I'm looking for my next play in the biotech sector. Are you aware of any other companies with multiple events (catalysts) in the coming months (i.e. SPPI)?

    Thanks
    Sep 03 03:58 PM | Link | Reply
  •  
    Alswoop:
    Thanks for the feedback! I appreciate it!

    ARIA remains very compelling under $5. ARIA is far better positioned than ALTH with regards to price and value. In other words, I view ARIA as dirt cheap. For the record, I am long ARIA. I wrote a detailed article on ARIA in mid August. I encourage you to check it out. I also like GTXI right now.

    I hope this helps.

    Justin
    Sep 03 04:20 PM | Link | Reply
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