3 Attractively Valued Biotechs From BIO CEO 2013

Includes: FURX, POZN, RXII
by: Bio Insights

A large number of companies reported at the 15th Annual BIO CEO & Investor Conference, which was just held on February 11-12th 2013 in New York City. This article will focus on a handful of undervalued companies from the conference that don't get as much mention in the mainstream as other high-profile names and have already been added to my watchlist a while ago.

These stocks all have factors that could drive up share prices in 2013, and represent investments worthy of consideration.

Furiex (FURX)

One of the big rallies of 2013 that seemed to be ignored by the media was Furiex's big jump to $35/share on January 28th, following news of the FDA approval of NESINA (alogliptin) and the fixed-dose combinations of OSENI (alogliptin and pioglitazone) and KAZANO (alogliptin and metformin HCL) for type II diabetes. These compounds are all being marketed by Furiex's partner Takeda (OTCPK:TKPHF), which has the resources to market diabetes drugs more effectively.

This approval resulted in an immediate $25 million milestone payment to Furiex from Takeda, and the new potential for substantial royalty revenues from the US diabetes treatment market, as well as other milestone payments upon certain sales-based milestones.

This adds a lot of juice to Furiex's financials going forward, and easily gives FURX the chance at reaching earnings-positive territory later this year. I think that Furiex's valuation of roughly $363 million reflects this FDA approval, but much more upside exists from the European market for type II diabetes as well as from the potential of the ignored phase III drug Trelagliptin (SYR-472).

I also think that FURX could see buying when the stock turns EPS-positive as a result from the upcoming royalty revenues.

RXi Pharmaceuticals (NASDAQ:RXII)

One of the most exciting recent trends in the advancement of therapies has been the introduction of highly effective RNAi (RNA interference) therapeutics. By interfering with RNA, a whole new generation of therapies can be developed that attack diseases through an entirely different mechanism of action than was thought possible. Sarepta Therapeutics (SRPT) is another company that bases their technology on RNA interference, and now seems to have a very effective muscular dystrophy treatment.

RXi is another one of the leaders in this subsector, and has been reporting progress on its anti-scarring treatment RXI-109 which is just at the end of phase I trials. I expect the safety data to come out quite good, as RXI-109 is locally delivered and does not have a high enough dosage to warrant much concern. The efficacy of RXI-109 also seems to be established through existing clinical trials which tested anti-CTGF (connective tissue growth factor) compounds too.

The market for scar prevention therapies is well over $1 billion in annual revenues, which makes the $18 million valuation of RXII attractive for buy-and-hold investors that have confidence in RNAi. RXi may also be a good buyout target for larger pharmaceutical companies that are looking to expand their profile in RNAi based therapeutics, since it is much cheaper than the likes of SRPT.

Pozen (POZN)

Pozen is a recent favorite of fellow biotech enthusiast Scott Matusow, and has moved up about 15% since the excitement began.

This company, which is valued at about $192 million now, has 6 therapies in its pipeline, although the commercialization rights for the two that have already received FDA approval have been compromised in exchange for milestone payments. The bright side is that they have a migraine therapy MT 400 which is virtually guaranteed FDA approval due to the approval of Treximet, which was the same thing in a higher dosage.

The big catalyst for Pozen for 2013, as mentioned by Scott, is indeed the NDA submission for PA32540 which is scheduled to happen in April 2013. This will combine omeprazole with acetylsalicyclic acid, basically making a Prilosec-aspirin hybrid that should allow patients to take a pill that offers the full beneficial effects that aspirin has on cardiovascular health while limiting the damage done to the gastrointestinal tract.

Pozen seems quite excited about the market prospects of this pill, which could end up becoming the primary driver of POZN shares. I also think that POZN could have a good run-up as speculation builds over the potential FDA approval of PA32540.

Disclosure: I am long SRPT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.