Bio Run-Ups: What To Expect In The Next Few Months

by: Alexander Maxwell

FDA catalysts for small pharmaceutical companies can be huge, and they can usually either make or break a stock's share price. For some companies it can represent the culmination of years of hard work, while for others it is just another step in a bumpy road. There are a few PDUFA notification dates coming up (a PDUFA notification date is a date by which the FDA will tell the company whether or not the company's drug has been approved; the FDA generally has three options: approve, issue a CRL which means not approved, or delay approval for another time frame usually three months). Usually many of the people who believe in the drug will stay in for PDUFAs and the people who were in for the run-up will already be out (at least I hope for them that they are out) by the PDUFA date.

The idea of trading on a pharmaceutical run-up is that there is generally a trend among pharmaceutical companies after they file for an NDA that in probably a time frame of two to three months before the decision, the stock begins to gain a large amount of interest and hence the share price increases. This represents an interesting idea for investors, as usually some will come in early on in the process, buy low, and sell before the PDUFA (usually a few weeks depending on your risk tolerance; remember the FDA can sometimes come out early with their decision). They will pocket the difference without absorbing the risk associated with the PDUFA date and from what I have noticed it seems to be that the more important the drug is to the company, the bigger the run-up. Here are a list of a few upcoming PDUFA dates and the companies. Also please note that a similar occurrence happens before FDA panel votes; for an example look at DVAX, it ran way up before the panel and then crashed after the negative panel vote. So again a run-up investor will typically have cashed out before the panel actually is able to vote on the drug.

The first company with an upcoming PDUFA date is: the April 26th PDUFA date for Sucampo Pharmaceuticals (NASDAQ:SCMP). This PDUFA is over their drug AMITIZA for opioid induced constipation. Obviously, a drug in that market would have a reasonably large market potential. This drug company is also profitable, as you can see through the AP article. Also of note is the fact that SCMP is already selling the drug in other regions of the world; while this is not necessarily indicative of a positive FDA decision, it does help investors to be confident that the drug will be approved. This could mean that the approval is already baked into the stock price, so I would be rather careful in doing run-up investing on SCMP; however, it does look like a decent long-term investment if you are interested in that.

Another PDUFA date in April is for Titan Pharmaceuticals (NASDAQ:TTNP) on April 30th, 2013. This is for their drug Probuphine, which is designed as a maintenance treatment for opioid dependence. According to Titan, the drug also received priority review by the FDA, which shortened the standard 10 month review time (note that as of January 1st of this year, I believe that the standard has changed to 12 months). I would expect a run-up, Titan's other drug on the market has not been selling all that well even though it is partnered with Vanda (NASDAQ:VNDA) and Novartis (NYSE:NVS). Probuphine seems to have large market potential, which Titan might be hanging its hat on in order to be profitable. A serious test was the Adcom on March 21st, 2013 for the TTNP drug. The committee was contentious but overall voted for approval, which is likely a good sign for the stock. Given their recent lucrative commercialization agreement signed with Braeburn Pharmaceuticals, this stock has the potential to move quickly based on a positive FDA decision. I do not want to speculate as to whether or not the stock will continue to run-up, all that I can say is that TTNP will remain a compelling investment in my opinion.

A PDUFA occurring on the same day as Titan's is one for Raptor Pharmaceuticals (NASDAQ:RPTP). This is for their drug PROCYSBI for the treatment of nephropathic cystinosis. This is an interesting run-up play, as their PDUFA date was extended to April 30th, and was originally January 30th. It is possible that most of the run-up was killed when they announced the extension. However, I would speculate that it was not, as most of the run-up people probably got out when the extension was announced and are only now getting back in. RPTP is not profitable right now, so this drug is very important to their long-term growth prospects and therefore, there is likely to be a run-up surrounding this drug.

A Committee meeting date for Delcath Systems (NASDAQ:DCTH) is scheduled for May 2nd. This committee vote will be very important for their surgical procedure Melblez. It is supposed to help fight cancer. I do believe that the run-up has already begun, as there has through the last month been a pop in DCTH's share price. However, it might not yet be over. Word of caution though is that I would make sure that I am out before this committee date, as I do not anticipate it going very well for DCTH. Remember, however, that the Committee's decision is just advisory and that the FDA can approve a drug even if the committee suggested that they reject it; however, the FDA follows the committee's recommendation roughly 90% of the time. It is also interesting in the sense that if this stock takes a hit by a committee rejection, then there could very well be an opportunity for another run-up leading into the actual PDUFA date (very similar to what we saw with Dynavax Pharmaceuticals after its committee rejection.)

On the same day is the Advisory Committee date for AVEO Pharmaceuticals (NASDAQ:AVEO). Aveo is not yet profitable, so once again this is a very important committee hearing for AVEO, as mentioned above, if the committee rejects the drug the odds go up substantially that the FDA will overall reject the drug. The drug in question is Tivozanib for the treatment of renal cell carcinoma. This drug is entering a rather big market if approved, so a run-up is very possible. Also, this drug is even more important than meets the eye for AVEO, as it is also being tested in various types of cancer. A victory over the FDA would likely help to validate the method of the drug, and would add to the pop in share price likely upon an approval being issued. AVEO strongly needs this drug to get through regulators, as they are bleeding cash. This presents an excellent run-up play for any investors interested. Also, looking at the three month chart it looks as though the run-up has not yet started meaning that you do not appear to be late for the party. This is my personal favorite short term run-up candidate. Just like with DCTH though, it could be interesting if the drug is rejected by the committee. We could set ourselves up for more of a Dynavax situation in which we buy right after the negative ruling, and ride the stock up close to the PDUFA and sell right before at around the same price it was before the advisory committee vote.

On May 31st, DepoMed (DEPO) is projected to receive its PDUFA response. This drug is for menopausal hot flashes, and was rejected by the committee. While the rejection of the drug by the committee is a shame, as it means that the drug is not very likely to make it through to approval at least not without more data...DepoMed seems as though it is growing in terms of revenue, so in the scheme of things it would be nice for them to see the drug get approved, but they are not in as much trouble if it is ultimately not approved, when compared to some other stocks who have to lean entirely upon one drug being approved.

Similarly, May 31st is the PDUFA date for a company called Flamel Technologies SA (FLML). This is a relatively small company, trading under five dollars a share, and just over 100 million dollars in market cap. What is most intriguing at least in my research is the fact that they have been able to keep it a secret from shareholders what the drug is that they have submitted their application for, and will instead disclose at a later date what the product is. This is a very interesting situation, and a rather unique one, in the press release all that they mention of the product is that: " if approved by the FDA this product is expected to generate $25 million to $35 million or more in peak annual revenues." It is hard to say what the fair value of the company would be based on that revenue, without knowing such things as the margin of the product, price point or even what market the drug is in.

I would be hesitant about the run-up situation of the stock simply because no one is sure about what the drug is, and no one really knows how accurate that revenue number could really be. Since it is hard to gauge exactly how important the drug would be for the company, I would still say that we will experience a run-up in stock price. With the stock trading well off of its 52 week high, I would not be surprised at all if there is a large run-up even with all of the investor uncertainty surrounding this stock. My hat is off to the people who are long on this stock; I wish you luck, I am not sure how I would be able to handle not knowing exactly what my company is researching and be able to place that much trust in the CEO of the company. However, it does look like an interesting value play.

On June 15th we have the actual Delcath PDUFA date. The panel vote is projected by many people to be negative, so that would suggest that the PDUFA date would likely be negative as well. However, weirder things have happened; I would say that if you wanted a contrarian pick for the year and wanted to hold one through PDUFA with a chance for a major surprise on the upside it could possibly be Delcath. The results from their study look interesting, however, I am not sure as to whether it will be sufficient to convince the FDA to give Delcath the green light. I would expect personally to see more testing required before being able to even resubmit the NDA.

July 28th is the AVEO PDUFA date. As mentioned above this is my favorite run-up candidate, so this would be a very important date to know for any investor taking a serious look into AVEO.

August and September seem to be relatively quite months for the FDA in terms of PDUFA decisions, however, it is pedal to the metal when it comes to October PDUFA decisions.

October 14th is the Antares Pharmaceutical (NASDAQ:ATRS) PDUFA date for its OTREXUP injector for the treatment of Rheumatoid Arthritis. This is a stock that I personally own and am confident given the success that Antares demonstrated in its studies that the device will get the green light from the FDA. Remember that this is just the device being approved; the drug in the device has been on the market for quite a while, which helps to eliminate one of the variables of the FDA decision regarding Antares. Furthermore, this decision is very important for Antares as this product would be the first one that Antares itself would take to market, it has a few products and injectors for which it receives royalties.

The fact that Antares is taking this product to market tells me that it is extremely important for the company, and therefore I would expect a similar run-up in the months leading up to the FDA decision. I would, however, expect a bigger run-up for AVEO, which is a stock that I do not own, as their approval would validate the entire platform. Antares' platform has already been validated many different times mainly through its Tjet Device, which is marketed as Tev-Tropen by none other than Teva Pharmaceuticals (NYSE:TEVA). If you are looking for a long idea in terms of a pharmaceutical stock, I would describe Antares as a very compelling investment with seemingly low risk as Antares is very close to profitability already even without the approval of OTREXUP and also is sitting on what seems to be a mountain of cash. For more information on Antares, please view my article on why ATRS is a compelling long-term investment.

For the final PDUFA date discussed in this article, it's AMAG Pharmaceuticals (NASDAQ:AMAG). Their PDUFA date is on October 21st of 2013. Please note that this is an sNDA, which means that the drug has already been approved and the sNDA is to add an application for which the drug can be used. In the case of AMAG Pharmaceuticals, the product is Feraheme, which is approved to help treat iron deficiency anemia in patients with chronic kidney disease. The sNDA is to expand the indication to include all adults with iron anemia deficiency who are unable to take oral iron. The Oral Iron was already a condition for the previous indication with Chronic Kidney disease, as Feraheme is an IV solution. Obviously, this PDUFA date would be very important for AMAG Pharmaceuticals as it substantially expands the patients who are available to use their solution (this would also of course mean increased revenue).

By expanding their indication, the increased revenue would help to put AMAG on the road to profitability and it is likely that the approval of the sNDA would take a nice chunk out of the loss that AMAG experiences every quarter, as AMAG would be able to increase revenue relatively easily for their drug. This is an interesting run-up, as I do not believe that it is too late at all, maybe even quite early to enter the party and sitting at a market cap of over 400 million it is by no means cheap, but there is still plenty of room for the shares to run up prior to the PDUFA date; notice that AMAG has recently broken its 52 week high; I would say that if you could get on now you might be looking at some substantial profits in regards to a particular run-up, as it is usually a good sign for a run-up when the stock is annihilating its 52 week high.

As time gets closer to the end of the year, I will post a list of the next upcoming PDUFA dates. I will also keep track of the decisions that these companies come out of their PDUFA dates with, and I will also keep track of where the right time to buy was in order to see if we can draw any more generalizations to help make pharmaceutical run up investing even more profitable. Remember that investing in run-ups is risky business. I have made a great deal of money doing it and have also lost a great deal of money doing it, so be very careful. I wish everyone the best of luck with their investment decisions.

Disclosure: I am long ATRS. 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.

Additional disclosure: I might initiate a position in AVEO within the next 72 hours.