5 Healthcare Companies With Holiday Catalysts

by: Spencer Knight

The FDA will be busy this month with four Advisory Committees and one PDUFA date scheduled in December. As always, these events can cause a stock to soar or a fly right over a cliff. This situation exists primarily with small biotechnology companies hoping for the one big approval to take their business to the next level. Fortunately for speculators there will be some opportunities during this holiday month. The question is will the FDA deliver these companies a beautifully wrapped gift or a lump of coal?

December 7, 2011

The first of three Advisory Committee meetings on December 7, is scheduled to discuss the implementation of Medtronic's (NYSE:MDT) Cardiac Resynchronization Therapy Defibrillator (CRT-D). The device is already marketed, but Medtronic is petitioning the FDA to approve CRT-D for additional indications. During this process, the FDA sent the new PMA to the Advisory Committee. Since Medtronic is a healthcare bellwether, the share price movement on the day is likely to be determined based upon broader indexes. If, for instance, the broader market is booming and Medtronic receives a positive recommendation; which will happen, we may see the share price significantly outperform the main three U.S. indexes. On the other hand, even if the Advisory Committee gives a positive recommendation, if the broader market is slumping, we may not see any sustained upside during the session.

Therefore the possible catalyst for Medtronic is minimal, but anytime a healthcare company has the opportunity to increase revenue with a new treatment or, in this case, a new device, traders will be looking to capitalize on that announcement. As alluded to previously, it is a fairly simple case for CRT-D, but since the FDA sent the amended PMA to the Advisory Committee there may be underlying issues.

The second Advisory Committee on the day will discuss Pfizer's (NYSE:PFE) Inlyta (better known as Axitinib). Pfizer is attempting to get Inlyta approved for the treatment of advanced renal cell carcinoma, which is a type of cancer that occurs in the kidneys. After Regeneron's strong Advisory Committee and recent approval for the company's VEGF-A style treatment, Pfizer may be in line for a positive recommendation as well. It is important to note both treatments focus on different diseases, but I am simply pointing out the blockage of VEGF receptors is a safe treatment. Of course one can easily bring up the fact that Regeneron's treatment is focused upon wet-AMD and Pfizer's is directed toward cancer, which has been a difficult obstacle for several major healthcare companies to conquer.

The real question is how will Pfizer's share price be effected by this decision. The decision has the possibility to move the share price. Since Pfizer lost patent protection for Lipitor on Wednesday, the company will need every treatment it can to make up for that hole. Obviously a strong recommendation will give the share price enough juice to see a 3%-5% spike immediately after the announcement. This may not hold throughout the trading session, but it will give traders some time to pick up slight profits. On the other hand if the Advisory Committee gives a negative recommendation we may see the share price slip accordingly. And after the CRL for Remoxy back in June, we may see shorter-term shareholders become frustrated if Pfizer does not receive a positive recommendation for Inlyta.

The third Advisory Committee will meet to discuss Affymax's (NASDAQ:AFFY) peginesatide. Affymax is attempting to get peginesatide approved for patients with anemia who are also diagnosed with kidney disease and are in dialysis. The company is currently in good standing with no debt and roughly $115 million at management's disposal. However unless peginesatide is given a strong recommendation the share price will plunge because peginesatide is the company's closest treatment to approval. Therefore investors have been waiting a while. Unfortunately investors may not receive positive news from the Advisory Committee.

After Affymax released the results from the phase-three clinical trials investors were not happy and the share price sank 75% on the one day. It must be noted the extent of this drop was due to the adverse-effects rate being higher than anticipated, particularly in the non-dialysis group. With that said, the NDA is specifying peginesatide for patients on dialysis. Another issue is the fact that peginesatide did not prove to be superior than epoetin and darbepoetin. Therefore even if peginesatide is approved, we may not see the treatment reach the number of patients it will take to move the share price to the 15 level.

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With that in mind, the Advisory Committee may in fact recommend the treatment for approval. This would be a surprise, but Affymax has vested a substantial amount of time into peginesatide. On that note, any type of positive recommendation will send the share price souring in anticipation of a future FDA approval. In this event, the share price will slide down again from the high point before the presumable PDUFA date, which sets up the company to be a perfect short opportunity.

If the FDA sends a negative recommendation the share price will plummet again. The likely scenario is a negative recommendation. It can be argued investors have priced this into the share price already, but there is much more to come. If peginesatide cannot get approved in the long run, expect Affymax to fall to the 3.00 range.

December 8, 2011

The following day the FDA will give Antares (AIS) a decision regarding the company's overactive bladder (OAB) treatment Anturol. If approved, Anturol will be the company's third approved treatment. As investors may know, the share price of Antares has been steadily below the 52-week high for some time. One would expect the share price to move to the $3.00 level in anticipation of the PDUFA date, but we will see over the next week. Anturol is a different type of treatment for OAB because it is a transdermal gel. Therefore you do not have to ingest any type of medication, which, according to Antares, allows the patient to avoid some of the side effects such as dry mouth.

What should investors expect over the upcoming week? The share price should continue to move higher. If not for the abnormally weak summer in 2011, the share price would be on a continuous trend higher. Are investors expecting an approval? Yes I believe they are, and they may get it. It must be noted a majority of the commotion regarding the share price has been due to Libigel, but with an approval of Anturol investors should expect to see a substantial surge in the share price. Similarly if a CRL is handed down, the share price will drop substantially. In this event, the share price will not fall off the map like many biotechs after a CRL because the focus is still on Libigel. Fortunately for investors an approval is likely heading Antares' way.

December 12, 2011

A few days later Alexza's (NASDAQ:ALXA) Adasuve is slated to face the FDA's Advisory Committee. Adasuve was rejected in October 2010 (under the name AZ-004) citing adverse pulmonary reactions as well as a required human factors study to validate the product can be used successfully. Alexza states these issues are resolved, but the Advisory Committee has stated it will focus on pulmonary safety. Adasuve may be in the same boat as Mannkind's (NASDAQ:MNKD) Afrezza. Both are novel inhalation powders that have possible pulmonary reactions. Therefore we will likely see the Advisory Committee pick apart Adasuve, which means unless the Staccato system is perfect we will see a negative recommendation.

Adasuve is intended to treat agitation in patients with schizophrenia and/or bipolar disease. There are about 8 million patients diagnosed with schizophrenia or bipolar disease in the U.S. and agitation can be a violent side effect and/or symptom of these diseases. While this may sound fine and dandy, one issue that should be brought up is how a caregiver will give a severely agitated patient the treatment. The system may be simple, but if a patient is severely agitated it may become extremely difficult to get the patient to accept the Staccato system.

Nevertheless, the share price will be severely effected by the decision. Alexza's share price has already seen continuous declines and a shot in the arm from the Advisory Committee will send the stock tumbling. On the other hand, since a positive recommendation is not expected, the share price has the potential to fly 40% on a positive note from the Advisory Committee. Unfortunately this will not happen because Alexza did not address the pulmonary concerns the FDA cited. Everything else including the human factors study was a success, but the company more or less dismissed the FDA concerns toward pulmonary side effects.

This month may be a short month due to the holidays, and it would not be surprising to see the PDUFA date delayed for one reason or another. Whatever the case, the important point to note is the fact that three of the above events will cause dramatic share price shifts for the respective companies. Will these three small biotechs cause the broader indexes to shift? No, but the two large-cap giants have the opportunity to substantially shift the Healthcare sector, and the broader indexes in the process.

Disclosure: I am long PFE.