Heron Therapeutics: Giving A 'Thumbs Up' To This ~$14 Biopharma Stock

| About: Heron Therapeutics, (HRTX)
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Summary

A small biopharma named Heron Therapeutics has pulled back some 25% from recent highs. Should this concern be on your buy radar as a biotech investor?

It does have several positive attributes including multiple shots on goal, strong analyst support and upcoming catalysts.

We take a deeper look at this name below.

"Since no one but you can know what's best for you, government control can't make your life better." - Harry Browne

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I have had several requests recently to take a look at a small biopharma called Heron Therapeutics (NASDAQ:HRTX) recently, so we will start off the trading week with a quick deep dive on this name.

Company Overview:

Heron is a small biopharma concern that is focused on developing novel, patient-focused solutions that apply their innovative science and technologies to already-approved pharmacological agents. In this way, the company is very much like Eagle Pharmaceuticals (NASDAQ:EGRX), BioDelivery Sciences (NASDAQ:BDSI) and several others. Heron has been public for more than a decade and has an approximate market capitalization of $550 million. The stock currently trades at just under $14.00 a share, which is near the bottom of its 52-week trading range. The shares 52-week high is just north of $25.00 a share.

Product Portfolio & Pipeline:

The company has one approved product, one compound they just filed a NDA on, and one promising late stage offering as well. All compounds were developed using the company's proprietary Biochronomer drug delivery technology which can deliver therapeutic levels of a wide range of otherwise short-acting pharmacological agents over a period of days to weeks with a single injection

SUSTOL®:

The company's one current approved product is also known as granisetron. It is an extended-release injection and is indicated in combination with other antiemetics in adults for the prevention of moderately emetogenic chemotherapy {MEC} or anthracycline and cyclophosphamide combination chemotherapy regimens. The company recently guided that it expects to see $15 million to $25 million in revenues from this new product in 2017. This was considerably below the consensus (~$45 million to ~$50 million) on the street and is one reason behind the shares weak performance over the past few months. On a brighter note, the company announced Friday that SUSTOL® is now included in the National Comprehensive Cancer Network's Clinical Practice Guidelines in Oncology for Antiemesis Version 1.2017.

CINVANTI™:

Also known as HTX - 019 is being developed for the prevention of CINV. The compound has the potential to become the first polysorbate 80 free, intravenous formulation of aprepitant, a neurokinin-1 (NK1) receptor antagonist. The company filed a NDA for CINVANTI™ in January.

HTX - 011:

This is the company main pipeline offering. It is a long-acting formulation of the local anesthetic bupivacaine in a fixed-dose combination with the anti-inflammatory meloxicam for the prevention of post-operative pain. It targets both pain and inflammation and had demonstrated advantages over current standard of care in multiple surgical models-bunionectomy, hernia repair and abdominoplasty (tummy tuck)-in Phase 2 studies.

Analyst Commentary & Balance Sheet:

The analyst community is quite high on Heron's prospects at the current moment. The current median price target analysts currently have on HRTX is just over $34.00 a share. So far in 2017, Jefferies has reiterated its Buy rating and $29.00 price target on January 6th. It should be noted that price target was down from $40 previously on reduced Sustol sales guidance for 2017. Cantor Fitzgerald reissued their Buy rating and $34.00 price target on January 12th and Cowen & Co. chimed in late last week with its own Buy rating and $40.00 price target.

The company raised some $150 million recently via a secondary offering, so near term funding issues seem to be put to bed. Hopefully is Sustol and CINVANTI™, if/when approved, sales do well; this will be last capital raise the company does in the foreseeable future.

Outlook:

Aloxi is the competitor Sustol is aimed at and seems to have some beneficial traits compared to that compound. Aloxi did over $450 million in net sales in 2015 but is coming off patent in 2018. Another SA contributor I greatly respect, had a $300 million peak sales bogey on Sustol in a recent article. If CINVANTI™ is approved which looks likely, it will go head to head with Emend from Merck (NYSE:MRK) which does some $500 million in net sales, although it does come off patent in 2018. In trials, CINVANTI™ showed better tolerability and some other superior features to Emend. HTX-011 provided it also makes its to approval will compete against Exparel and myriad others in the ~$9 billion post-operative pain market.

Although Heron technically violates my "Ten Year Rule", I am going to take a small stake in this biopharma stock today. It has multiple "shots on goal", has resolved its funding overhang for the time being, has upcoming catalysts and solid analyst support. In addition, my favorite healthcare investors, the Baker Bros. have an over 5% stake in the firm.

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Thank You & Happy Hunting

Bret Jensen

Founder, Biotech Forum

Disclosure: I am/we are long HRTX.

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.