Biotech Forum Daily Digest - Biotech Soars! Spotlight On Novacure

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Includes: AVEO, BLUE, CELG, KPTI, NVCR, PTLA
by: Bret Jensen

Summary

The biotech sector had its best week in recent memory thanks to benign actions from the administration around curbing excessive drug pricing.

Both large caps and small caps enjoyed huge rallies and many small caps soared on company specific news.

All the other notable news, events and analyst ratings as well a Spotlight feature on Novacure are below.

"Hesitation of any kind is a sign of mental decay in the young, of physical weakness in the old."
― Oscar Wilde

Oscar Wilde

The biotech sector soared this week in its best performance in recent memory. The administration released details on how it intends to tackle drug pricing issues by fostering competition and faster drug approvals, rather than additional onerous regulation. The recently released GOP healthcare plan this week also contain no adverse actions on the drug industry.

The biotech sector rallied strongly and finally burst through upward resistance levels decisively that had been firmly in place since December of 2015. Hopefully this shift in sentiment entices some of the large drug and biotech giants to get off their hands and get more active in the M&A market which could then ignite the next leg of the rally. Absent that, we made consolidate these huge gains over the next few weeks.

Author's note: To get these Biotech Forum Daily Digests as soon as they are published, just click on my profile, hit the big, orange "Follow" button, and choose the real-time alerts option.

Portola Pharmaceuticals (NASDAQ:PTLA) surged over 45% in trading Friday after the FDA granted approval to its compound Betrixaban which is an extended-duration anticoagulant, for the prevention of venous thromboembolism {VTE} in hospitalized at-risk adult patients. The stock has nearly tripled since we gave it a big "Thumbs Up" here on these pages late in December.

Bluebird Bio (NASDAQ:BLUE) sank over five percent on Friday despite the rally in the sector. It disclosed preliminary Phase 3 trial data from its Northstar-2 study assessing its LentiGlobin drug product in patients with transfusion-dependent beta thalassemia and non-β0/β0 genotypes. While the data met its primary endpoint, investors were underwhelmed.

Finally, Aveo Oncology (NASDAQ:AVEO) soared over 70% in trading to close out the week. The European Medicines Agency's Committee for Medicinal Products for Human Use {CHMP} decided to adopt a positive opinion recommending approval of FOTIVDA (tivozanib) for the treatment of advanced renal cell carcinoma which should lead to approval for this compound for use throughout Europe.

Thanks to the positive opinion on FOTIVDA, Aveo Oncology saw only the second analyst firm activity of 2017 Friday. Piper Jaffray took the opportunity to raise its price target from $1.60 to $2.00 a share on this small oncology play while maintaining its Outperform rating. FBR Capital reiterated its Buy rating and $3 price target last month in the only other rating on the stock this year.

Celgene (NASDAQ:CELG) which had one of the biggest moves among the large caps of the sector last week, was reiterated as a Buy during the week by Oppenheimer, Leerink Swann and Jefferies. Price targets proffered ranged from $148 to $154.

Karyopharm Therapeutics (NASDAQ:KPTI) got a shout out from Cantor Fitzgerald on Friday who reissued their Buy rating and $18 price target on the firm. The company released preliminary data from a mid-stage study around its compound to treat relapsed/refractory diffuse large B-cell lymphoma (DLBCL) this week as well.

Note: New analyst ratings are a great place to begin your due diligence, but nothing substitutes for deeper individual research in this very volatile sector of the market. Many of the small-cap names highlighted in "Analyst Insight" will eventually appear in the "Spotlight" section, where we do deeper dives on this type of promising but speculative small-cap concerns.

Today we look at a new name for our Spotlight feature.

Company Overview:

NovoCure (NASDAQ:NVCR) is a small biotech firm that engages in the development, manufacture, and commercialization of tumor treating fields (TTFields) for the treatment of solid tumors. It is based in the Channel Islands and currently has a market capitalization of approximately $1.5 billion. The company uses TTFields, which are low intensity, alternating electric fields that disrupt cell division through physical interactions with key molecules during mitosis in solid tumor cancers to develop their compounds. Basically this is an electrical device used in combination with other therapies to increase the chance of survival. It should be worn on the head for up to 18 hours a day during treatment period.

The company came public in late 2015 and trades near $15.00 a share. Even with a recent solid rally, the shares could qualify as being a 'Busted IPO'.

Pipeline:

Its lead product is Optune which is approved in the U.S., Europe and Japan for the treatment of glioblastoma {GBM} where it has shown good results.

Optune also recently had encouraging Phase 2 results for the treatment of ovarian and pancreatic cancer and also is mid-stage testint for mesothelioma as well. Revenues in the last quarter were just over $30 million, up 144% from the year ago period and 40% from the previous quarter. Covered lifes also increased to 180 million from 130 million the quarter before as the company signed up some additional manage care providers. Novocare is working to get into the medicare program with could increase its reimbursable audience by a quarter.

Analyst Commentary & Balance Sheet:

The company ended the last reported quarter with some $220 million in cash and marketable securities against approximately $100 million of debt. This should be adequate to fund all activities until the end of 2018.

Four analyst firms have reiterated or initiated Buy ratings on Novocure over the past three months. However, the median analyst price target is $15.75 a share. This is right around the current trading levels.

Verdict:

This is an intriguing little stock. Unfortunately, medical devices are not my forte and I also prefer U.S. based companies. In addition, the stock has had a nice run so far in 2017 reducing the potential for further capital appreciation at least in the near term. I am going to pass on this one for now. If the stock drifted back toward the ~$10 level, I might be tempted to pick up a few shares, however.

"The minute you hesitate you are in trouble." ― Steve Waugh

Author's Note: I am happy to be a part of the 2nd DIY Online Investment Summit that will run June 27th through June 28th. I will be one of nine top SA contributors, including Brad Thomas, Eric Parnell and Ian Bezek, giving their investment views and stock picks for the second half of 2017. Over 10 hours of interviews will be available to registrants. Best of all, it is free to all that register here.

The Biotech Forum

Thank you & Happy Hunting

Bret Jensen

Founder, Biotech Forum

Disclosure: I am/we are long AVEO, CELG, KPTI, PTLA.

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.