Biotech Forum Daily Digest For February 26th

by: Bret Jensen


The biotech sector navigated another volatile week in the market to end roughly flat last week.

Analysts like Friday's FDA approval for the prospects of KemPharm and lineup in support of Adamas Pharmaceuticals after its recent sell-off.

All the other notable news, events and analyst ratings from across the industry as well as a Spotlight feature on BioMarin Pharmaceuticals are provided in the paragraphs below.

Perhaps the less we have, the more we are required to brag.” ― John Steinbeck, East of Eden

The markets continued to be volatile last week. Investors are focused on whether the Federal Reserve will raise interest rates by quarter point, three or four times in 2018. The 10 Year Treasury yield is one key focus area with pundits watching intently to see if this instrument will broach the three percent level for the first time in over four years.

Stocks had a huge intraday swing on Wednesday, followed by a big rally on Friday to end the week. When all was said and done, most of the major indices were close to where they started trading this week. The main biotech indices largely followed the path of the overall market last week and ended largely flat on the week.

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Bellicum Pharmaceuticals (BLCM) staged a solid rally late last week as the company signaled its intention more thoroughly monitor neurotoxicity risks to patients as part of study revisions required by the FDA in response to a recent clinical hold. This hold was placed on the company candidate BPX-501 in late January after reports of three cases of encephalopathy, one of which was fatal. Cantor Fitzgerald also reiterated Bellicum as a Buy with a $10 price target on Friday as well.

New leadership at FDA continues to make changes at the government agency. A report out from PriceWaterhouseCoopers states shows that the agency reined in its issuance of new federal regulations to a 20-year low in 2017. The FDA has generally pursue issuing guidelines rather that dictating hardline regulations according to the report.

Here is the quick rundown of key events across the industry this week.

On Monday, uniQure (QURE) will be presenting data from its gene therapy candidate 'AMT-130' at the Annual Huntington's Disease Therapeutics Conference.

The next day both Summit Therapeutics (SMMT) and Apellis Pharmaceuticals (APLS) will be making presentations at the BTIG Healthcare Conference.

Also Tuesday, Phase 3 topline result are due out from ObsEva (OBSV) around its IMPLANT2 study assessing the effect of Nolasiban on improving the pregnancy rate in IVF procedures. The company will host a conference call before the market opens. A Phase 2 trial did not meet primary endpoint in 2016.

On Wednesday, Heat Biologics (HTBX) will be presenting initial Phase 2 data for its compound HS-110 in combination with Opdivo to treat Non-small cell lung cancer. Shareholders could certainly use some good news, given stock has lost over 95% of its value since coming public in the second half of 2013.

Also on Wednesday, Sorrento Therapeutics (SRNE) will learn if its resubmitted NDA for ZTlido is approved. This is a lidocaine patch targeting pain associated with post-herpetic neuralgia.

Finally, on Friday; Otonomy (OTIC) will learn if its sNDA for OTIPRIO is approved for acute otitis externa. A Phase 3 trial for this condition met its primary endpoint early in 2017.

JP Morgan initiates Intra-Cellular Therapies (ITCI) as an Overweight with a $25 price target this morning. Earlier this month, RBC Capital initiated the shares as a Buy with a $33 price target. RBC's analyst noted the company's

valuation underappreciates the likelihood of approval of lead drug ITCI-007 in schizophrenia and the market opportunity of '007 across various psychiatric indications"

Small cap biopharm KemPharm (KMPH) is popular among analysts this week. The FDA just approved its compound Apadaz, an opioid painkiller for short-term acute pain management on Friday. Yesterday, Oppenheimer reissued its Buy rating and $13 price target on KMPH. Today, it is Canaccord Genuity reiterating its Buy rating and $11 price target. Oppenheimer had this to say about FDA approval and the company prospects going forward:

We believe the approval of Apadaz (benzhydrocodone/APAP) for the short-term management of acute pain not only provides KMPH a pathway for value creation through partnering the asset but also validates its ligand activated therapy (LAT) pro- drug platform. At this point, we find it difficult to assign value to Apadaz (not in our model) since any value hinges on KMPH’s ability to secure a partner; however, it seems like this is a clear near-term priority for the company to monetize the asset. With that said, we believe the risk/reward at current levels remains attractive as we think shares should appreciate based on positive results from KP415’s pivotal study in ADHD and potential upside from an announced Apadaz partnership in the coming months."

Adamas Pharmaceuticals (ADMS) saw its first analyst activity in many months last week. Analysts evidently see the shares recent weakness as a significant buying opportunity. The following analyst firms either reiterated or assigned positive ratings to ADMS last week: Cowen & Co. ($40 price target), Evercore ISI ($85 price target), Mizuho Securities ($48 price target), Northland Securities, Piper Jaffray ($49 price target), Needham ($40 price target) and Noble Financial.

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.

Biomarin Pharmaceuticals (BMRN) reported fourth quarter results on Friday. Despite beating on both the top and bottom line numbers, the stock fell some one percent during the day even as the overall market was posting a huge rally. Earlier in trading on the day, the stock was down slightly more than three percent. Let's take a look at the company and it earnings results in today's Spotlight feature.

Company Overview:

BioMarin is a San Francisco area based biopharma concern. The company focuses on developing and commercializing pharmaceuticals for serious diseases and medical conditions. The stock has a just under $15 billion market cap and trades right around $83.00 a share as of the close of the market on Friday.

BioMarin has a half dozen products on the market and a fully integrated multinational organization in place. Its pipeline has several drug candidates in various developmental stages. The furthest along is Pegvaliase. This is an investigational enzyme substitution therapy for the treatment of phenylketonuria and has a PDUFA date in late May. Valoctocogene roxaparvovec for Hemophilia A also is in Phase 3 development.

Earnings Results:

The company reported revenues of just over $358 million during the fourth quarter. This represents better than 19% year-over-year growth. This was slightly better sales growth than expected. The fourth quarter loss was a bit bigger than the consensus. Management provided 2018 guidance projecting revenue would come in between $1.47 billion and $1.53 billion in FY2018 led by Vimizim: $460 million to 500 million and Kuvan:$440 million to $480 million.

Analyst Commentary:

Analyst firms liked BioMarin's fourth quarter results. On Friday, Leerink Swann ($132 price target), Deutsche Bank ($124 price target), Stifel Nicolaus ($102 price target) and BMO Capital ($125 price target) all reissued Buy ratings on BMRN. The current median analyst price on BioMarin is just north of $120.00 a share.


My regular readers know that I have been watching BioMarin closely recently. The stock has been in a pretty strong and narrow trading range of between ~$80 to ~$100 a share for almost two years now. With the stock near the 'floor' of this range, risk seems limited on the downside at current levels.


BioMarin looks like a good value. Its core product portfolio is growing at more than a solid clip and its pipeline continues to evolve. With strong analyst support and the shares trading near the bottom of a two-year trading range, the stock makes a compelling accumulate candidate. A Buy-Write option strategy also seems a compelling investment strategy at current levels as well.

Bravado may stir the crowd, but courage needs no audience.” ― T.F. Hodge

Disclosure: I am/we are long ADMS,BLCM, BMRN, ITCI,QURE,SRNE.

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.