Biotech Forum Daily Digest For The Ides Of March
Summary
- The biotech sector will try to build on Friday's late rally that closed a losing week on an up note.
- The FDA calendar is light this week. Intra-Cellular Therapies will see if it can continue its rally this week after Buy ratings from a half dozen analyst firms.
- All the other notable news, events and analyst ratings from across the sector and a Spotlight feature on Xencor are below.
There's a reason why golfers walk forward to their next shot. It's to move on.” ― J.R. Rim
It was another tough week for the market overall last week. Investors worried both about the potential for four quarter point hikes from the Federal Reserve in 2018. New concerns arose last week on the possibility of a 'trade war'.
All three major indices ended up in the red once again ek with the Dow having several days of triple digit declines. Fortunately, a deep early sell-off Friday was reversed by the end of the day. High beta sectors like biotech staged a nice intraday rally that kept losses lower for the week than they would have been. The main biotech indices rose over two percent to end a challenging week on a high note.
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Otonomy, Inc. (OTCPK:OTIC) disclosed Friday that the FDA has approved OTIPRIO for the treatment of acute otitis externa due to Pseudomonas aeruginosa and Staphylococcus aureus. OTIPRIO is the first single-dose antibacterial approved in the U.S. for the infection. Shares spiked initially but ended the day roughly flat as profit taking hit the stock.
There are a few presentations/study results that could have impacts on these small cap biotech stocks this week.
More data was released around Aimmune Therapeutics (AIMT) drug candidate's 'AR101' Phase 3 'PALISADE' trial. Initial data was release two weeks ago showing AR101 met its primary endpoint. Additional study results were disclosed at the American Academy of Allergy, Asthma & Immunology conference in Orlando Sunday. Our sister feed, The Insiders Forum just provided an in depth investment analysis on this 'Tier 4' biotech concern this weekend.
In addition, Clearside Biomedical (CLSD) is soaring today after announcing successful Phase 3 study results assessing its drug candidate suprachoroidal CLS-TA to treat patients with macular edema associated with non-infectious uveitis.
Savara (SVRA) will have Phase 2 top line data be presented at the American College of Cardiology Expo next Saturday around its compound Aironite to treat heart failure with preserved ejection fraction.
We will see if the rally in Intra-Cellular Therapies (NASDAQ: ITCI) can continue this week. Its stock rose some 20% on Friday as six analyst firms reiterated or assigned Buy ratings to ITCI on Thursday and Friday on upcoming data readouts. Analyst firms 'chiming in' included JP Morgan and Cowen & Co. Price targets proffered ranged from $25 to $34 a share. This is what Cantor Fitzgerald's analyst ($31 price target) had to say on ITCI:
We continue to believe stock is undervalued; reiterate BUY With the stock down ~7% (S&P 1.33%, NBI 0.93%) after ITCI reported its 4Q17 earlier today (3/1), we would utilize the pullback as an opportunity to BUY the stock ahead of an upcoming period that is rich with potential stock catalysts. Given lumateperone’s profile so far, especially on safety/tolerability vs. other products, we continue to believe the product, if approved, could become a meaningful part of the treatment paradigm for schizophrenia; see our recent initiation here for background. Lumateperone is also in development for other large markets (bipolar depression, behavioral disturbances in Alzheimer’s) where the unmet need is high. In short, we continue to believe the stock is undervalued and presents meaningful potential for upside."
Zimmer Biomet Holdings (ZBH) got reiterated as a Buy with a $168 price target over at Stifel Nicolaus Friday. The analyst firm surveyed over 150 U.S.-based hip and knee surgeons. Based on results, Stifel's analyst believes utilization of Zimmer's products will increase as supply returns to normal and also finds "responses also strongly point to robust potential adoption of the company's new product pipeline". I recently added Zimmer to my portfolio on the shares recent weakness. The CEO recently purchase approximately $3 million in new shares, a strong vote of confidence. Also on Friday, Needham assigned a Buy rating ($155 price target) and Cantor Fitzgerald reissued its own Buy rating ($140 price target) on Zimmer as well.
H.C. Wainwright starts MacroGenics (MGNX) with a Buy and $38 price target this mornings. Its analyst believes this small cap concern is emerging as 'an immune-oncology pure play'. Cowen & Co. also assigned a new Buy rating on MGNX just over a month ago.
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.
I have quite a few questions around Xencor (XNCR) in recent weeks. This make sense as the shares have been in rally mode despite the volatile market over the past month. Let's revisit this name in today's Spotlight feature.
Company Overview:
Xencor, Inc. (XNCR) is a California based clinical‑stage 'Tier 4" concern focused on developing engineered monoclonal antibody therapeutics to treat severe and life‑threatening diseases such as autoimmune disorders, allergic diseases, and cancer. Its proprietary XmAb® technology platform is a novel approach that has resulted in many collaborative endeavors since coming public in December 2013. More importantly, the stock has been anything but a 'busted IPO' and has rewarded its shareholders splendidly over the four plus years. The company now sports a market capitalization of approximately $1.4 billion and the stock is near all-time highs at just under $30.00 a share.
Pipeline:
Unlike most monoclonal antibody companies that focus on the interaction with a target antigen, Xencor’s design focuses on the portion of the antibody that interacts with multiple segments of the immune system and controls antibody structure. This portion, referred to as the Fc domain, is constant and interchangeable among antibodies.
Source: Company Presentation
As can be seen here, the company has a diverse set of primarily early stage candidates. The pipeline has two key milestones in 2018. A Phase 2 trial for XmAb5871 for the treatment of Systemic Lupus Erythematosus should have interim data hit sometime in the fourth quarter. In addition, a Phase 3 trial around XmAb5871 for the treatment of IgG4-Related Disease should kick off in the second half of this year.
Analyst Commentary & Balance Sheet:
What help buoy the stock this week was the first analyst commentary on the stock in some four months. On Wednesday, Cantor Fitzgerald reiterated its Outperform rating while lifting price target on XNCR from $37 from $32 previously. The same day, Piper Jaffray reissued its Buy rating and $40 price target. The company ended 2017 with over $360 million in cash, cash equivalents and marketable securities and has no foreseeable funding needs.
Verdict:
I continue to like the risk/reward profile of Xencor. It has strategic partnerships with heavyweights in the industry like Novartis (NVS). Xencor is also well-funded and has multiple 'shots on goal' and a few milestones in 2018. I am not chasing this name after its recent rally but would consider adding to my stake on any downturns in the market. A Buy-Write option strategy using the August $30 call strikes to bring your net cost (stock price - option premium) to initiate an initial position always seems like one prudent strategy.
Stocks are also like Golf; while you are sure to hit a birdie, eagle, albatross, you wind up hitting one or two over par!” ― Sandeep Sahajpal
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
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Specializing in profiling high beta sectors, Bret Jensen founded and also manages The Biotech Forum, The Insiders Forum, and the Busted IPO Forum model portfolios. Finding “gems” in the biotech and small-cap stock sectors, these highly volatile spaces proven hugely successful have empowered Bret Jensen's own investing portfolio.
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Analyst’s Disclosure: I am/we are long AIMT, ITCI, MGNX, OTIC, XNCR, ZBH. 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.
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Comments (21)
○ Complete enrollment of Phase 2 anti-PD-1 combination study (1H 2018), and
○ Present clinical data (2H 2018)
All of the above...earning, recent sales trend and what seems to be an ideological shift in Managment. I am truly optimistic again...if the numbers Steve up and break a 3k per week prior to June.
