A Review Of My Last 3 Small Cap Bio-Pharma Picks

by: StockMatusow

Last week I provided 3 very solid small cap bio-pharmas picks for traders and investors to consider. I am pleased most of them agreed with my picks and decided to engage in some rather heavy buying in 2 of them. The 2 with heavy buying I consider riskier than my third pick, but still have solid longer-term prospects nonetheless. I firmly believe all 3 picks are undervalued and will go over some points as to why I feel this way in this article.

Acadia Pharmaceuticals (ACAD) is a company that I believe has a great chance to make a move similar to what Ariad Pharma (NASDAQ:ARIA) did in its 3 year move up from under $3 a share to near $15 a share, where it trades today.

Dendreon (DNDN) traded below $5 a share 4 years ago, and made a parabolic move to over $57 a share before settling back to the range it is trading at today. Granted, both Dendreon and Ariad develop cancer drugs, which gives them extra speculation value.

However, at the current price per share of $1.87, the upside potential is huge for Acadia while the downside risk from the current price is minimal in my opinion, unless the company fails in its new Phase 3 restructured trial of its lead drug, Pimavanserin.

Acadia's drug Pimavanserin potentially could be a real blockbuster, although it has had one set back to date that has caused the company to restructure the Phase 3 clinical trial.

I also remarked that Biosante's (BPAX) Libigel, a drug candidate for the treatment of post-menopausal female sexual dysfunction, also suffered a setback with its Phase III efficacy data. While the gel worked in terms of delivering testosterone (thought to be the cause of a lack of sexual desire in these women), the placebo proved to be just as effective in producing positive results. I clearly see a subjective result being obtained here with both of these drugs. In Biosante's case, if they are able to restructure another Phase III study of Libigel and properly engage the study, Libigel may eventually have a chance to succeed.

Acadia has the money to restructure its Phase III clinical, while it appears Biosante does not. I have heard there is big money investors behind Acadia, so that should give some confidence to the smaller money investors hoping to see a nice run in the Acadia stock price over the next 3 years.

I my prior article, I remarked Acadia was due for a move to $1.80, so I set that as my short term target. Boy, was I wrong about that one, as the price made a move to $2.06 before retracing back to $1.87, more in line where the price should be to ensure a more steady climb upwards as the company meets its goals.

My target prices for Acadia have not changed; a 1 year price target of $3.25, and a 3 year price target of $12.

NuPathe (PATH) is a company I am very impressed with, and I consider it one of the most undervalued companies I have ever seen, even after it made a nice run from $3.40 to $5.10 a share in just 3 trading sessions. As I remarked in my article about Nupathe, my short term target price was $4 a share, so I was also too low on that one. I honestly don't think my article is the main reason it moved so high, but more along the lines of investors not knowing about this little company with such a small market cap and the huge potential it has. Investors and traders just simply see what I see with Nupathe, as they should in my opinion.

Key pipelined drug: NP101

NP101 actively delivers sumatriptan, the most widely prescribed migraine medication. In clinical trials involving more than 10,000 applications, NP101 offered patients fast onset and sustained relief of debilitating migraine symptoms including headache pain and migraine-related nausea (MRN). It utilizes SmartRelief, a proprietary transdermal delivery technology that rapidly transports medication through the skin using a process called iontophoresis.

On Aug 30, 2011, NuPathe announced that it has received a Complete Response Letter (NYSE:CRL) from the FDA regarding the New Drug Application (NDA) for its migraine patch (NP101 or Zelrix).

In the CRL, the FDA acknowledged that NuPathe established the efficacy of the migraine patch in the overall migraine population. The CRL primarily contained chemistry, manufacturing, and safety questions which the company believes it has, or shortly will have, sufficient data to address. The company may conduct additional clinical and/or non-clinical studies to address these issues.

The CRL is the only real reason the company's stock is not selling for at least 2 times its current price level of around $4.80 a share in my opinion. Efficacy was good, and I believe this is a viable and more efficient treatment for those who suffer from migraines that could be revolutionary in terms of bringing more effective relief and preventive recurrence of migraines. I believe the company has properly addressed the issues the FDA raised in the CRL response, so it is my opinion NP101 will be approved this time around.

The reason for my belief in this is because the company's management has years of experience dealing with The FDA, especially the company CEO. The data looks good in my opinion, and the CRL issues raised by the FDA are definitely fixable.

I hope to be doing a question and answer article with Nupathe CEO Jane H. Hollingsworth soon, so stay tuned for that.

Antares Pharma (AIS)

I own a substantial amount of Antares stock because I believe it is the best small cap long term investment opportunity I have seen in quite some time. Taking away all the crazy price swings in the last 3 weeks with Antares, the stock has been steadily climbing upwards, closing in its last trading session at $2.82

This company is grossly misunderstood by many people who seem to think Antares is strictly a bio-pharma. Antares is more of a drug delivery company than anything else. The company's main products are needle free self injectors, with injectors being developed for generic, biologic, and biosimilar drugs. Antares simply does not make injectors for products; it marries these injectors to existing drugs, like Methotraxate (NYSE:MTX) with its VIBEX MTX platform.

MTX is a generic drug which Antares has gained both patent and intellectual property rights (NYSE:IP) to by marrying the drug to a self injector. In my prior article, I gave some estimates on what the market looks like for Antares with VIBEX MTX:

High/low MTX earnings projections for 2014 and 2015:

2014 - $203M ($1.70 eps)/$135M ($1.13 eps)
2015 - $405M ($3.24 eps)/$270M ($2.16 eps)

I also gave overall revenue projections that did not figure in the company's female contraception gel, Nestragel:

  • $12.5M HgH global royalties and margin from device and component sales
  • $8.1M EpiPen U.S. royalties and margin from device sales
  • $10M Vibex2 U.S. royalties and margin from device sales
  • $6M Pen1 royalties and margin from device sales (EU only in 2015)
  • $12.5M Pen2 U.S. & EU royalties and margin from device sales
  • $9M Gelnique/Anturol global royalties
  • $1.5M Elestrin royalties
  • $277M Vibex MTX U.S. sales and EU royalties and margin from device sales
  • $140M VIBEX QS1 U.S. sales and EU royalties and margin from device sales
  • Pfizer deal unknown, Guess is $7M
  • NestraGel: The true wild card here that would add additional value when a proper partnership deal is secured.

The company CEO Paul Wotton, recently stated that its VIBEX QS1 has more market potential than VIBEX MTX. Wotton's presentation at The 24th Annual ROTH Conference can be heard here. I strongly recommend readers listen to his presentation, whether you own Antares stock or not. Wotton does a fine job explaining what Antares does and the company's long term goals. Total revenue in 2015, $476M, not including a Nestragel deal which could net high upfront and milestone payments. The company CEO recently stated in an investors conference, that Antares is not interested in royalty deals anymore, but full partnerships. Therefore I expect the deal for Nestragel to be a big one for Antares. I predict when a deal is announced, the stock price will double within 2 trading sessions.

Unless a deal is announced very soon for Nestragel, do not expect a quick hit with the Antares stock, but a nice slow upwards move over time.

I don't know about you, but I can wait for the huge long term reward with Antares. For investors looking for top notch management, top line growth, and possibly the next Amgen (NASDAQ:AMGN), then Antares should be considered for your portfolio.

Disclosure: I am long AIS.

Additional disclosure: Additional Disclosure: My Father holds Nupathe stock.

Disclaimer: This article is intended for informational and entertainment use only and should not be construed as professional investment advice. Always do you own complete due diligence before buying and selling any stock.