5 Biotech Stocks At Rock Bottom Price With Takeover Possibility

by: StockPandit

So far, 2012 has been the best year for the Biotechnology and Drugs industry. So many stocks have surged in the last four months based on clinical trial results, U.S. Food and Drug Administration (FDA) approval, FDA Advisory Committee's recommendation, European commission approval, recommendations from independent committees, partnership with big pharmaceuticals, acquisitions, and so on.

In this article, I will focus on 5 biotechnology and drug companies that have negative price performance for the year 2012. Investors like to buy the stocks at a rock bottom price that have growth potential. When the stock price is at bottom, it also creates a potential takeover opportunity from its competitors to leverage the discounted price as well as to accelerate the drug developments from these companies.

Biotech stocks are high risk-reward stocks and hence considerable analysis is required before trading. Use this list as a potential starting point for your analysis. I have screened these 5 biotechnology stocks based on the following criteria:

  • Security Type: Common Stock
  • Sector: Healthcare
  • Industry: Biotechnology or Pharmaceuticals
  • Market Cap: Greater than or equal to 100 Million
  • Volume (90 Day Average): Greater than or equal to 1 Million
  • YTD Stock Price Performance: Less than or equal to -25%

The following chart provides the 5 biotechnology and drugs stocks with negative price performance for the year 2012:

1. Chelsea Therapeutics International Ltd (NASDAQ:CHTP): Chelsea Therapeutics is a development stage pharmaceutical company that focuses on acquiring, developing and commercializing products for the treatment of a variety of human diseases. Chelsea is pursing an orphan drug strategy for the development of Northera and Northera is currently approved and marketed in Japan.

Chelsea Therapeutics has a market cap of $147.49 million and it is currently trading around $2.20 with a 52-week range of $1.91 to $6.06. The stock has -57.7% price performance for the year 2012.

Reason for the Downfall

(NYSE:A) On Feb 13, 2012, Chelsea Therapeutics has received FDA note for its key drug, Northera (droxidopa). Over the course of the drug's development program 19 patients died, with three deaths possibly related to Northera. After the announcement, CHTP stock price went down from $5 to $3.11.

(NYSE:B) On Mar 28, 2012, FDA has issued a Complete Response Letter (CRL) regarding the new drug application (NDA) for Northera Capsules. After this news, CHTP stock price went down from $3.67 to $1.93 within 10 days.

Catalyst for Upward Movement

In a recent news, Chelsea Therapeutics announced that it plans to meet with FDA in May to discuss next steps for Northera drug Application. Chelsea scheduled a meeting with the FDA to review the Agency's comments, clinical trial recommendations and to help determine appropriate next steps toward securing approval of Northera. Chelsea believes that data from this trial could potentially meet the criteria for clinical efficacy and durability of effect data identified in the CRL. Notably, the CRL did not identify any outstanding concerns.

Chelsea is also developing a library of metabolically inert antifolate compounds engineered to have potent anti-inflammatory and anti-tumor activity to treat a range of immunological disorders, including two clinical stage product candidates: CH-1504 and CH-4051.Any positive news on Northera drug from FDA or positive clinical trial results on its pipe drug will move the stock price higher.

2. Oncothyreon Inc. (ONTY): Oncothyreon is a clinical-stage biopharmaceutical company, focuses on the development of therapeutic products for the treatment of cancer. Its primary product candidate, Stimuvax is in two phase III clinical trials for the treatment of non-small cell lung cancer. Stimuvax is being developed by Merck KgaA (NYSE:MRK) under a license agreement with ONTY.

Oncothyreon has a market cap of $229.65 million and it is currently trading around $4.02 with a 52-week range of $3.94 to $11.59. The stock has -46.31% price performance for the year 2012.

Reason for the Downfall

On Mar 6, 2012, Oncothyreon shares dropped close to 40% after the company's earnings report. Merck KgaA announced that the ongoing Stimuvax Phase III trial results would not be released until early 2013. It should be noted that the U.S. regulators put Stimuvax trials on hold for 3 months in 2010 after a patient with a blood malignancy developed a brain infection while taking the drug.

Catalyst for Upward Movement

Oncothyreon is also focusing its on PX-866, small molecule drug that irreversibly inhibits phosphatidylinositol-3-kinase (PI-3K) and ONT-701, a pan-inhibitor of the B-cell lymphoma-2, or Bcl-2, family of anti-apoptotic proteins. Even though, positive news on Stimuvax is expected after a long time, Oncothyreon's pipeline drug progress is the only catalyst for this share price to move up.

3. Keryx Biopharmaceuticals Inc (NASDAQ:KERX): Keryx is a biopharmaceutical company focused on the acquisition, development and commercialization of pharmaceutical products for the treatment of cancer and renal disease.

Keryx Biopharmaceuticals has a market cap of $102.98 million and it is currently trading around $1.45 with a 52-week range of $1.28 to $5.55. The stock has -43.87% price performance for the year 2012.

Reason for the Downfall

On April 2, 2012, Keryx announced that the Phase 3 "X-PECT" (Xeloda & Perifosine Evaluation in Colorectal cancer Treatment) clinical trial evaluating perifosine (KRX-0401) & capecitabine (Xeloda) in patients with refractory advanced colorectal cancer did not meet the primary endpoint of improving overall survival versus capecitabine + placebo. KRX-0401 (perifosine) is in-licensed by Keryx from AeternaZentaris Inc. (NASDAQ:AEZS) in the United States, Canada, and Mexico. After this news, KERYX stock price went down from $4.98 to $1.74.

On May 8, 2012, Keryx announced that it terminated the license agreement with Aeterna Zentaris for KRX-0401 (perifosine).

Catalyst for Upward Movement

Keryx is also developing Zerenex (ferric citrate), an oral, ferric iron-based compound that has the capacity to bind to phosphate and form non-absorbable complexes. On April 23, 2012, Keryx announced that its Japanese partner, Japan Tobacco and Torii Pharmaceutical Co., Ltd., has announced positive top-line results from a Phase 3 study of Zerenex in Japan for the treatment of hyperphosphatemia in end-stage renal disease patients on hemodialysis. Keryx is expecting to complete the Phase 3 clinical programs for Zerenex in the U.S. and Japan by this year-end. Based on the licensing agreement, JT/Torii is expected to pay Keryx up to $100 million in up-front license fees and payments upon the achievement of specified milestones, of which $28 million has been received by Keryx to date. The only hope on Keryx is the regulatory approval of Zerenex from U.S. FDA, the European Medical Agency or Japan.

4. ViroPharma Inc (VPHM): ViroPharma is a biotechnology company, develops and commercializes therapeutic products that address serious diseases in the United States and internationally. It focuses on developing products used by physician specialists or in hospital settings. ViroPharma is developing a portfolio of therapeutics for rare and Orphan diseases including C1 esterase inhibitor deficiency, Friedreich's Ataxia, adrenal insufficiency; and recurrent C. difficile infection (CDI).

ViroPharma has a market cap of $1.42 billion and it is currently trading around $20.34 with a 52 week range of $14.62 to $33.17. The stock has -26.07% price performance for the year 2012.

Reason for the Downfall

On April 10, 2012, ViroPharma announced that U.S. FDA denied the citizen petition filed by ViroPharma on March 17, 2006, related to the FDA's proposed in vitro method for determining bioequivalence of abbreviated new drug applications referencing Vancocin Capsules. On the same day, Akorn Inc. (NASDAQ:AKRX) and Watson Pharmaceuticals Inc. (WPI) revealed that FDA approved their abbreviated new drug application for vancomycin hydrochloride USP capsules, the generic version of Vancocin. Vancocin is used for the treatment of Clostridium difficile-associated diarrhea (CDAD), and also for enterocolitis, an inflammation of the colon and small intestine. ViroPharma stock price went down from $28.61 to $20.93 within 6 days after this news announcement.

On April 13, 2012, ViroPharma sued two federal agencies seeking a court order temporarily blocking approval of generic forms of its biggest product, the antibiotic Vancocin.

Catalyst for Upward Movement

ViroPharma's pipeline includes Cinryze (C1 esterase inhibitor -human) in combination with Halozyme's Enhanze technology, VP20621 and VP-20629. Cinryze is approved by US FDA for routine prophylaxis against angioedema attacks in adolescent and adult patients with HAE, and in Europe for routine prevention, pre-procedure prevention and acute treatment of angioedema attacks in adolescent and adult patients with HAE.

5. Spectrum Pharmaceuticals Inc (NASDAQ:SPPI): Spectrum Pharmaceuticals is a biotechnology company, engages in acquiring, developing, and commercializing prescription drug products primarily in the areas of hematology and oncology. Spectrum currently markets two oncology drugs, FUSILEV (levoleucovorin) for Injection and ZEVALIN (ibritumomab tiuxetan) Injection for intravenous use. In addition, Spectrum has two drugs, apaziquone and belinostat, in late stage development. The company also has a diversified pipeline of novel drug candidates.

Spectrum Pharmaceuticals has a market cap of $655.34 million and it is currently trading around $11.01 with a 52-week range of $6.94 to $16.00. The stock has -25.84% price performance for the year 2012.

Reason for the Downfall

On April 5, 2012, Spectrum announced that the Phase 3 clinical trials for apaziquone did not meet their primary endpoint of a statistically significant difference in the rate of tumor recurrence at 2 years between the two arms. However, no drugs have been approved and marketed in the U.S. for more than 20 years for low-grade, non-muscle invasive bladder tumors (NMIBC). Spectrum is planning to meet with FDA to discuss future steps. After this news, SPPI stock price went down from $12.21 to $9.51 within 9 days.

Catalyst for Upward Movement

The main catalyst for Spectrum Pharmaceuticals includes positive news on its diversified portfolio of proprietary drugs in the pipeline (SPI-1620, SPI-2012, Lucanthone, SPI-014), revenue growth and market share of FUSILEV and top line data from Belinostat's trial that is expected in Q4 2012.

Sources: Some of the data is sourced from Google Finance, Fidelity and investors site.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CHTP, ONTY, SPPI, VPHM, KERX, MRK, AKRX, WPI, AEZS over the next 72 hours.

Disclaimer: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research.

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