Small Cap Bio-Pharma Movers For Wednesday August 8th

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Includes: AEZS, ARNA, ATRS, KERX, VNDA
by: StockMatusow

Antares Pharmaceuticals (ATRS) Pps: $4.66 Market Cap: $485.90M

Antares engages in the development and marketing of self-injection pharmaceutical products and technologies, and topical gel-based products.

The company will release its second quarter 2012 financial results before the market opens today, August 8, 2012, and host a conference call shortly thereafter at 8:30 a.m. ET (Eastern Time) to discuss the results.

For the quarter, I am expecting revenues of $4.5M and a flat EPS between -$0.03 and $0.02. Since I am a long term investor in Antares who is looking forward at least 3 years out from now, the EPS at this time is meaningless. I would rather the company keep a penny or 2 and put it back into top-line growth products, like Vibex MTX and Vibex QS-T. I estimate the combined pipeline worth of these 2 products to be in excess of 2 billion dollars looking forward. The focus with Antares should be on its future top-line earnings, not its current fundamentals. I strongly feel many short sellers misunderstand what Antares will look like 3 years out, and are only focused on the current fundamentals--like some current Antares longs. Antares at this time uses its royalty stream to re-invest into its top-line growth. If investors are patient with this one, they can expect to see a stock price north of $20 a share within 3 years--in my opinion.

Today, I suspect Antares could be announcing an early NDA filing for Vibex MTX, and/or a deal for its birth control gel--Nestragel. The current management has a history of under promising and over delivering, so I do not expect the spots on this leopard to change. In the Antares last earnings calls, the company revealed the identity of its Vibex QS1 as a testosterone quick shot for Low T, now called Vibex QS-T--6 months earlier than promised.

Aeterna Zentaris (AEZS) Pps: $0.41 Market Cap: $45.40M

Aeterna Zentaris engages in the discovery, development, and commercialization of drugs for oncology and endocrine therapy primarily in the United States, Switzerland, and Japan.

The company announced yesterday that the United States Patent and Trademark Office has granted a patent for the use of its oral ghrelin agonist, AEZS-130 (EP1572) as a diagnostic test for adult growth hormone deficiency (OTC:AGHD). Filed on February 19, 2007, the patent (US 8,192,719 B2) titled, "Methods and Kits to Diagnose Growth Hormone Deficiency by Oral Administration of EP1572 or EP1573 Compounds", became effective as of June 5, 2012, and will expire on October 12, 2027. The corresponding composition of matter patent (US 6,861,409 B2), filed on June 13, 2001 and granted on March 1, 2005, will expire on August 1, 2022, with the possibility of a patent term extension of up to 5 years.

AGHD affects 35,000 adult Americans, with 6,000 new adult patients diagnosed each year. Growth hormone not only plays an important role in growth from childhood to adulthood, but helps promote good health throughout life. AGHD is usually characterized by low energy levels, decreased strength and exercise tolerance, increased weight or difficulty losing weight, emotional changes, anxiety and impaired sleep.

Aeterna Zentaris stock has yet to recover from the sell-off that occurred when the share price got cut from $2.14 on March 30th to $0.73 on pre-market news April 2nd, 2012 revealing it did not get the results it hoped for studying the use of its dru perifosine in combination with capecitabine to treat cases where previous treatments have failed. Patients did not live any longer on this drug combination than they did on the standard treatment, Xeloda, which is capecitabine alone.

I feel the patent announcement is positive news for AEZS, which could help rally the stock a bit today along with my opinion that the shares are already oversold.

Keryx Pharma (KERX) Pps: $1.85 Market Cap: $131.71M

Keryz, Aeterna's partner in the drug perifisone, also had its stock price cut from $4.98 to $1.74 on the news in April.

However, yesterday after the bell, Kerx announced better than expected earnings, reporting a Q2 loss of $0.02 per share, $0.07 better than the Capital IQ Consensus Estimate of ($0.09).

The company commented:

At June 30, 2012, the Company had cash, cash equivalents, interest receivable, and investment securities of $27.2 million, as compared to $39.5 million at December 31, 2011. We are well-positioned to complete the Phase 3 long-term study for Zerenex in the fourth quarter of 2012 and we expect to have New Drug Application filings across all three key phosphate binder territories, the U.S., EU and Japan, in the first quarter of 2013. Importantly, we are operating with a well-controlled burn rate, and we believe that our current cash will be sufficient to take us through these key milestones.

Keryx has a 5-Year projected earnings per share growth rate of 30.00% and an analysts' Rating of 1.40. The short interest was 14.65% as of 08/02/2012--a potential positive which could help see the stock rally today.

Arena Pharmaceuticals (ARNA) Pps: $7.36 Market Cap: $1.34B

Arena engages in discovering, developing, and commercializing oral drugs that target G protein-coupled receptors in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases.

Since the approval of its weight loss drug Belviq in June the stock has fallen from a yearly high of $11.39 to $7.21--a fall of 37%. I feel long term investors have excellent value here at its current price level. The focus now on Arena should be the potential top-line growth in its strong pre-clinical pipeline. Because Arena will likely receive gobs of cash from Belviq sales, I believe it is a strong speculation bet that management will re-invest this cash into its pipeline, gaining leverage in any potential deal with a large pharma partner for any of its pre-clinical pipelined drugs. I believe Arena has a great shot at becoming the next Jazz Pharma (JAZZ).

The catalyst trading is pretty much done in Arena, so the stock has been seeing a steady decline--hot money exiting, smart money accumulating. Although still speculative, Arena might just be a great long term investment if it manages its money correctly.

My pick this week:

Vanda Pharmaceuticals (VNDA) Pps: $4.19 Market Cap: $118.27M

Vanda engages in the development and commercialization of products for the treatment of central nervous system disorders. It offers Fanapt, an oral formulation of a compound for the acute treatment of schizophrenia in adults. The company is also developing Fanapt, a Phase II clinical trial injectable formulation for the treatment of Schizophrenia. Its products in clinical development also include Tasimelteon, which completed Phase III clinical trials for the treatment of sleep and mood disorders, including circadian rhythm sleep disorders; and Tasimelteon that is in Phase IIb/III trials for the treatment of major depressive disorder.

The first thing about Vanda I notice is the fact its market cap is lower than the actual cash it has on hand--effectively, the company can buy itself. Many small cap developmental pharmas lack the cash to have a good chance at geting their drugs approved. Vanda has more than enough cash and is not a big cash burner.

Balance Sheet

Total Cash (mrq):

144.70M

Total Cash Per Share (mrq):

5.13

Total Debt (mrq):

0.00

Total Debt/Equity (mrq):

N/A

Current Ratio (mrq):

4.36

Book Value Per Share (mrq):

0.71

The 2nd thing I noticed when looking at Vanda is its partnership with Novartis NG (NVS) that potentially can bring them $400M in revenue.

The company's product portfolio includes Fanapt (iloperidone), a compound for the treatment of schizophrenia, the oral formulation of which is currently being marketed and sold in the U.S. by Novartis, tasimelteon, a compound for the treatment of sleep and mood disorders, including circadian rhythm sleep disorders (CRSD), which is currently in clinical development, and VLY-686, a small molecule neurokinin-1 receptor (NK-1R) antagonist.

Pursuant to Vanda's amended and restated sub-license agreement with Novartis, it received an upfront payment of $200.0 million and is eligible for additional payments totaling up to $265.0 million upon the achievement of certain commercial and development milestones for Fanapt in the U.S. and Canada. Compare these facts to its current market cap, and I think we can see the company is grossly under spec-valued.

The company is also conducting four clinical trials to pursue U.S. Food and Drug Administration (FDA) approval of tasimelteon for the treatment of Non-24-Hour Disorder (N24HD) in blind individuals without light perception. Two of the clinical trials were initiated in the third quarter of 2010, the third was initiated in the third quarter of 2011 and the fourth was initiated in the fourth quarter of 2011. In addition, in the third quarter of 2011, Vanda initiated a Phase IIb/III clinical trial to study the efficacy of tasimelteon for the treatment of Major Depressive Disorder (MDD).

According to an article from August 6 in the Washington Post, of the estimated 65,000 to 95,000 blind people in the United States who have sleep complaints, up to 70 percent might suffer from non-24. Some who suffer from non-24 have found limited relief through treatment with synthetic versions of the hormone melatonin, which works to drag forward the body clock's reset time by providing a chemical pulse to the brain that signals nighttime. Vanda scientists hope that tasimelteon, which has a similar molecular structure to melatonin, will have superior beneficial effects. Synthetic melatonin itself is classified as a dietary supplement.

Vanda has seen a stagnant stock price lately; it has not taken part in the small cap biopharma rally--yet. Look for my feature article today that will appear on Reuters that will provide more in depth coverage. The company also has some upcoming catalysts for later in the year which is mentioned in the feature article.

My short term price target opinion for Vanda is $5.00, 1 day to 3 months.

Disclosure: I am long ATRS.

Additional disclosure: Family holds VNDA Stock. Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.