2 Biotech Companies With Positive Results That May Be Headed In Opposite Directions

Includes: BCRX, NXTM
by: Matt Schilling

On Thursday November 8th, two companies within the biotech sector announced significant developments that should send shares higher over the next few trading sessions. Both of these companies have announced better than expected earnings for the quarter, but only one stands out as a potential candidate for a long-term investment.

BioCryst Pharmaceuticals (NASDAQ:BCRX) which is based in Durham, North Carolina is "a biotechnology company, designs, optimizes, and develops novel small-molecule pharmaceuticals that block key enzymes involved in infectious diseases, inflammatory diseases, and cancer". On Thursday, the company announced quarterly EPS results of -$0.19/share on revenue of $5.80 million, which is pretty impressive since analysts were expecting BCRX to post a loss of -$0.21/share on revenue of $4.70 million.

One the biggest catalysts for the company will be the continued development of its pipeline. Currently the company has three compounds in development, "which include peramivir, a neuraminidase inhibitor for the treatment of influenza, which is in Phase III clinical trial stage; BCX4208, a Phase II clinical trial stage purine nucleoside phosphorylase (PNP) inhibitor for the treatment of gout; and forodesine, an orally-available PNP inhibitor for cancer, which is in Phase II clinical trial stage. Its pre-clinical compounds include BCX4161, an oral prophylactic drug for hereditary angioedema; and BCX5191, which is a novel adenine nucleoside analog targeting viral RNA polymerase for the treatment of hepatitis C".

Although the company's pipeline looks promising, BCRX received a rough setback during the Phase III clinical trial of Peramivir, which was suspended on November 7th. According to Dr. William Sheridan, who is the Chief Medical Officer of BioCryst, "We are proceeding with a full analysis of unblinded data from the trial, and a final decision will be made following completion of the analysis and further discussions with our development partners; however, it is unlikely that peramivir development for U.S. registration will continue." Such a setback could crush any momentum shares may have been generating and at this point I'd look to either establish a short position or avoid the company at all costs.

NxStage (NASDAQ:NXTM) which is based in Lawrence, Massachusetts is "a medical device company, develops, manufactures, and markets products for the treatment of kidney failure, fluid overload, and related blood treatments and procedures". On Thursday, the company announced quarterly EPS results of -$0.04/share on revenue of $61.10 million, which is pretty impressive since analysts were expecting NXTM to post a loss of -$0.06/share on revenue of $60.60 million.

Jeffrey H. Burbank, Founder and Chief Executive Officer, noted that "NxStage continues to deliver double digit growth because we're doing the right thing for patients. We remain committed to increasing adoption of home, more frequent dialysis, and see multiple catalysts for growth including; increased patient demand, our robust product portfolio and our centers of excellence strategy. With continued execution, we believe we can achieve over 14% annual growth in the Home for 2012."

Potential investors should look to establish a moderate sized position at current levels and look to add to those positions as earnings dates approach. If the company indicates any positive development with regard to the construction of its new manufacturing plant in Germany (which is expected to be completed during the fourth quarter of 2012), I would also look to increase my position.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.