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Four Beaten-down Biotech Stocks that are on my BUY list

|Includes: Alnylam Pharmaceuticals, Inc. (ALNY), ANIP, ATRS, IONS, MNTA, MYRX, SNY, TEVA
We all know that it has been a rough month or two for the biotech sector, fueled by the overall market decline following the debt ceiling debate as well as the biotech sector weakness following $DNDN Dendreon's weak Provenge prostate cancer vaccine sales and resulting 70% drop in stock value. This has resulted in a large list of biotech companies trading at extremely low valuations. While I can't promise that prices won't continue lower, I think now is the time for careful research and evaluation on stocks you may want to own in the coming months. 

In my opinion, the following 4 stocks offer compelling risk/reward propositions at current levels and have risen to the top of my buy list.

Alnylam $ALNY 
Market Cap $274m, Enterprise Value (negative) -$42m
ALNY (click here for complete research page) is the leader in the much beleaguered RNAi field. Its programs are early stage, RNAi has suffered many setbacks, and the Tekmira litigation is an overhang. However, the next 3-12 months will have a host of proof of concept data releases for various programs, which I believe will help establish the fact that RNAi drugs will be able to be used with success for carefully selected indications. Positive regulatory action for Kynamro (aka mipomersen) from ISIS may also buoy the entire space. Finally, this valuation gives no value to ALNY's 45% stake in Regulus (a private micro-RNA company owned with ISIS and Sanofi $SNY), which could yield more upside via partnerships or a much-discussed IPO.

Biosante Pharma $BPAX
Market Cap $251m, Enterprise Value $191m
BPAX (click here for complete research page) is best known for Libigel, its testosterone gel for female sexual dysfunction.  BPAX will report phase 3 efficacy results from 2 trials later this fall, around the same time as the PDUFA date for its male testosterone gel, licensed to TEVA. This will be followed in 2012 by Libigel safety data and NDA filing. I think BPAX is attractive here on fundamental valuation, as well as a run-up play for the fall.

Myrexis $MYRX
Market Cap $70m, Enterprise Value (negative) -$45m
MYRX (click here for complete research page) has never traded above cash on hand following its spinout from Myriad Genetics $MYGN. Unlike the other companies on the list, we are still awaiting MYRX 6/30/11 quarterly results and update (they use July 1 fiscal year, so should report in early September). There are a number of potential catalysts that could get this stock moving, including 1) Discussion of CEO replacement search process (or "strategic alternatives"??); 2) The oft-delayed phase 1 data for MPC-3100 HSP90 inhibitor ( entry indicates enrollment was completed in June, so preliminary data should be released soon); and 3) a partnership for the preclinical inflammatory disease program targeting IKK-epsilon.

Momenta Pharma $MNTA
Market Cap $791m, Enterprise Value $463m
MNTA (click here for research page) is currently a cash-generating machine with many question marks. And Wall Street hates uncertainty. I am in the camp that does not believe a generic Lovenox (enoxaparin) from Teva will enter the market any time soon. You may have to wait til 2012 for significant newsflow on MNTA's follow-on biologics (FOBs, aka biosimilars) programs. Finally, in the short-term, actual or TEVA-spun negative news around the September 2011 litigation (or unfavorable decision from this summer's mini-trial) may provide an even lower entry point to be take advantage of.

Disclosure: I am long ALNY, BPAX, MYRX, MNTA, ISIS and AIS.