Scott Matusow
Stock prices sometimes experience volatile moves, especially as a near-term catalyst event approaches.
In the developmental biopharma segment of the market that we follow daily at stockmatusow, stock prices sometimes experience volatile moves, especially as a near-term catalyst event approaches. Today we look at five companies that should see significant upward price movements in the near future.
Synergy Pharmaceuticals
Synergy Pharmaceuticals (SGYP) is a biopharmaceutical company that focuses on developing drugs to treat gastrointestinal (GI) disorders and diseases. The company, whose two leading products are Plecanatide (SP-304) and SP-333, expects to release topline data from its Phase IIb IBS-C trial in the 2nd quarter 2014.
Insiders have also been purchasing the stock this year with the most recent buy on October 29. The majority of the purchases were above the level of the stock as it is currently trading. As insiders, they have the best sense of where the stock will be going in the future and it is encouraging to see them putting their money behind the company before data release.
The Baker Brothers, who also have a position in Synergy at about $4.23 a share, own about 2.7M shares, or approximately $12M worth. This is bullish for the company since the Baker Brothers have an excellent track record in biotech investments. We expect Synergy to reach at least $6 before data release.
Figure 1
Progenics Pharmaceuticals
Progenics Pharmaceuticals (PGNX), which zeroes in on oncology drugs, has two upcoming catalysts. The company expects to announce data from its Phase II PSMA ADC trial at the American Society of Clinical Oncology meeting in January. Progenics also has scheduled a tentative advisory panel meeting (ADCOM) with the FDA in March (10th-11th) to review an sNDA for Relistor expanded usage in OIC (opioid induced constipation) chronic pain.
In a December 6 press release the company’s executive vp, Prober Israel, said:
“PSMA ADC is the most advanced antibody drug conjugate in clinical development to treat prostate cancer. Based on the data seen with PSMA ADC in chemotherapy experienced patients, we have decided to explore whether this compound can also benefit men in the less clinically advanced chemotherapy naïve setting.”
In an October 1 press release the company also stated:
“Salix Pharmaceuticals, Ltd. and Progenics Pharmaceuticals today announced that the FDA will convene an Advisory Committee on March 10-11, 2014 at which time Salix’s Supplemental New Drug Application (SNDA) for RELISTOR® (methylnaltrexone bromide) Subcutaneous Injection, for opioid-induced constipation, or OIC, in patients with chronic pain will be considered. The date and agenda for the Advisory Committee will not be definitive until publication in the Federal Register.”
Last June Progenics did a secondary offering of 8.5M shares at $4.40 a share. This raised approximately $3.48M. The underwriters also chose to purchase an additional 1.3M shares, resulting in an extra $5.2M. The company has about $75M in cash, which should be sufficient to fund operations.
The Baker Brothers also hold a position in Progenics at $4.93 a share. They have a little over 4.2M shares.
We believe Progenics is undervalued and could run to $6 before data release. The company stands to rake in billions if their biopharmaceutical products receive FDA approval.
Inovio Pharmaceuticals
Inovio Pharmaceuticals (INO) is developing synthetic vaccines and immune therapies for cancer and infectious disease. Inovio’s pipeline aims to treat cervical dysplasia, cervical cancer, head & neck cancer, prostate cancer, hepatitis, HIV, and many other major indications. On November 12 the company stated:
“In this quarter, Inovio completed enrollment of its double-blinded, placebo-controlled, randomized phase II clinical trial (HPV-003) focused on cervical dysplasia and expects to report unblinded efficacy data in mid-2014. Inovio has initiated preparatory activities for a potential phase III study and also plans to initiate phase II studies of VGX-3100 against HPV-caused cervical cancer and head and neck cancer in 2014.”
This Phase II study is unblinded, so insiders might have a good idea of whether the company will be reporting positive or negative data in mid 2014. So far, insiders have been buying the stock with the most recent activity coming on November 13, right after the press release came out. We are going to keep an eye on these insider buys to get a feel for what they are expecting as we get closer to data release.
Due to the medical indications that Inovio has targeted, we see the firm as one of the biggest risk-to-reward companies in the biotech sector. Whether or not the company will present great data is anyone’s guess, but if its platform proves to be successful, Inovio could be a huge winner for investors.
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AcelRx Pharmaceuticals
AcelRx Pharmaceuticals (ACRX) has set its sights on treatments for acute and breakthrough pain. Its lead product is Zalviso for post-operative pain following open abdominal surgery and hip or knee replacement surgery. The company has announced that the FDA accepted the NDA for Zalviso. On December 16 AcelRx stated:
“AcelRx announced today that the U.S. Food and Drug Administration (FDA) has established a Prescription Drug User Fee Act (PDUFA) action date of July 27, 2014, for AcelRx’s New Drug Application (NDA) for Zalviso. AcelRx announced on December 2, 2013 that FDA accepted for filing the Zalviso NDA.”
We expect AcelRx to run higher as it nears the PDUFA action date for Zalviso. In the middle of this year the company had an unwarranted selloff on no fundamental news. The stock hit a high of $13.50 in July and dipped to about $6 in November. On that dip, Perceptive Advisors bought almost $5M worth of stock.
Since those buys, AcelRx has released positive news. On December 16, the company announced they have agreed on a commercial agreement for Zalviso with Grunenthal in the European Union and Australia. Under the agreement AcelRx will receive an upfront cash payment of $30M and is eligible to receive up to $220M in milestone payments. On December 19, the company announced that it had secured a $40M credit facility with Hercules Technology Growth Capital. This is non-dilutive for the shareholders and gives the company a strong position of working capital.
We also believe AcelRx has a strong management team that has a successful track record of developing biotech companies. Given that the insiders own a large portion of the company, the management’s goals are aligned with those of the investors, i.e., management has a stake in the company with their own money and will not seek ways to reward themselves that would hurt the stock for retail investors Management also has a history of getting their companies sold to large pharmaceutical firms. We think this possibility gives AcelRx additional upside.
All things considered, we believe AcelRx is currently undervalued and could run to $15 or more before the PDUFA date in July.
Figure 3
Ariad Pharmaceuticals
Ariad Pharmaceuticals (ARIA) works on therapies for cancer patients. The company’s lead product is Iclusig (ponatinib) and Ariad received accelerated approval from the FDA in late 2012 to sell Iclusig for patients with chronic myeloid leukemia and Philadelphia chromosome positive acute lymphoblastic leukemia. However, on October 9, 2013, the stock took a huge hit as the FDA placed a hold on Iclusig because some patients in an ongoing clinical trial were getting blood clots.
On October 20, 2013, a company press release stated:
“The FDA has approved revised U.S. Prescribing Information (USPI) and a Risk Evaluation and Mitigation Strategy (REMS) for Iclusig (ponatinib) that allows immediate resumption of its marketing and commercial distribution. The USPI includes a revised indication statement and boxed warning, updated safety information and recommendations regarding dosing considerations for prescribers.”
On the day the company first announced a hold on the product, the stock was trading in the $18 range. As of December 20, the stock moved at around $6. Although not without risk, we believe the company is currently undervalued and could trend higher as people again begin to speculate on the company’s future.
We believe the company’s next earnings call will serve as a catalyst date. Ariad will be able to discuss the resumption of sales of Iclusig and provide give additional guidance about future sales and trials.
We expect Ariad to rally over the coming months into the large gap created by the October 9 news.
Disclosure: I am long PGNX, SGYP.
Scott Matusow is an independent investor/writer/trader and team leader of StockMatusow.com. He has about fifteen years of stock market experience, which include trading, investing, and managing his family’s trust as well as his personal account. Scott uses his ability to read situations and emotion, charts, times and sales, historical data, and macroeconomic and other market forces to predict stock price movements. Using these allowed for him to completely divest his own and family’s money near the top of the market before the 2008 financial crisis. Scott has his own online talk show which can be heard at www.scottmatusow.com/radio. Other places you can follow Scott are on Twitter (@StockMatusow) and on Facebook.
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