Here are the Top Biotech Picks for 2011, Stocks Highlighted at the JP Morgan Healthcare Conference, News on Human Genome Sciences, Dendreon, Bargain Biotech Stocks, and January FDA Catalysts.
5 Bargain Biotech Stocks for 2011
Street Picks
NEW YORK (InvestorPlace) -- On July 8, 2009, I recommended five cutting-edge medical products and biotech stocks. Even factoring in the single dud of the group, you would still have an average return of more than 110%.
Do I have your attention? Good, because I've put together a list of the hottest bargain biotech stocks to buy for 2011. Some of the names will look familiar because I think the stocks still have legs, while others have been swapped out for new names that I think have more potential in the year ahead.
Here are the best biotech stocks to own now:
Continued
No. 1: Cerus
Cerus (CERS) developed and markets the INTERCEPT Blood System, which is designed to inactivate blood-borne pathogens in blood components so the blood can be used in transfusions. In other words, it "cleans" donated blood of viruses, bacteria and parasites.
Cerus is pretty much the only game in town with this remarkable technology, and it has gained approval in most large European countries. Why not the United States? Well, management has not stood up to the FDA. The approval has been held up by one member of the FDA even though Cerus hit the primary endpoints in its pivotal Phase III trial and is receiving grants from the Department of Defense.
The FDA should quit dragging its feet eventually. There is no scientific or product risk in this stock. Cerus' system works. My target price is $14 in one to three years.
•Related Article: 10 Best Stocks for 2011
No. 2: Curis
Curis (CRIS) has developed a series of cancer treatments based on a technology that disrupts intercellular signaling in the Hedgehog pathway. Disrupting communication disrupts cell duplication, the foundation of tumor growth.
Curis has more than 20 trials under way with Genentech/Roche and the National Cancer Institute. This year, Genentech will likely report results of a basal cell carcinoma trial for skin cancer, and it has said it will go from this mid-phase trial directly to an application for approval if the results are strong enough.
One success means a volcanic eruption in the stock, as it will prove the core technology is a viable platform for cancer treatments. A failure could put the entire program -- and the company -- in jeopardy. I believe the technology will be a success, which means this $2 stock could be worth $40-plus. If I'm wrong, you will probably be looking at a 50-cent stock. I'd say it's worth the risk.
Related Article: 5 Top Bargain Stocks Less Than $5
No. 3: Compugen
Compugen (CGEN) is the world's leading molecular intellectual property company. Based in Israel, the company has revolutionized the early phases of drug development through a highly automated process of exploring and selecting molecules with the greatest promise to serve as the basis for a particular treatment.
The company licenses its peptides and proteins for a fee to the who's who of the drug industry, and also receives a back-end cut of any drug that makes it to market using its discoveries.
Compugen just announced that it entered into an agreement with Baize Investments under which it will receive $5 million in R&D funding. My target for CGEN is $20 in three to five years.
•Related Article: 5 Dividend Stocks That Will Trump the Dow
No. 4: Spectrum Pharmaceuticals
Spectrum Pharmaceuticals (SPPI) is a commercial-stage biotechnology company with a primary focus in oncology and hematology The company specializes in rescuing treatments abandoned, in development stages, by other companies.
It has had a tremendous run based on market introductions and partnerships in the past two years, but now has even greater potential for a blockbuster with a drug called Zevalin for non-Hodgkin's lymphoma. This drug is currently approved as a salvage and adjunct therapy, and the company is in mid-stage trials for the use of Zevalin as a front-line treatment, which would be a much larger market.
The risk in this stock is high. It could be cut in half or worse on bad news from one of several clinical trials. However, successful trial results could take this stock from less than $7 to $32 in one to three years. SPPI could also become a takeover target.
No. 5: Impax Laboratories
The not-so-small generic drug maker Impax Laboratories (IPXL) (NASDAQ: IPXL) has arguably the best manufacturing technology for time-released drugs in the entire generic industry.
Pfizer's (PFE) patent for its $11 billion cholesterol drug Lipitor expires this year, and due to legal actions, it is already known that IPXL has figured out how to make a generic version of the blockbuster drug. I expect it to market it through a partner either in November of this year or six months later in May 2012 due to FDA regulations.
Two other major product introductions are anticipated in 2011: generic Concerta for ADHD and generic Solodyn for bacterial infections, currently with combined sales of $1.8 billion.
My target for the stock is $35-$40 in one to two years. IPXL is also the possible target of an acquirer.
Stocks to Watch at JPMorgan Healthcare Conference
By David Miller Jan 07, 2011 3:00 pm
Next week investors will congregate in California to discuss the future of the biotech industry. Companies to watch include Exelixis, Medivation, and Dendreon.
It’s the time of year for the JPMorgan (JPM) Healthcare Conference. The conference, which runs Monday through Thursday next week in San Francisco, is the surest place to see everyone in biotech each year. The size of the crowd at the conference, held at the Westin St. Francis hotel, is a decent indicator of how hot the biotech sector is each year. This year’s crowd will be 20% above last year's and one of the largest since I started attending in 2003.
Our firm sets up in a suite down the street and has a steady parade of companies through the doors. This is an excellent opportunity to catch up with the companies we already cover, but more importantly meet new companies to add to our coverage universe. Here’s what I’m looking forward to next week
Exelixis (EXEL) recently released seemingly excellent Phase II data in prostate cancer. Shortly thereafter, management announced they were focusing the company’s assets on this program. I’ve looked at Exelixis often since its first appearance at JPM and have always been turned off by its spendthrift ways. This year it seems to be different. I’m excited to sit down with management to chat about both the data and how they're focusing their resources.
Medivation (MDVN) is one of the companies my clients are always asking about. I’ll want to chat about MDV3100, its prostate cancer drug, as well as the other drugs in its pipeline.
Dendreon (DNDN) got most of the big news out of the way in a conference call this morning so they could talk with investors one-on-one without breaking Reg FD. Their EU strategy is clear, they hit 2010 revenue numbers, and reaffirmed 2011 guidance. Once the company announces how they will raise money (and how much) to support the EU expansion, the stock should be in the clear for 2011. This stock was my firm’s top pick for 2011 back in August and is atop many “top biotech investments for 2011” lists.
Seattle Genetics (SGEN) signed a nice technology deal with Pfizer (PFE) Thursday. There's a running argument in the biotech community whether ImmunoGen’s (IMGN) or Seattle Genetic's antibody-drug conjugate technology is better. Both companies can point to clinical success, but Seattle Genetic has been leading in big-dollar deals lately. SGEN traditionally raises money around this time of year. If they forswear doing that in their wall-to-wall meetings with investors next week, it might make a difference to the stock price. The company is due to file a BLA for FDA approval of brentuximab vedotin Q1-2011. I expect approval six months later for both Hodgkin’s Lymphoma and ALCL.
Corcept (CORT) investors were disappointed when excellent data for Corlux in Cushing’s Syndrome was met with sell-the-news declines in the stock price. Management needs to do the fundraising everyone expects and get it done sooner rather than later. We’re hoping they're not shy during their meetings with investors when pointing out why their trial design and data are stronger than data in Cushing’s from Novartis (NVS).
PolyMedix’s (OTC:PYMX) size and OTC listing makes it largely invisible to most investors. Its antibiotic platform is new and potentially very exciting. 2010 saw a steady rise in interest in PolyMedix on the part of investors until the FDA asked for more data before allowing clinical trials to start in the US (Canadian authorities had no issues, so trials continue there). In my chat with them, I’ll be looking to understand the impact on timelines and making sure this type of “unexpected” outcome isn’t repeated.
BioMarin (BMRN) has been a top pick of my firm for years. We’ve been covering it since 2004 when it was trading around $7. This orphan disease-focused company is perennially on the likely-to-be-acquired list, particularly given big pharma’s recent appetite for these companies. This year, BioMarin appears to be energized to put its large cash balance ($440 million) to work advancing its pipeline.
The schedule has many other companies, but I’m most excited to meet with these. JPM is also a chance to meet with clients -- existing and prospective. Frankly, I also enjoy watching all my East Coast friends try to adapt to market life on the West Coast -- up late, up early.
Read coverage from last year's conference: Now Is the Time to Invest in Health Care.
January Stock Catalysts for Biotech & Drug Companies
By Brett Chase Jan 04, 2011 2:20 pm
Orexigen, Endo Pharmaceuticals and Clinical Data are among stocks that will move on FDA action.
US officials are expected to act on a number of drug applications this month. The moves will drive trading in companies, especially smaller biotech firms that live and die by Food and Drug Administration approvals. Here’s a look at some important FDA events for January. As always, dates are subject to change.
January 7
The FDA is expected to decide whether Endo Pharmaceuticals’ (ENDP) extended-release, tamper-resistant pill version of painkiller Opana should be approved for sale. Endo’s pill is designed to be crush-proof to help thwart drug abuse. The application is getting a speedy review from regulators. Last month the agency approved a separate application for Endo’s testosterone gel, a decision that boosted the company’s shares.
The FDA also is expected to decide by January 7 whether AstraZeneca’s (AZN) thyroid cancer drug vandetanib should be approved. Last month, a panel of expert government advisers recommended that the drug be approved but also said the treatment should be studied further to evaluate safety.
January 12
Eli Lilly’s (LLY) pancreatic enzyme replacement therapy liprotamase faces an FDA panel. Lilly acquired the treatment with its $180 million purchase of closely held Alnara Pharmaceuticals last year. The FDA rejection in October of Lilly’s diabetes drug Bydureon was a big blow for a company that needs new products to replace older drugs. Lilly hasn’t said much about liprotamase, which treats cystic fibrosis patients and would have competition from drugs already on the market.
January 20
Eli Lilly (LLY) faces another panel that will consider its imaging agent florbetapir, which is aimed at helping diagnose Alzheimer’s disease. Lilly acquired the product through its acquisition of Avid Radiopharmaceuticals in November for $300 million. Lilly agreed to pay up to another $500 million if the product is approved and meets sales goals.
January 22
Clinical Data (CLDA) is expected to receive word from the FDA about approval of its depression drug Vilazodone. While some analysts predicted a potential blockbuster drug, shares of the company dropped 18% in the past month on concerns the drug may not be approved.
January 26
MannKind (MNKD) was supposed to hear from the FDA December 29 on whether its fast-acting inhaled insulin treatment Afrezza would be approved. The agency said it needed “about” four additional weeks to review the application. Afrezza was rejected by the FDA early last year. Analysts are divided on whether the product can be approved this time.
January 30
Abbott Laboratories (ABT) and Depomed (DEPO) are expecting to get an agency decision on the experimental drug DM-1796, for the treatment of pain caused by shingles. Depomed’s stock doubled in the past year. The company licensed the drug to Solvay, which was later acquired by Abbott.
January 31
Orexigen Therapeutics (OREX) should get word on whether its diet pill Contrave will be approved. A panel of FDA advisers surprised the investment world by recommending approval even after agency staff expressed concerns about safety and effectiveness. The advisers recommended a safety study after approval. Don’t be surprised if the FDA decides it needs more time to review this drug. Diet pills are highly controversial and two other weight-loss drugs offered by Arena Pharmaceuticals (ARNA) and Vivus (VVUS) were rejected by the FDA last year.
On the Rise: Human Genome Sciences
By Brett Chase Jan 11, 2011 1:30 pm
Bulls on the stock say new lupus drug Benlysta will be approved and is a sure blockbuster product.
Even before CEO H. Thomas Watkins promised yesterday to generate billions in new revenue by 2015, investors were warming to Human Genome Sciences (HGSI) again.
Shares of the company are up 12% this year, trading midday Tuesday at $26.75. That’s down from a high of $33.30 last year. But there are still lingering fears that experimental lupus drug Benlysta won’t be approved or use of the treatment will be limited because of concerns about its effectiveness.
The Food and Drug Administration is considering the drug’s approval after a panel of expert advisers in November recommended allowing Benlysta on the market, making it the first new lupus drug in half a century. After delaying its decision last month, the agency is expected to act by early March.
Bulls on this stock believe Benlysta will be a multi-billion dollar blockbuster drug for Human Genome and development partner GlaxoSmithKline (GSK). Success may also make Human Genome a prime takeover candidate for a big drug company.
“We continue to be extremely enthusiastic about the commercial prospects of Benlysta,” says Stifel Nicolaus analyst Maged Shenouda, who rates the stock a buy.
Shenouda, who has a $38 target price for the stock, believes the drug will be approved and it will generate $156 million in sales this year, climbing to $2.9 billion by 2014. After US approval, Shenouda believes the drug also will be cleared for sale in Europe.
Like any good analyst, Shenouda has been doing his homework, contacting medical experts to get a pulse on whether doctors will prescribe the product.
“Based on multiple clinician discussions, we believe Benlysta’s efficacy and safety profile will drive broad adoption,” he says.
He bases his 2014 revenue estimate on Benlysta taking about 20% of the lupus drug market in the US and more than 14% in Europe.
What’s more, Human Genome will be an attractive takeover candidate, he says.
The knocks on the drug: Limited effectiveness, particularly in African-American patients. But the safety concerns are minimal and this is a disease that hasn’t been treated with a new drug for a very long time, not to mention, lupus is a horribly painful condition.
The label may even carry disclaimers, stating -- for instance -- that Benlysta showed less of a benefit in black patients, Leerink Swann analyst Joseph Schwartz says in a note last month.
“We believe the revenue impact of such statements would be minimal, considering the lack of other attractive treatment options,” says Schwartz, who rates the stock a buy and has a $35 a share price target.
In case there was any doubt, CEO Watkins told analysts and investors at a conference yesterday that 2011 is a turning point for the money-losing company. He says a sales team is in place for a near-term drug launch.
“Based on the opportunities we have in hand and our expectation of US and European regulatory approvals of Benlysta, we believe Human Genome Sciences will achieve sustainable multi-billion dollar annual revenues by 2015,” Watkins said. This year “will be a game-changing year for us assuming approval and launch of Benlysta.”
Dendreon's Provenge Overhang
By Brett Chase Jan 07, 2011 1:40 pm
Signs are positive for Dendreon moving ahead with its prostate cancer vaccine Provenge in the US and eventually Europe. Medicare reimbursement however, continues to hold back the stock.
Dendreon (DNDN) is moving ahead with plans to sell its prostate cancer vaccine Provenge in Europe, a positive signal for a stock that’s been beat up over reimbursement worries in the US.
Dendreon will apply either late this year or early 2012 to sell Provenge in Europe. Company executives say they won’t be required to conduct any new human studies to get approval there -- another positive. If all goes as planned, Dendreon will get European clearance by 2013.
Despite the positives, Dendreon’s shares aren’t exactly rallying on the news. The stock rose about 4% to $36.93 in midday trading. The shares are down 4% over the past three months and down almost a third from their high last year as concerns over the company’s capacity to make enough Provenge and insurance reimbursement questions spooked some investors.
In November, a panel of experts advising Medicare and Medicaid recommended that the government should reimburse patients who receive the vaccine. The agency that oversees the two public health plans ordered the review after Provenge was approved for sale in the US last year. The Centers for Medicare and Medicaid Services says it will draft guidance on paying for the treatment by March and will make a decision by June 30. Provenge patients are currently being reimbursed by government and private insurance.
Dendreon reiterated an earlier estimate that Provenge sales will be as much as $400 million this year and the company will continue to lose money as it spends to produce and sell the vaccine and expand to Europe. (Provenge revenue was $48 million last year.) Dendreon plans to build a plant in Germany and initially will contract with another company to produce Provenge. That’s, of course, contingent on Provenge winning EU approval.
The bulls on this stock think Dendreon is way undervalued.
Robert W. Baird analyst Christopher Raymond has a price target of $56 a share. The stock closed above $54 after receiving approval last year.
“Now may be the best time to get involved in this name, ahead of Dendreon’s planned capacity expansions and in particular ahead of additional or more substantive signals of strong commercial uptake,” Raymond says in a note yesterday.
Provenge is a new type of treatment. It’s a vaccine that turns a patient’s immune system against cancer. In men with advanced prostate cancer it’s been shown to extend their life an average of four months. A number of analysts predict the treatment eventually will exceed $1 billion in annual sales.
“What we’re in is a golden era for patients with prostate cancer,” Dendreon CEO Mitchell Gold said on a call with investors and analysts this morning.
This wonder drug comes with a big price tag: $93,000 per treatment. Conspiracy theorists believe the government’s review of the treatment is related to sticker shock. But Medicare’s analysis isn’t supposed to consider price. The review in November was over safety and effectiveness.
Pricing the product in Europe will be an issue as well. But that’s a challenge every drug maker faces as a number of countries have price controls.
Gold says demand continues to be strong and plans for production and sales are on track. The company has 100 sales people and production capacity will increase tenfold this year as plants in New Jersey, Los Angeles and Atlanta come on line.
The only overhang on the stock seems to be the Medicare issue. A bet on Dendreon continues to be a call on whether insurance reimbursement is upheld. So far, the signs point to that happening.
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