Quest For 10-Baggers in BioHealth in 2010 (JAZZ, TRGT, VNDA, DNDN, HGSI, CGEN, BNVI, QCOR, ACHN, PSDV, ATHX, SNSS, AVNR, BIOD, ALXA, CTIC)
If one thing was noticed in biotech stocks, or BioHealth stocks as we often say, it was that investors, traders, and speculators all piled into the chase for the next ten-bagger late in the year. When you have as many biotech and BioHealth stocks that ran over 1,000% in 2009 that is only to be expected…. hence the 10-bagger comments. We had many biotech and biohealth shares rally from their lows significantly this year, with companies such as Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ), Targacept, Inc. (NASDAQ: TRGT), Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA), Dendreon Corp. (NASDAQ: DNDN), and Human Genome Sciences, Inc. (NASDAQ: HGSI) all being in or having been in the 10-bagger club this year.
But late in 2009 we started seeing an onslaught of low-priced stocks with small cap or micro-cap values running rapidly higher on news. In some cases these faded, and in some not. We saw the traders run up shares of Compugen Ltd. (NASDAQ: CGEN), Bionovo, Inc. (NASDAQ: BNVI), Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR), Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN), pSivida Corp. (NASDAQ: PSDV), Athersys, Inc. (NASDAQ: ATHX), Sunesis Pharmaceuticals, Inc. (NASDAQ: SNSS), and AVANIR Pharmaceuticals, Inc. (NASDAQ: AVNR) on news late in 2009. Also covered as potentials for this are Biodel Inc. (NASDAQ: BIOD), Alexza Pharmaceuticals, Inc. (NASDAQ: ALXA), and Cell Therapeutics, Inc. (NASDAQ: CTIC).
We have reviewed each of these and given a synopsis for each to see if these could be the 10-baggers for 2010.
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Is Sunesis The Next 10-Bagger? (SNSS, DNDN, JAZZ, TRGT, VNDA, HGSI)
Sunesis Pharmaceuticals, Inc. (NASDAQ: SNSS) has become the next small cap and low-prices biotech craze this week. We have seen this occur this year in other stocks, and now it seems that investors and traders are ready to jump into many of these small-cap biotech stocks with the hope of catching the next 10-bagger (1,000% return on investment). When you look at the amazing performance of many stocks in the sector, you probably won’t be too shocked to see why traders and speculating investors pile in:
- Dendreon Corp. (NASDAQ: DNDN) is up 900% from its lows over the last year.
- Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) has jumped about 1,400% from lows.
- Targacept, Inc. (NASDAQ: TRGT) has jumped over 1,000% from lows.
- Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA) has popped over 2,000% from its lows.
- And the biggie…. Human Genome Sciences, Inc. (NASDAQ: HGSI) was under $0.50 in March, making those fortunate few who bought after the March price tank have a gain of 50-fold if had they still held on today.
Today’s action dwarfs what was seen on Tuesday after Sunesis announced positive data from its two Phase II clinical trials of its lead drug candidate called voreloxin. The company said that the results showed strong efficacy and safety profile when used as a single agent or in combination with chemotherapy in patients with difficult to treat acute myeloid leukemia.
This data was presented at the 51st American Society Hematology Annual Meeting in New Orleans, LA. Sunesis showed that the high rates of remission in both trials have translated into durable effects with meaningful preliminary overall survival results.
With an anticipated median survival of three and a half to six months on currently available therapies, primary refractory and first relapse AML patients are particularly in desperate need of more effective treatment options. The company said that it plans to discuss the data with the FDA in End-of-Phase 2 meeting scheduled for the first quarter of 2010.
This stock closed at $0.44 on Monday before the data was released. But then on December 8 it had trading volume of 10,042,800 and closed up at $0.53. Yesterday it closed up at $0.60 on 4.1 million shares. The 52-week trading range was $0.05 to $0.90, which shows how this was a dormant stock. But then this morning traders began piling into the stock. And piled and piled. At 2:00 PM EST the stock is up a whopping 120% at $1.32 on 23 million shares having traded, but the stock traded as high as $1.84 on the day.
If you smooth out the most recent trading action and if you smooth out the exact lows you have an average share price of probably $0.30 or $0.35. If we see one more day of this action, a 10-bagger is more than just theory.
Even after the run this week, this is a mere $45.4 million market cap stock. At the end of September, it held $3.87 million in cash. Always keep in mind that there is a nasty side to major price gains in small speculative biotech stocks that release positive study data. That is the “news selling” where companies raise cash in private placements. Don’t be too shocked if you see the company use the gains to raise cash.
JON C. OGG
Vanda (VNDA) Leaps On Novartis Pharma News
Vanda Pharmaceuticals (NASDAQ:VNDA) moved up 14% to as the company disclosed that it has entered into an agreement with Novartis Pharma AG to commercialize and develop Fanapt (iloperidone), Vanda’s anti-psychotic, in the U.S. and Canada. Fanaptwas approved by the U.S. Food and Drug Administration on May 6, 2009 for the acute treatment of schizophrenia in adults. Fanapt is a mixed dopamine D2 / serotonin 5HT2A receptor antagonist. The U.S. anti-psychotic market is approximately $14 billion. Read more
Sepracor: A Thought Of A Higher Price… (SEPR, CBST, ONXX, GERN, VNDA, REGN, SGEN, ALNY)
It is common that when mergers are announced that some shareholders are either unsatisfied or want more. Sepracor Inc. (NASDAQ: SEPR) and its proposed $2.6 billion sale to Dainippon Sumitomo Pharma Co. might not be enough to satisfy everyone involved in the shareholder side of the deal. That is the case if you read a Bloomberg report from Tuesday night and this could be the first of many such suits.
It appears that the allegations are that the terms of the merger are detrimental to shareholders because of a break-up fee and shopping provisions. This is an effort either to block the merger or to secure a higher price and better terms. So here is how the $23.00 stacks up… It was a 27.6% premium to the September 1 price, but was a 48% premium to the 6-month average.
This deal does make-whole anyone who bought shares over the last year. But it comes with a huge hit for many investors who have been in it for the long-term. From the end of 2004 to mid-2007 this was generally a $40 to $60 stock. Then it was a $30 stock and the stock was in the low $20’s to $30 for most of the period from mid-2007 to mid-2008.
If you look at the deal on a valuation basis, it seems very cheap. The Thomson Reuters figures for 2010 are $2.91 EPS and $1.26 billion in revenues for 2009 and $2.99 EPS and $1.31 billion in revenues for 2010. In short, The company is selling for less than 8-times a blended earnings estimate and just over 2-times revenues for a blended time horizon.
Any time a merger is seemingly based upon a 52-week high, it is hard to feel too sorry for investors. At least until you start looking at the multiple of earnings being so low. We screened recently for all of the low P/E stocks in drug and biotech and there are still many other low P/E multiples in there.
We also are putting together another piece right now containing the following stocks as merger candidate discussions:
- Cubist Pharmaceuticals Inc. (NASDAQ: CBST)
- Onyx Pharmaceuticals Inc. (NASDAQ:ONXX)
- Geron Corporation (NASDAQ: GERN)
- Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA)
- Regeneron (NASDAQ: REGN)
- Seattle Genetics Inc. (NASDAQ: SGEN)
- Alnylam (NASDAQ: ALNY)
JON C. OGG
SEPTEMBER 9, 2009
More Biotech/Drug Mergers Coming? (SEPR, CBST, ONXX, GERN, VNDA, REGN, SGEN, ALNY)
This week came a merger of at least one of the drug and biotech players we expected to occur. That was in Sepracor (NASDAQ: SEPR). We will be putting together a list of much more detailed picks in teh sector this coming week.
Some of these are our own picks which we think should be acquired, and some are current biotech-drug targets which others feel are on deck. To see the full deal on how this related, BioMedReports.com has a full breakdown on teh Spreacor terms and we used this for determining value on some of our other picks….
Among the picks being presented in detail next week are as follows:
Cubist Pharmaceuticals Inc. (NASDAQ: CBST)
Onyx Pharmaceuticals Inc. (NASDAQ:ONXX)
Geron Corporation (NASDAQ: GERN)
Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA)
Regeneron (NASDAQ: REGN)
Seattle Genetics Inc. (NASDAQ: SGEN)
Alnylam (NASDAQ: ALNY)
Have a great weekend and stay tuned for the full details on these and others next week.
JON C. OGG
SEPT. 4, 2009
After Tenfold Gains, Vanda Insiders Dumping Stock (VNDA)
Vanda Pharmaceuticals Inc. (NASDAQ: VNDA) has been a monster gainer of late as traders and short-sellers keep driving the stock up. This was a mere $1.00 stock early last week and this has closed up five straight days after an unexpected FDA approval. Yet today, we see that insiders are now unloading stock.
The run was based upon the great hope for the unexpected approval of its Schizophrenia treatment. With this and related disorders being a huge blockbuster opportunity, the approval could lead to a blockbuster drug status with a $1 billion target in annual sales.
Shares closed up 15% today at $12.96, yet we are seeing some selling after the close as a result of insiders selling. Whether or not that holds tomorrow is up to more powers than we can speculate on.
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Is Vanda's Fanapt(tm) For Schizophrenia The Real Deal? (VNDA)
Vanda Pharmaceuticals Inc. (NASDAQ: VNDA) was such a huge mover that it was almost surreal. Shares closed at $7.84 on Thursday after trading almost 10 million shares. They were at $1.08 on Wednesday. The FDA granted marketing approval of its Fanapt(TM) for the acute treatment of adult patients with schizophrenia.
The approval was supported by two placebo-controlled Phase III clinical studies with safety data of more than 3,000 patients that compared Fanapt(TM) to placebo and active control in patients with schizophrenia.
This may mark a new opportunity for many patients with schizophrenia. Many patients only seem to experience only partial responses to current therapies. This also has a side effect profile deemed ‘excellent” across a wide range of major tolerability problems associated with other antipsychotic therapies.” The efficacy of Fanapt(TM) for the treatment of schizophrenia was supported by two placebo-controlled short-term (4- and 6-week) trials. Both trials enrolled patients who met the DSM-III/IV criteria for schizophrenia, and Fanapt(TM) was shown to be superior to placebo in controlling symptoms of schizophrenia across doses of 12mg to 24mg per day. The recommended target dose range of Fanapt(TM) is 12mg to 24 mg per day. Titration to the target dose of 12mg per day can be achieved in 4 days.
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When Biotechs Run Out of Cash… Or Go At-Risk (ISTA, VNDA)
Investors are in love with biotechs right now and it is hard to argue against it with the attractive pipelines that can be purchased. Throw in a cheap US Dollar that allows foreign buyers to buy at a 25% to 35% discount, and the argument grows even stronger.
But there are many biotech zombies that have imploded to nothing but cash, a few employees, and a hope and prayer to find the next drug candidate being shopped around on the cheap. There is a second group second group of troubled biotechs that have product candidates but are on the race to zero cash.
Enter, Ista Pharmaceuticals (NASDAQ: ISTA)…
ISTA Pharmaceuticals stock is down almost 14% today after the company shares were downgraded at Jefferies with a new UNDERPERFORM rating. Jefferies is growing more and more concerned that ISTA is on a path that will make it run out of cash by early-2009. The research note also notes that the holders of $40 million in convertible debt may use their rights to PUT the securities back to the company. That would only chew up more liquidity.
ISTA isn’t a biotech zombie though. The company has two product candidates in teh development pipeline. In fact, Jefferies believes these could make the company attractive to a more speculative buyer. This would likely generate higher shareholder returns rather than investing in this for looking at an independent company.
Unfortunately, the liabilities at the end of last quarter were $73.561 million versus total assets of $60.03 million (with only about $35 million available in raw cash and equivalents). Some companies go zombie and trade at a discount to cash prices because of the cash burn rates that will take it under book value.
Vanda Pharmaceuticals (NASDAQ: VNDA) yesterday imploded to the point that it trades well under its perceived net cash value. That is because the longer review and extra trials are likely to erode that cash faster than a lotto winner out of the trailer park.
JON OGG
JULY 29, 2008
Biotech Implosion: Vanda Pharmaceuticals (VNDA)
Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA) is seeing a major implosion this morning. The company has disclosed that it received a dreaded FDA not-approvable letter on its iloperidone. This was its late-stage schizoprenia candidate as well. The drug candidate is apparently too close to other drugs already on the market and the FDA said more safety data would be required to consider another application.
Vanda shares are down 59% at $1.35, which has gone from the good to the bad to the ugly. Its prior 52-week trading range was $2.70 to $19.62. Its current market cap after the drop is about $36 million. While that is well under its cash levels on the books, it will burn through much cash to fulfill its FDA obligations to proceed.
This one isn’t a biotech zombie yet, but you’d never know it if you just looked at its stock chart.
Jon Ogg
July 28, 2008
Vanda Scores on Insomnia Phase III Trials (VNDA)
Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA) is seeing shares rise this morning on news that its Phase III data showed Tasimelteon significantly improves sleep in patients with chronic insomnia. The positive top-line results from a Phase III trial showed that its investigational drug candidate, Tasimelteon, which it calls a novel melatonin agonist, met the primary endpoint of the trial and significantly improved sleep in adult patients with chronic insomnia. This study also demonstrated that Tasimelteon was well-tolerated and exhibited a safety profile generally similar to placebo.
This was its Phase III, multi-center, placebo-controlled, 4-week trial that evaluated 322 patients with chronic primary insomnia. Patients were randomized to receive either 20 mg or 50 mg of Tasimelteon or placebo over the four weeks.
On Nights 1 and 8 of treatment, mean LPS improved by 45.0 minutes in the 20mg group (p<.001), by 46.4 minutes in the 50mg group (p<.001), and by 28.3 minutes in the placebo group. On Nights 22 and 29 of treatment, mean LPS improved by 49.4 minutes in the 20mg group (p<.001), by 45.1 minutes in the 50mg group (p=.016), and by 33.9 minutes in the placebo group. Importantly, this effect was also seen acutely on the first night of treatment. Patients in the 20mg and 50mg groups fell asleep 22.9 minutes (p<.001) and 25.9 minutes (p<.001) faster, respectively, than those in the placebo group.
Vanda shares are indicating higher with some 2-hours to the open. Shares closed at $4.99 and are indicated up at $5.90 in early trading (7:30 AM EST). Its 52-week trading range is $2.70 to $21.50. This one also has a substantial short interest so watch for that spring-loaded effect.
Jon Ogg
June 26, 2008
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