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. I feel some of the companies listed below are worth owning at today's prices (8/23/11), others may decline even further. For full disclosure, click here for a current list of which stocks I own among those I cover. As always, complete your own research and consider your circumstances before taking any action based on my thoughts.
Keep reading below the jump for my stock by stock analysis:
Keep reading below the jump for my stock by stock analysis:
Group 1 - I would be comfortable establishing or adding to a position at current prices:
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 (clinicaltrials.gov 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 take advantage of.
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 (clinicaltrials.gov 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 take advantage of.
Group 2 - Stories I like, but think the market may allow a lower entry price for
Antares Pharma $AIS
Market Cap $228m, Enterprise Value $195m
AIS (click here for complete research page) is a two-headed beast. First half is the fact that BPAX licensed Libigel from AIS and AIS owns commercialization rights for most of the ex-US territories. Second, AIS develops auto-injectors for a variety of products and has several partnerships with TEVA. AIS has held up really well lately and has a higher enterprise valuation than BPAX. That, combined with repeated delays on the Teva-partnered programs have me cautious right now.
Ligand Pharma $LGND
Market Cap $247m, Enterprise Value $262m
LGND (click here for complete research page) holds rights to a complex portfolio of ~60 different drugs, ranging from unpartnered preclinical programs, to eight difference commercialized products that will pay LGND royalties in 2011. The key newsflow going forward is additional Promacta HCV data from GSK (they announced that the first phase 3 trial was successful), Carfilzomib NDA filing and potential approval, and a partnership for the SARM program in muscle wasting (phase 2 ready).
OncoGenex $OGXI
Market Cap $108m, Enterprise Value $33m
OGXI (click here for research page) is partnered with TEVA to develop an antisense drug targeting clusterin for cancer that is licensed from ISIS. Two lengthy phase 3 trials in prostate cancer are ongoing but will not report data until 2013. The phase 3 program for non-small cell lung cancer (NSCLC) has been delayed and I wonder if it will get off the ground at all. OGXI has a very small float and low volume, so has had some violent swings (in the presence of absence of news).
Optimer Pharma $OPTR
Market Cap $370m, Enterprise Value $212m
OPTR (click here for complete research page) recently won approval for a C. difficile antibiotic, Dificid (fidaxomycin), which it has launched in partnership with CBST. I won't pretend to know what the market will think of the launch, based on recent biotech trends that punish companies with newly launched drugs. However, I think the drug will be a success and OPTR is definitely a buyout candidate.
Senomyx $SNMX
Market Cap $156m, Enterprise Value $94m
SNMX (click here for research page) is a company you've probably never heard of that use biotech high-throughput screening techniques to develop novel ingredients for food and beverage products that enhance (such as sugars, artificial sweeteners, MSG) or block (such as bitter ingredients) particular flavors. There most high profile deal is with Pepsi. Another thinly traded stocks that can be highly volatile on occasion. A good buy at this price, but could go lower. Always in play for a buyout, with Pepsico and Firmenich being the most logical suitors.
Synta Pharma $SNTA
Market Cap $195m, Enterprise Value $147m
SNTA (click here for complete research page) is developing the leading HSP90 inhibitor, ganetespib (STA-9090) which is in a phase 2b/3 trial for NSCLC and a host of earlier stage studies. I can see SNTA dipping back to $3 or so on a continued market downturn, but that would set up a huge rally when SNTA announces a huge Asian partnership (and perhaps a smaller deal for another pipeline program) by the end of 2011.
Antares Pharma $AIS
Market Cap $228m, Enterprise Value $195m
AIS (click here for complete research page) is a two-headed beast. First half is the fact that BPAX licensed Libigel from AIS and AIS owns commercialization rights for most of the ex-US territories. Second, AIS develops auto-injectors for a variety of products and has several partnerships with TEVA. AIS has held up really well lately and has a higher enterprise valuation than BPAX. That, combined with repeated delays on the Teva-partnered programs have me cautious right now.
Ligand Pharma $LGND
Market Cap $247m, Enterprise Value $262m
LGND (click here for complete research page) holds rights to a complex portfolio of ~60 different drugs, ranging from unpartnered preclinical programs, to eight difference commercialized products that will pay LGND royalties in 2011. The key newsflow going forward is additional Promacta HCV data from GSK (they announced that the first phase 3 trial was successful), Carfilzomib NDA filing and potential approval, and a partnership for the SARM program in muscle wasting (phase 2 ready).
OncoGenex $OGXI
Market Cap $108m, Enterprise Value $33m
OGXI (click here for research page) is partnered with TEVA to develop an antisense drug targeting clusterin for cancer that is licensed from ISIS. Two lengthy phase 3 trials in prostate cancer are ongoing but will not report data until 2013. The phase 3 program for non-small cell lung cancer (NSCLC) has been delayed and I wonder if it will get off the ground at all. OGXI has a very small float and low volume, so has had some violent swings (in the presence of absence of news).
Optimer Pharma $OPTR
Market Cap $370m, Enterprise Value $212m
OPTR (click here for complete research page) recently won approval for a C. difficile antibiotic, Dificid (fidaxomycin), which it has launched in partnership with CBST. I won't pretend to know what the market will think of the launch, based on recent biotech trends that punish companies with newly launched drugs. However, I think the drug will be a success and OPTR is definitely a buyout candidate.
Senomyx $SNMX
Market Cap $156m, Enterprise Value $94m
SNMX (click here for research page) is a company you've probably never heard of that use biotech high-throughput screening techniques to develop novel ingredients for food and beverage products that enhance (such as sugars, artificial sweeteners, MSG) or block (such as bitter ingredients) particular flavors. There most high profile deal is with Pepsi. Another thinly traded stocks that can be highly volatile on occasion. A good buy at this price, but could go lower. Always in play for a buyout, with Pepsico and Firmenich being the most logical suitors.
Synta Pharma $SNTA
Market Cap $195m, Enterprise Value $147m
SNTA (click here for complete research page) is developing the leading HSP90 inhibitor, ganetespib (STA-9090) which is in a phase 2b/3 trial for NSCLC and a host of earlier stage studies. I can see SNTA dipping back to $3 or so on a continued market downturn, but that would set up a huge rally when SNTA announces a huge Asian partnership (and perhaps a smaller deal for another pipeline program) by the end of 2011.
Group 3 - Not interested right now, or see further downside
Adolor $ADLR
Market Cap $107m, Enterprise Value $75m
ADLR (click here for complete research page) served as a good example of how quickly a biotech stock can rally from a negative or near zero enterprise valuation. The rally has been fueled by the reacquisition of Entereg marketing rights from GSK as well as positive phase 2 data from their ADL5945 opioid induced constipation (OIC) program. As I made clear at the time, I hated the Entereg deal, and the OIC data are not that strong in a crowded field. I worry about the likelihood and strength of partner to fund the OIC phase 3 trials. Regardless, I think a stock offering is quite likely. I am staying away from this one.
Infinity Pharma $INFI
Market Cap $189m, Enterprise Value $107m
INFI (click here for research page) defied the recent biotech plunge for awhile, as I incredulously pointed out on Twitter. But of course I didn't short it at $10 and now it sits at $7. INFI is an odd beast because of its unusual arrangement with Mundipharma and Purdue Pharma that provides complete research funding for all its programs except its HSP90 inhibitor IPI-504 (retaspamycin HCl). This takes a negative off the table (financing risk), but also seriously blunts upside, as partnering transactions are in the past and make a buyout less likely. I like the IPI-926 hedgehog inhibitor in pancreatic cancer (though risky), but any data is in the future at this point.
Isis Pharma $ISIS
Market Cap $700m, Enterprise Value $480m
ISIS (click here for complete research page) is the pioneer of antisense drug development. Its leading program, mipomersen(now called Kynamro) is moving towards regulatory approvals in the US and EU in 2012, a significant milestone. However, setbacks and delays in the rest of the pipeline leaves a chasm of time in which there will be no late-stage catalysts to drive a second product towards commercial revenue behind mipomersen for hypercholesterolemia.
Spectrum Pharma $SPPI
Market Cap $438m, Enterprise Value $314m
SPPI (click here for research page) sells two oncology drugs (Fusilev and Zevalin) and has two more in late stage development (belinostat and apaziquone). Its future is tied most strongly to the duration of the generic leucovorin shortage, the uptake of Fusilev for colorectal cancer when generic supplies return, and whether Zevalin sales can gain any growth traction with an assist from the removal of the bioscan requirement (sNDA is pending a late fall DUFA date). I don't care to handicap any of these situations, and I don't trust management not to make an in-advised asset acquisition in their quest to become an important pharma company, so I will stay on the sidelines.
Supergen $SUPG (soon to be renamed Astex Pharma $ASTX)
Market Cap $191m, Enterprise Value $71m
SUPG (click here for research page) recently closed a merger with privately-held Astex Therapeutics (UK). On their recent conference call they disclosed a plan to spin-off their US-based (SUPG legacy) discovery operations, including some preclinical and clinical programs, into a new company called Montigen. I detailed and analyzed this disclosure and its consequences in a recent blog post. In addition to verifying that the 2006 Montigen acquisition and the tens of millions spent developing CLIMB-based programs have been worthless, SUPG will also have to seed the spinoff with cash (I estimate $50m), further adding to the cost to reimagine the business with the Astex merger. I need to see the allocation of clinical programs between ASTX and spinoff, need to see if they can get anyone to invest/be interested in spinoff, and see what the valuations are for the two companies before I consider SUPG again.
Adolor $ADLR
Market Cap $107m, Enterprise Value $75m
ADLR (click here for complete research page) served as a good example of how quickly a biotech stock can rally from a negative or near zero enterprise valuation. The rally has been fueled by the reacquisition of Entereg marketing rights from GSK as well as positive phase 2 data from their ADL5945 opioid induced constipation (OIC) program. As I made clear at the time, I hated the Entereg deal, and the OIC data are not that strong in a crowded field. I worry about the likelihood and strength of partner to fund the OIC phase 3 trials. Regardless, I think a stock offering is quite likely. I am staying away from this one.
Infinity Pharma $INFI
Market Cap $189m, Enterprise Value $107m
INFI (click here for research page) defied the recent biotech plunge for awhile, as I incredulously pointed out on Twitter. But of course I didn't short it at $10 and now it sits at $7. INFI is an odd beast because of its unusual arrangement with Mundipharma and Purdue Pharma that provides complete research funding for all its programs except its HSP90 inhibitor IPI-504 (retaspamycin HCl). This takes a negative off the table (financing risk), but also seriously blunts upside, as partnering transactions are in the past and make a buyout less likely. I like the IPI-926 hedgehog inhibitor in pancreatic cancer (though risky), but any data is in the future at this point.
Isis Pharma $ISIS
Market Cap $700m, Enterprise Value $480m
ISIS (click here for complete research page) is the pioneer of antisense drug development. Its leading program, mipomersen(now called Kynamro) is moving towards regulatory approvals in the US and EU in 2012, a significant milestone. However, setbacks and delays in the rest of the pipeline leaves a chasm of time in which there will be no late-stage catalysts to drive a second product towards commercial revenue behind mipomersen for hypercholesterolemia.
Spectrum Pharma $SPPI
Market Cap $438m, Enterprise Value $314m
SPPI (click here for research page) sells two oncology drugs (Fusilev and Zevalin) and has two more in late stage development (belinostat and apaziquone). Its future is tied most strongly to the duration of the generic leucovorin shortage, the uptake of Fusilev for colorectal cancer when generic supplies return, and whether Zevalin sales can gain any growth traction with an assist from the removal of the bioscan requirement (sNDA is pending a late fall DUFA date). I don't care to handicap any of these situations, and I don't trust management not to make an in-advised asset acquisition in their quest to become an important pharma company, so I will stay on the sidelines.
Supergen $SUPG (soon to be renamed Astex Pharma $ASTX)
Market Cap $191m, Enterprise Value $71m
SUPG (click here for research page) recently closed a merger with privately-held Astex Therapeutics (UK). On their recent conference call they disclosed a plan to spin-off their US-based (SUPG legacy) discovery operations, including some preclinical and clinical programs, into a new company called Montigen. I detailed and analyzed this disclosure and its consequences in a recent blog post. In addition to verifying that the 2006 Montigen acquisition and the tens of millions spent developing CLIMB-based programs have been worthless, SUPG will also have to seed the spinoff with cash (I estimate $50m), further adding to the cost to reimagine the business with the Astex merger. I need to see the allocation of clinical programs between ASTX and spinoff, need to see if they can get anyone to invest/be interested in spinoff, and see what the valuations are for the two companies before I consider SUPG again.
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