Tag - Biotech

It’s hard to believe, but the average drug sitting on the shelf in your medicine cabinet costs $800 million and 10 years to develop.

Any astute investor might wonder where that $800 million goes and whether he can profit from it. A good chunk of the investment is earmarked for early pre-clinical trials and the three phases of FDA approvals, more and more of which are being outsourced by both Big Pharma and Biopharma to companies such as Kendle International (Nasdaq:KNDL), one of the leading clinical research organizations (CRO) in the world.

Founded in 1981 by Dr. Candace Kendle, PharmD, the Cincinnati, Ohio firm has a market cap of $724.7 million and has consistently demonstrated an eye for the strategic opportunity. It is one of the smaller CROs, but has positioned itself to play on a global scale. It employs nearly 4,000 people in 48 office locations in 28 countries on six continents. Scale is important for a vendor supporting the increasingly global pharmaceutical industry, as both development spending and revenue shifts out of North America and into Asia/Pacific, Latin America, and the rest of the world. With offices in Australia, China, India, Singapore, and throughout Latin America, Kendle is well positioned to benefit from this significant shift.

Size and reach are also important in the “megatrial” market, the fastest growing segment of the CRO industry. Just as the name implies, megatrials are large-scale, long-term controlled research studies that require thousands of patient participants (usually 10,000 or more), strong project leadership, and a high level of technology to collect and analyze the resulting data. Kendle’s organic growth and crafty acquisitions have built a company that is fully capable of competing for these mega projects.

In 2006, Kendle acquired Charles River Laboratories, a provider of Phase II-IV Clinical Services. The acquisition boosted the company’s size by 50% and . . .

Allion Healthcare (Nasdaq:ALLI), a specialty pharmaceutical company focused on HIV/AIDS therapies, is ably performing in an attractive market segment. Expected to nearly double earnings this year, Allion is taking care of others and is feeling pretty good itself.

The company offers reimbursement expertise, arrangement of medication delivery and patient consulting services. It operated 11 specialty pharmacies under the MOMS Pharmacy brand in four states and had 15,610 patients at the end of 2007. Allion’s distribution centers are near metropolitan areas in New York, California, Florida, New Jersey and Washington, where the majority of patients live.

And there is a stream of them: in the United States, the World Health Organization says as many as 2 million people were living with HIV/AIDS in the United States at the end of 2005; other data show between 400,000 and 500,000 were taking medicine. There are at least 40,000 — probably many more — new cases of HIV infection each year. The market is estimated at $25 billion for anti-retrovirals and ancillary HIV drugs.

Allion has expanded both internally and through acquisitions, the most recent of which was a purchase in April of Biomed America, a provider of infusion medications for patients with immune deficiencies and other chronic illnesses. And in May, Allion opened a pharmacy in partnership with Lifelong AIDS Alliance of Seattle, which serves more than 3,000 people.

The company intends to continue expansion by raising revenue from its current product base, increasing the number of diseases served and offering more services. It’s open to acquisitions and wants more partnerships.

Strong second-quarter results included the Biomed acquisition and AIDS partnership. Sales in the quarter through June were up 39% from the previous year, . . .

Salix Pharmaceuticals Ltd.’s (Nasdaq:SLXP) stock slipped by 12% after the firm announced before the opening this morning plans to raise $50 million by offering convertible senior notes.

The Raleigh, N.C.-based drug manufacturer said it will use the money in part to fund potential product acquisition or in-licensing opportunities. Some money also will be used for general corporate purposes and to develop product candidates.

Salix, which develops and markets prescription pharmaceutical drugs for the treatment of gastrointestinal diseases, has taken a hit this year since competitors starting selling a generic version of inflammatory bowel disease treatment Colazal, which was previously Salix’s best-selling product.

At mid-day, Salix is at $7.84, down $1.06 from Friday’s close. Shares have ranged between $5.40 and $14.26 in the past 52 weeks.

For detailed price information and news stories on Salix, click SLXP.

Shares of Dyax Corp. (Nasdaq:DYAX) skyrocketed by nearly 18% this morning, hitting a new 52-week high, after the biopharmaceutical company said it soon plans to apply for federal approval of DX-88, its potential treatment for heredity angiodema.

The Cambridge, Mass.-based company reported before the opening this morning positive results from its second Phase 3 trial of the drug candidate, saying DX-88 was well-tolerated with no drug-related serious adverse side effects.
DX-88, according to Dyax, performed better than a placebo in treating HAE, a rare genetic disease characterized by episodes of acute swelling, pain and inflammation. Dyax will complete an application to the U.S. Food and Drug Administration in the fourth quarter.

This morning, Dyax is at $5.10, up $0.77 from Friday’s close, after having reached a new 52-week high of $5.35 earlier in the day. The stock had ranged between $2.80 and $5.18 during the past year.

For detailed price information and news stories on Dyax, click DYAX.

(Part two of a two part series)

Dr. Fariba Ghodsian, chief investment officer of DAFNA Capital, looks for biotech companies that offer a differentiated advantage for a drug – ones that offer a unique product, or a different way to deliver a drug. If the drug is a me-too — i.e. many other companies have a similar drug — then the company is not attractive. She also examines the company’s market potential and its chances for success. “Obviously the market size of the drug is important,” Ghodsian notes. “But sometimes companies can thrive very well in very limited markets.”

She says the market should be an attractive one where the disease is difficult enough that the insurance companies would be willing to pay a high premium. She points to Genzyme (Nasdaq:GENZ) as an example of that. The biotech company made a billion dollar drug out of orphan diseases by tacking on a high price.

It goes without saying that the drug must also demonstrate a favorable safety and efficacy profile to warrant approval, while management is key to get the drug to market.

Ghodsian also examines if the company has the financial resources to go forward. “Often time’s biotech companies raise too little money, or are sometimes shortsighted when it comes to financing and I think that bites them in the end,” she said. “So a company that is well financed particularly in this market is important.”

Most of the companies in Ghodsian’s universe are not profitable. Some of the companies she invests in are very late stage, while some are more in clinical development. Among specific stocks she favors include, Isis Pharmaceuticals (Nasdaq:ISIS), Rigel Pharmaceuticals (Nasdaq:RIGL) and Pozen (Nasdaq:POZN).

Isis Pharmaceuticals is in the business of RNA-based drug discovery and development. Ghodsian finds this to be a unique company because it has a very broad base technology in antisense, which in essence is a way to block genes. “What we really like about Isis is that they have proved that the technology works,” Ghodsian said. “We like the company both for their specific drugs and for their broad technology platform.”

The company has a potential blockbuster drug for the reduction of blood lipids. “It has shown exceptionally strong clinical activity in patients, even those who . . .

Acura Pharmaceuticals (Nasdaq:ACUR)
Palatine, Ill.
http://www.acurapharm.com

52-week low/high: $5.79/$27
Shares Outstanding: 42.72 million
Market Capitalization: $331 million

More than 75 million Americans suffer from pain — more than the number of people with diabetes, heart disease and cancer combined. Prescription medications exist; however, the abuse of such, especially by younger people, complicates physicians’ ability and/or willingness to treat pain. Enter Acura Pharmaceuticals (Nasdaq:ACUR), a company that specializes in prescription drug abuse deterrents. 

The company has seen broad-based institutional interest as of late. According to Nasdaq.com, seven new positions were initiated as of March 31, 2008 in Acura, while eight existing investors increased their positions. On the flip side, only one position was decreased and sold out. Those who initiated new positions as of March 31 were UBS (NYSE:UBS), Merrill Lynch (NYSE:MER), Black Rock (NYSE:BLK), Wells Fargo (NYSE:WFC) and Deutsche Bank (NYSE:DB).

The Palatine, Ill.-based firm specializes in development of opioid pain medicines using what it calls Aversion technology, which is a patented platform designed to develop pharmaceutical products that are intended to relieve moderate to severe pain and deter common methods of prescription drug abuse (injection, nasal snorting and intentional swallowing). Acura’s lead product candidate is acurox — orally administered release tablets with oxycodone to treat severe pain.

In fact, Acura in conjunction with pharmaceutical company King Pharmaceuticals (NYSE:KG) recently reported positive results for a phase III study on the acurox tablets and expects to submit a new drug application to the FDA for acurox tablets by year end.

Acura also has a license agreement with King to develop opioid analgesic products using the aversion technology (opioid is a chemical used in drugs for pain relief). The two are currently jointly developing three immediate-release opioid analgesics using the aversion technology.

The alliance with King, consummated in December 2007, has proven to be a sagacious move, as the company is already realizing revenue accretion. In 2008, Acura recognized $17.1 million in revenues, adding to a strong first quarter.

For the first three months ended March 31, 2008, the latest quarter for which results were available, the company reported net income of $7.4 million, or $0.15 per, compared with a net loss of $9.2 million, or $0.26 per share for the same quarter in 2007.

Drilling down further into the financials, the company has just closed in on profitability. Acura swung to a profit in the fourth quarter of 2007. The company began generating positive cash flows from operations in 2007 and has been steadily increasing its cash position. As of April 30, 2008, the company had cash and cash equivalents of approximately $30 million with no term indebtedness.

Gross margins are higher than the industry at 100%, while the industry sits at 69%. Operating margin was 39.17% compared with -19.84% for the industry.

Behind the scenes of the cumbersome drug discovery and approvals process, there is a mini-industry that does not manufacture drugs but provides technologies and services to make drug testing more efficient.

One of the most promising companies in the sector is Philadelphia-based eResearch Technology Inc. (Nasdaq:ERES), whose software products automate the collection and interpretation of clinical data, particularly cardiac safety data, for pharmaceutical and biotechnology companies as well as drug device makers. After an extended period of little or no growth, eResearch is now on a roll.

The 31-year-old company in May said its revenues from a series of software products and consulting services rose to $33.7 million, or 59.7% from the year-ago period while EPS nearly tripled to $0.11 from $0.04.

This sudden growth spurt reflects multiple new product launches and upgrades internally as well as the acquisition late last year of Covance Cardiac Safety Services Inc. (CCSS) from Covance Inc. (NYSE:CVD).

Conditions in the industry eResearch Technology serves can vary widely, depending on competition from a very fragmented group of players as well as government regulations covering the drug approvals process. But most existing signs point to the company’s good fortune continuing for some time. CEO Michael McKelvey recently said the pipeline of new opportunities was strong, reflecting a continued emphasis on cardiac safety in drug development.

Shares of eResearch have more than doubled over the past year and, at a closing price of $17.06 on Monday, they are just shy of their 52-week high of $18.85. Although the company is still not widely covered by financial analysts, two who do track its revenues project total sales will grow to $140.7 million this year and $163.2 million next year, compared with $98.7 in 2007. Three analysts who . . .

ChemGenex Pharmaceuticals Ltd. (Nasdaq:CXSP) wants to share an ancient Chinese secret with the world, one that could provide a knockout punch to a form of leukemia resisting other treatment.

Recent announcements from the Australian company with a California research base triggered interest in the American Depository Receipts of ChemGenex — and given hope to those diagnosed with one of the four main types of leukemia.

For U.S. investors looking at ChemGenex’s Nasdaq-traded shares, or at the shares on the Australian Stock Exchange (ASX:CXS), it could be difficult to calculate the biotech company’s financial health. The SEC filings lack quarterly updates, and few analysts follow ChemGenex, though two in Australia rate it a “buy.”

Its homeland shares are trading around $1 Australian. On the Nasdaq, ChemGenex has risen 80% since January. Shares hit a 52-week low of $8.58 last Aug. 28, and a high of $26.99 on Tuesday. ChemGenex closed at $23.50 on Friday.

ChemGenex Pharmaceuticals was formed in 2004 from the merger of AGT BioSciences of Melbourne, with ChemGenex Therapeutics of Menlo Park, Calif. It united AGT’s focus on genetic discoveries in treating cancer, diabetes, obesity and depression, with ChemGenex Therapeutics’ application of genomic technologies to cancer treatment. A late 2007 spinoff of its metabolic disease business focuses on cancer.

With headquarters in Geelong, Victoria, ChemGenex is guiding omacetaxine mepesuccinate, derived from the Chinese yew tree, through final patient trials. The substance received U.S. fast-track approval for clinical trials to treat chronic . . .

Cytori Therapeutics Inc. (Nasdaq:CYTX) jumped more than 10% Tuesday after the company announced a patent was issued for its Celution System technology from the U.S. Patent and Trademark Office. The patent protects the San Diego-based biomedical manufacturer’s right to produce and sell technology that processes tissues to obtain a diverse mixture of cells, including red and white blood cells. The company still is seeking U.S. regulatory approval for the device, though it is currently sold in both Europe and Asia-Pacific regions. Cytori shares traded at about $6.74 apiece.

AspenBio Pharma Inc. (Nasdaq:APPY) is trading heavier than usual after Lazard Capital Markets started coverage of the medical and biotech company with a “buy” rating. In midday trading Tuesday, AspenBio shares rose 13.82% to $5.27 per share. The Castle Rock, Colo.-based company has long anticipated the FDA approval of the its new appendicitis screening test, and Lazard set a price target of $15 per share for AspenBio based on that approval.
 
For detailed price information and recent news stories about AspenBio Pharma, click APPY.

Investing in pharmaceutical companies can be a risky business where investors essentially bet on whether clinical trials will pass with flying colors, which many times isn’t the case. Many drug companies have now adopted the method of “outsourcing” clinical trial testing to firms such as Life Sciences Research, Inc. (NYSE:LSR), to assuage risk that could directly affect financial results.
 
The outsourcing of drug testing is becoming big business: it’s currently estimated that 25% to 30% of pre- and non-clinical testing is outsourced, and industry analysts such as Hamed Khorsand with BWS Financial believe that this percentage, as well as the absolute dollars that go toward outsourcing, will continue to grow.

Life Sciences, which has an estimated annual testing capacity of over $300 million, is in the business of teaming up with clients for Phase 1 clinical trials to independently verify results. The company is the largest provider of pre-clinical efficacy testing in the United Kingdom and Europe, and is globally one of the “big three” that include Covance (NYSE:CVD) and Charles River Labs (NYSE:CRL).

On top of assessing whether products meet regulatory and commercial requirements for human consumption, Life Sciences also tests the effect of compounds on the environment and assesses the safety and efficacy of veterinary products, though 85% of the small cap’s customers are pharmaceutical companies.

The company is beginning to catch Wall Street’s attention: Life Sciences has brought its operating margin back to the 15% to 17% range, with aggressive growth that has yet to reach a ceiling. According to Khorsand, the small cap is sitting on an approximate 26% growth capacity.

The staple of Life Sciences’ growth is a reflection of growth in the pharmaceutical industry as a whole. As more and more potential drugs are tested for market, the need for independent research jumps. Will there be new drugs for the treatment of depression, cancer, weight control, blood pressure and other ailments? Count on it. In order for the pharmaceutical industry to achieve its targeted margin growth, the industry will need to bring an even greater number of therapies to . . .

This week, we examine biotechnology expert Marc Lichtenfeld’s investing strategy as well as his recent pick of Enzon Pharmaceuticals, Inc. (Nasdaq:ENZN), a stock that not only ranks among his small-cap favorites, but one that has caught the attention of noted activist investor Carl Icahn.

Lichtenfeld is a senior analyst for the Xcelerated Profits Report and Smart Profits Report. He was a professional trader previously as well as a columnist at TheStreet.com.

Regarding his investment approach, Lichtenfeld says, “When it comes to health-care stocks — particularly the smaller-cap names — nothing replaces the roll-up your sleeves, work-till-your-eyes-are-blurry research.”

The analyst has developed a proprietary process called the F.I.R.S.T. system, which is a five-step method he uses use to narrow his watch list of potential buys. Let’s review each of the five components:

Financials:

He begins with examining a company’s financials. “In the health-care sector, it’s important to understand whether a firm has enough capital to continue its research and development, market and commercialize a product, or simply to continue everyday operations,” he says. Only after he is comfortable that there is a “growing and robust business,” will he move on to the next phases.

Interview:

Lichtenfeld emphasizes the important of learning about the people behind the business. As such, he takes the time to interview top company executives, institutional shareholders, vendors, production workers, even the short sellers. Indeed, he says, he will seek information . . .

Shares of Dendreon Corporation (Nasdaq: DNDN) are climbing in pre-market trading after analysts on CNBC's Fast Money show recommended the biotech company’s stock late Thursday. 

Analysts on the show said the small cap is expected to disclose preliminary data on prostate cancer drug Provenge mid-year. One analyst speculated that if the data show Provenge prolongs the lives of patients, it could receive approval from the U.S. Food and Drug Administration. Another analyst said an approval would be huge and that the stock could return to the $20 level if that occurs.

Shares of Dendreon (DNDN) gained $0.38, or 6.14%, to $6.57 ahead of the opening. Shares of Dendreon have been trading in the range of $3.57 to $25.25 for the past 52 weeks.

The subject of today’s column, BioCryst Pharmaceuticals, Inc. (Nasdaq: BCRX), comes with numerous caveats, not the least of which is that it has been a terrible performer over the past two years, falling from above $20 to single digits. Further, as a development stage biotech this is inherently a risky situation. The fact that is has yet to receive regulatory approval for its drugs adds further risk.

It also holds the inherent risk of being a small-cap stock, with a market capitalization of $235 million. And, it is working in a highly speculative area; the company is developing a drug, Peramivir, as a treatment for flu, as well as Fosodine, a treatment for leukemia.

BioCryst is often considered a “bird flu” play, as its Peramivir is being tested as a treatment for Avian influenza. As a result, the stock rose sharply through the second half of 2005, when media and investor attention were focused on the potential for a bird flu pandemic. It has fallen equally sharply since early 2006 as concerns over the Avian flu have abated.

The severe decline in the shares over the past year, however, has not deterred two leading biotechnology advisors who continue to see significant long-term potential. Both foresee continued development success with BioCryst’s Avian flu treatment. And both foresee additional potential in its pipeline.

Known on Wall Street as Big Pharma, multibillion-dollar companies such as Pfizer Inc. (NYSE: PFE), Merck & Co., Inc. (NYSE: MRK) and Bristol-Myers Squibb Company (NYSE: BMY) dominate the prescription drug market. But a compelling argument can be made for investing in the biotechnology sector, since biotechs have consistently outperformed the pill companies for the past few years.

While Amgen Inc. (Nasdaq: AMGN) and Genentech Inc. (NYSE: DNA), biotech's biggest names, have fallen on hard times (Amgen's stock has plunged 26% from its January high while Genentech's shares are off 14%), some smaller biotech companies hold promise., some smaller biotech companies hold promise.

One such micro-cap is Antares Pharma, Inc. (AMEX: AIS), a $90 million specialized pharmaceutical company with patented drug delivery platforms including Advanced Transdermal Delivery gels (medications—hormones or other active ingredients—that are applied to the surface of the skin in gel form), reusable needle-free injection systems, disposable mini-needle injection systems and fast-melt oral tablets. In the face of direct competitive pressures from companies developing transdermal gels such as NexMed, Inc. (Nasdaq: NEXM), Bentley Pharmaceuticals, Inc. (NYSE: BNT) and Novavax, Inc. (Nasdaq: NVAX), and players like Bioject Medical Technologies Inc. (Nasdaq: BJCT), which produces needle-free injection systems, Antares has flourished.

Having followed the newsletter advisory industry for some 25 years, I’ve found that often the most successful advisors are those who develop a career-long reputation and expertise within a specific sector. (Along these lines, I previously featured an article on Josh Wolfe discussing his industry-expertise in nanotechnology. See Big potential from TINY, May 11.)

Within the biotechnology sector, one clear standout among newsletter advisors is Michael Shulman, editor of the Changewave Biotech Investor. Although he generally follows larger and more diversified biotech companies, Shulman does maintain a highly speculative portfolio, which often includes small-cap issues.

Indeed, one small cap recently added to his buy list is Targacept, Inc.
(Nasdaq: TRGT). “I’ve been following the stock for quite awhile,” he says, noting that the company has just passed the one-year anniversary of its IPO.

With the caveat that this is a volatile and speculative play, Shulman says, “Although the stock has been a roller coaster over this past year, the company has made so much progress that now is the time to jump on it.”

Unlike many development stage biotechs with a short history, Targacept, he points out, is a 10-year-old company that was spun-off from Reynolds Tobacco to “commercialize compounds that were derived from some very serious research.” Shulman explains, “It’s the company’s heritage that is the key differentiator between Targacept and other biotech start-ups.”

Teen apparel retailer Hot Topic, Inc. (Nasdaq: HOTT) met analyst earnings expectations in the first quarter ended May 5, but guided below expectations for the second quarter. City of Industry, Calif.-based Hot Topic said after the close it had a net loss in the first quarter of $0.02 per share, matching the average forecast. For the second quarter ending Aug. 4, the company estimated it will lose $0.02 to $0.04 per share, compared with analysts' forecasts for a flat quarter. Hot Topic said its same-store sales would decline in the mid-single digits. In after-hours trading, shares were down only fractionally at $11.55.

Technology company NovAtel, Inc. (Nasdaq: NGPS) reorganized its management,
creating a new position of vice president and general manager, and moving certain executives to new roles. The Calgary, Alberta-based NovAtel, said in a release this afternoon that it made the moves to drive growth in its core business and take advantage of partnership and acquisition opportunities. In after-hours trading, shares were up about 1% at $37.61.

TRM Corp. (Nasdaq: TRMM) has received a Nasdaq notice saying the Portland, Ore.-based company was not in compliance with regulations because of a delayed filing for the quarter ended March 31. TRM, a consumer services company, also had not filed a form 10-K annual report for the year ended Dec. 31, 2006, because of accounting complexities, but the company said it filed that form today. The company has a hearing before a Nasdaq panel to appeal its possible delisting because of the late quarterly report. In after-hours trading, TRM shares were up 3.8% at $1.88.

Biotechnology has been among the leaders of the market's latest upmove, and a trio of advisors are now looking at some speculative ideas in the small cap biotech space - a market niche that is known for its high risk and volatility.

Michael Ashbaugh, editor of MarketWatch's The Technical Indicator, sees a pair of small cap firms that he believes are poised for speculative gains. He notes, “Public since October 2005, NxStage Medical (Nasdaq: NXTM) is a small-cap maker of dialysis machines positioned to rise. It initially gapped higher in February, after the dialysis center chain DaVita Inc. bought a $20 million stake in the company.”

Meanwhile, over the past three weeks, Ashbaugh adds, the stock has established a tight range near its 52-week high, “positioning the shares to extend higher."

In addition, he says, “AVI BioPharma (Nasdaq: AVII) is a small-cap biopharmaceutical name positioned to rise. Earlier this month, it gapped above a five-month downtrend and its 50-day moving average. Since then, it's closely observed the 50-day as support, extending its gains."

Gregg Early also see upside opportunity in a speculative, small-cap biotech play -- pSivida Ltd. (Nasdaq: PSDV), an Australian biotech/nanotech company that is focusing  on developing controlled drug delivery technologies. “The company has signed a big deal with Pfizer (NYSE: PFE),” Early says, “and it’s pretty darn big.”

According to the editor of The Real Nanotech Investor, the firm signed a $165 million exclusive worldwide research and licensing agreement with Pfizer for pSivida's drug delivery technologies in ophthalmic applications.

Early explains, “Pfizer has bought $5 million worth of pSivida stock off the Australian exchange and has also received a $9 million private placement of shares at a U.S. price of about $2.20 a share.”