Facebook Linkedin Tumblr Twitter
Home Blog Page 14622

These Five Biotechs Are Undervalued

By
Roger Hannington
-
biotech

Last week’s correction has injected an element of risk off sentiment into markets, as investors attempt to reduce their exposure to any further decline. However, as a side-effect of the sell-off, there are a number of opportunities to pick up strong fundamentals at a discount. Here are five biotechs that we believe are undervalued at current prices.

Synergy Pharmaceuticals, Inc. (NASDAQ:SGYP)

Back in June, Synergy reported the results of a phase 3 trial of its lead candidate Plecanatide. The treatment is targeted at sufferers of constipation and irritable bowel syndrome, and is a synthetic version of a peptide (a type of amino acid that forms bonds in the body) called uroguanylin. Uroguanylin is partly responsible for the amount of water that lines the gastrointestinal tract, so by introducing a synthesized version Synergy believes it can increase water flow, and normalize bowel movement. Phase 3 data illustrated efficacy, and the company hit highs of just shy of $10 in July. However, the company pushed back its approval filing from Q4 this year to Q1 next year, and this looks to have weighed on its share price a little. This said, the fundamentals remain sound, and with about $160 million cash and cash equivalents Synergy looks financially on point. Key drivers will be the two approval filings, one set for Q1 next year (as we have already mentioned) and one set for December 2016.

Oramed Pharmaceuticals Inc. (NASDAQ:ORMP)

Next up is Oramed. Oramed hit the mainstream radar back in July when it announced the dosing of its first patient with an orally administered insulin pill. In doing so, the company proved itself as being one step ahead of Novo Nordisk A/S (NYSE:NVO), which is also developing its own version of the treatment. Since the announcement, however, Oramed stock has traded pretty flat – and is currently selling at a 75% discount on 2014 highs. While it is probably going to be 2017 before the company can get its pill into phase 3 (assuming efficacy is demonstrated in phase 2), we expect this one to gain strength between now and then. The real value in Oramed is its market potential, with best estimates putting the global insulin market at around $50 billion. The company expects to complete its ongoing phase 2 in October this year, so we will be looking for the meeting of its efficacy primary endpoint as an upside driver before the year is out.

Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)

Third on the list is Lexicon. The company rocketed into August on the announcement that its lead candidate telotristat etiprate had met its primary endpoint in a phase 3. The treatment is a combination therapy designed to work alongside current standard of care for people with carcinoid syndrome. Since the news, however, a downgrade to neutral by JP Morgan alongside a Q2 loss has discounted some of the positive momentum. The treatment has orphan and fast track, and is targeting H2 2016 as its time to market (assuming accelerated review). Lexicon’s current market cap is a little over $1.2 billion, and if it can gain approval on the recent results, it could be going after a market worth around $700 million based on price point expectations. A $300 million raise last year should see the company through to revenue generation, with the next upside driver an NDA submission before the end of January 2016.

Xenoport Inc. (NASDAQ:XNPT)

Xenoport has one treatment already generating revenues and one promising lead candidate in the pipeline. The former is a restless leg indication that generated a little over $8 million during Q2 2015 and that the company forecasts will bring in a total of $43 million before the year is out. The second is a psoriasis indication, currently undergoing phase 2. The company is currently trading around 45% from highs with a market cap of a little over $430 million – about 10 times forecast 2015 revs. The release to watch going forward on this one is the top line from the ongoing phase 2 – expected before the end of September. Interim was promising, and if we see the trial meet its primary endpoint Xenoport could be on for a quick upside revaluation. The psoriasis market will be worth $7.4 billion within five years, and we have seen comparable therapies bring in over $1 billion annually recently.

Omeros Corporation (NASDAQ:OMER)

Finally we’ve got Omeros. Having spent most of 2015 slowly ranging downwards, Omeros stock pretty much doubled in price on the release of some positive top line data from its phase 2 thrombotic microangiopathies candidate, OMS721, this month. The gains turned out to be nothing more than a spike, however, and we are currently trading pretty much bang on prerelease levels. This one is a little riskier than some of the others on the list, as the company only has about 10 months of operational capital available to it based on current burn rate – but it generates (albeit lackluster) revs from a treatment launched in April and has just hit markets with a second indication in Europe. OMS721 is the one to watch here though. Completion is slated for December this year, and we have already seen what promising results can do to its market cap.

More from Market Exclusive:

  1. Market Wrap Up – The Cat is Dead
  2. Here’s An Opportunity To pick Up A Discount In Biotech

  3. Synthetic Biologics: A Small Company Targeting A Big Market

Story continues below

Synthetic Biologics: A Small Company Targeting A Big Market

By
Roger Hannington
-
Synthetic Biologics

US healthcare spending is a hot topic at the moment. By 2024, government spend on healthcare is expected to account for one fifth of gross domestic product – more than double that of the vast majority of other developed nations. Anything that can reduce this overspend, therefore, could be big business. One company currently working in the space, and even better, one that has a number of near-term milestones that could inject some upside potential into its market capitalization, is Synthetic Biologics Inc. (NYSE:SYN). With a market capitalization of a little over $210 million, Synthetic Biologics is a development stage pharma, but one that is tackling a potentially huge market. Let’s take a look at the company and its potential.

The company has two lead pipeline candidates, but the one that will focus on (primarily because this is the one with the near-term drivers) is SYN-004 – a preventative therapy targeted at C difficile infection, and the diarrhea and colitis associated with it. To simplify the science, C difficile is a bacterium that builds up in the gastrointestinal tract as a side effect of antibiotic treatment. Basically, a certain amount of antibiotic formula ends up in the gut (as opposed to in the bloodstream, where it belongs) and just sits there and builds up. This buildup of useless antibiotic leads to the formation of bacteria – one of which is C difficile. Every year, 14 million people receive IV antibiotics as part of surgical or other treatment in the US – with a total of 118 million administrations. Treatments targeted at C difficile buildup, and infections related, to it cost the US about $10 billion each year. At the moment, the only treatments available (and some that are in development) target the buildup. SYN-004 is preventative, designed to administer alongside an IV antibiotic treatment. Simply put, the patient takes antibiotics and SYN-004 at the same time, and the SYN-004 stops C difficile buildup without affecting antibiotic levels in the blood. At least, this is the hypothesis. So what does this mean? Well, it means that SYN-004 has the potential to treat in combination with 118 million antibiotic administrations annually. With 30,000 people dying each year from the implications of a C difficile buildup, and a potential saving of $10 billion annually, this treatment could be a real hit. That is, so long as the company can prove it is both safe and effective.

So where do we stand with that? Well, the company has initiated two phase 2A trials this year, with final data for both expected by the end of the year. Phase 1A and 1B proved safety and tolerability, as well as a certain level of efficacy on a small scale, so now we just looking at this efficacy to translate across a larger population. In anticipation of a phase 3, the company raised $42.6 million in public offering last month.

One of the great things about this area of biotech is that involves what are called microbiomes – basically just groups of microbes sealed together in a biological capsule. Why is this good? Because the time to market (i.e. the time it takes to go from preclinical to NDA) is roughly one third of the average pharmaceutical candidate. With trials well underway and fully capitalized this short time to market means a concentration of data releases – each of which have the potential to give us some upside in market cap.

So, what are we looking for over the coming few quarters? Well, the phase 2 data is expected from both A and B before the end of the year, and these releases will offer some insight into the phase 3 initiation. Management stated on last earnings call that they expect an October or November release, so we could be looking at a phase 3 initiation during the first quarter of next year. Time to completion will be about six months, so realistically, if all goes well, we could see an NDA filed way ahead of the 2017 turnaround. Looking at the trial specifically, the element to keep an eye on is the level of antibiotic in the patient’s bloodstream. If SYN-004 has any significant effect on concentration, it could seriously damage Synthetic Biologics’ chances of getting the treatment approved.

More from Market Exclusive:

  1. Market Wrap Up – The Cat is Dead
  2. Here’s An Opportunity To pick Up A Discount In Biotech

  3. AstraZeneca Might Just Have Tapped Into 90% of a $13BB Market

Story continues below

Here’s An Opportunity To pick Up A Discount In Biotech

By
ME Staff
-
biotech

There are analysts on both sides of global markets at the moment. One on side of the fence, we have those suggesting that the latest market crash is merely a correction as part of a long-term bull run, and that – as a result – it offers opportunities to get in at a discounted rate. On the other, we have suggestions that a weak economy in the US cannot withstand the proposed September interest rate hike, and further, that the crash in China that preceded the global crash came as a result of pre-emptive reduction in exposure to a Yellen hike. Regardless of which side of the fence you are on, there is one thing we can be a little more certain about – that some industries are less exposed than others. We have mentioned a couple of times already that the biotech space is one of those industries – with the demand for its products being relatively inelastic when compared to other sectors such as electronics or energy. With this in mind, here is one example of potential opportunity to get in at a discount and ride out whatever is left of this bull market on a relatively insulated exposure.

Introducing, Globus Medical, Inc. (NYSE:GMED). Globus lost nearly 18% of its market capitalization (amounting to close to $375 million) during Monday and Tuesday, and is still trading about 16% off 2015 highs – around levels that put it in line with its valuation from April or May this year. However, despite this decline, the company’s fundamentals look to be both strong and improving. On July 30, Globus reported its latest quarterly, Highlighting just short of $25 million profit on $134 million revenues – and an EPS of $.25. Based on these results, the company expects to post 2015 annual revenues of $524 million and an EPS $1.04.

So what does the company do? In short, it makes replacement robotic skeletal parts – with a particular focus on the spine. It currently has just shy of 100 unique and patented products on the market, with five of these gaining approval and reaching the market in the second quarter of this year alone. Further, there are two more products undergoing clinical trials – TRIUMPH and ACADIA – targeted at year-end completion.

So what are the downsides here? Well, the company reported in its latest earnings call that internationally it has had a pretty tough year. As yet, we’ve not seen the numbers, but they are reportedly showing marginal profitability. However, currency impacts are putting a lot of pressure on margins. If the dollar continues to strengthen (something that could well happen if Janet Yellen raises rates in September) it may be enough to turn outside US operations from black to red.

Growth going forward is expected to be rooted in rapid expansion of products to market – with this strategy being a key part of the company’s ability to maintain profitability. Primarily, this is due to its products being one-time solutions for end users. In other words, in order to sell more products, the company has to find different solutions for different users.

Looking at things from a technical perspective, and one of the few positives from the latest decline other than allowing us to get in at a discount, we have some well defined entry and exit parameters. For those looking long-term, an entry at current rates would likely be a hold until we at least gauge the implications of Fed actions before the end of the year. However, for a short to medium-term entry, current levels look attractive towards a well-defined target of aforementioned 2015 highs – just ahead of $29.

So to draw things to a close, Globus looks to present an interesting opportunity for the more optimistic investor looking to get in on what might be a short-term correction as part of a larger bull run. It also offers those unsure as to the current market conditions a chance of picking up a biotech exposure that is (to some extent, at least) insulated from wider global economic conditions. Keep in mind that picking up an allocation to any stock is risky at the moment – there’s so much uncertainty around that both fundamental and technical perspectives can quickly be proved wrong. Nobody could be blamed for being pretty much all in cash at the moment. However, for those that are not, this one’s well worth a look.

More from Market Exclusive:

  1. What Is the Real Cost of AstraZeneca’s Eye Cancer Flop?
  2. Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

  3. AstraZeneca Might Just Have Tapped Into 90% of a $13BB Market

Story continues below

Market Wrap Up – The Cat is Dead

By
TradeCircle
-
Dead Cat Bounce

Volatility continues. After a 3% bounce on the S&P 500 (NYSEARCA:SPY) and a very respectable 3.6% bounce on the Nasdaq (NASDAQ:QQQ), the dead cat bounce that was today ran out of spring.

It was once again the final minutes of trading that did the rally in, as the Dow Jones Industrial Average (NYSEARCA:DIA) crashed 3.3% in the final hour. It appears short selling traders are getting an early Christmas.

Oil also made a respectable comeback today, rising close to 2%, though oil stocks still saw the pain of the final hour collapse, as Exxon Mobil (NYSE:XOM) lost close to 4 percent into the close. Gold (NYSEARCA:GLD) and precious metals on the other hand did not respond positively to the sudden volatility at the end of the day, with the gold price ending the day down 1.2%.

All eyes will be on China (NYSEARCA:FXI) tonight, as trading opens in Shanghai in a few hours. The Nikkei had an equally volatile day yesterday preceding US market open, trading in a range of over 6% and ending down 4%. If the recent patterns continue, we should see a rise in the Euro (NYSEARCA:FXE) and corresponding fall in the US Dollar (NYSEARCA:UUP) along with a general collapse of emerging market currencies in the next 24 hours.

Finally, bonds got hammered today despite the negative close in equities. The iShares 20+ Year Treasury Bond ETF (NYSEARCA:TLT) is down 3.6% since its highs yesterday.

Given another poor close, look for stocks to open tomorrow gap down, and pressure on the Federal Reserve to call off any rate hikes to increase.

Story continues below

There Are Two Sides To The Market Crash Coin

By
Jennifer Aldershot
-
StockMarketCrash

As we addressed in this article, the floor fell out of global stock markets on Monday. Spurred by an equities market crash in China, UK and then US markets opened into decline. Some of the major indices recovered throughout the latter half of the day to register only single digit percentage overall declines – the Dow Jones Industrial Average (INDEXDJX:.DJI), FTSE 100 (INDEXFTSE:UKX) and the NASDAQ Composite (INDEXNASDAQ:.IXIC) – but the slide has no-doubt ravaged individual portfolios. Further, a slide into yesterday’s close in the US suggests we will open into further weakness this morning. The question now, is will this be looked back upon as the beginning of a longer-term bear market, or is it merely an (albeit) severe short-term correction. Additionally, if the latter of these two proves the case, is there a buying opportunity to be taken? Let’s have a look.

First, let’s consider the argument for a longer-term downturn. Basically, China has looked like it is in some trouble for at least the last few months, and probably more. Growth is down – as low as 4% by some estimates – and both individual and private appetite for taking on debt is almost non-existent. The Chinese government has taken some drastic measures recently to try and avoid yesterday’s collapse, including halting trading and devaluing its currency, but so far these measures have proven futile. So why is it such a big deal if China slows? Well, China is a large-scale exporter, but also imports heavily. However, in a bid to balance trade, the Chinese government has leaned towards reducing imports and increasing exports over the last 12 months. This was one of the primary drivers behind the devaluation of the yuan we saw earlier this year. This shift has led to some big changes in import revenues for key developing trade regions globally, however. This year alone, Chinese imports from the EU have declined nearly 13%. From Australia, more than 25%. Additionally, many developed nations and the vast majority of Asian nations rely heavily on Chinese demand for their commodities. South Africa has seen a 40% dip in its exports to China over the last six months. It is this sort of global withdrawal of resource driven capital that can filter through to wider negative implications.

However, of course, there is also an argument for the opposite situation. News media has also widely reported over the last few weeks that the US Fed could be looking to hike its base rate at the end of September. The implications of this are double edged – first that it allows the US to regain some element of control of its current monetary situation. Second, that higher borrowing costs could cripple already weak growth. The fact that this Chinese (and wider) equities market decline has happened now may be the factor that forces the Fed to change its mind. Elsewhere, the situation is similar. Japan, the UK and Europe are all looking at tightening monetary policy near term (i.e. before the end of the year) and this current situation may translate to a global period of extended loose policy. We are already overheated in major markets, so this is a dangerous approach as we are suggesting a reflation of what are already bubble proportions in many industries – but from a medium term profiteering perspective – is this such a big deal? Longer term, yes. Near term, all it means is there may still be some of the ride left in the latest bull market. Of course, the trick will be knowing when to get off. As yesterday’s action shows, things can turn around quicker than we thought possible.

So that’s where things stand. We could be headed for the next recession regardless of response, but there is a chance that the US interest rate hike has the potential to be the deciding factor in medium term global conditions. In other words, let’s see what Yellen does. At this point, her response looks more important than the short term participant response to an equities market crash.

 

Story continues below

Markets Go Crazy As October Support Tested

By
TradeCircle
-
Stock Market Roller Coaster Freakout

It’s days like this when market wrap ups sound like something out of a satirical newspaper. Headlines over the weekend were focused on the – apparently incredible – fact that the Dow Jones (NYSEARCA:DIA) had lost 1000 points in just one week. How about 1089 points in a single day? That’s what happened within the first 5 minutes of trading today as the Dow plummeted as low as 15,370.

And then it appeared as if the Godzilla of all buyers descended on Wall Street and rocketed the Dow back up over 1100 points, all the way to 16,459 by midday. The trading range for this one day was over 7%. That is equivalent to the trading range of the Dow since December 2014.

October 2014 support at 15,855 was broken at the open, though regained by the end of the day. It remains to be seen if that support will be held or if we are headed even lower. It may largely depend on action in China tonight.

As volatile as a 7% trading range sounds for the Dow, the Nasdaq had an even crazier day with a trading range of over 9%. It was so volatile that the PowerShares QQQ Trust which tracks the Nasdaq couldn’t even track it today at the open, as it had a trading range of an unheard of 21% from lows to highs today.

Leaders like Netflix (NASDAQ:NFLX) were the epitome of volatility today as shares dropped as much as 18% in five minutes, climbed to as much as a 5.4% gain, only to close down 6.8%.

The Volatility Index (VIX) spiked so high today that the Chicago Board of Options couldn’t even open it up for trading for nearly half an hour because the price of options on which the index is based were too volatile to be calculated. When it finally opened for trading, the VIX spiked to as high as 53.3, racing down to 30 by midday, and then spiking back up to close at 40.74. The VVIX, which measures the volatility of VIX options, the so-called volatility of volatility itself, spiked to all-time record highs.

And again, it was the last few minutes of trading that really exemplified the whole day. By 3:34PM EST, 26 minutes before the close, the S&P 500 (NYSEARCA:SPY) was sitting at 1880, but within only 12 minutes was back up to 1924.5, a 2.4% move in the space of only 720 dizzying seconds.

In the final 14 minutes of trading however, the index fell back below the psychologically important 1900 mark to close the day at 1894. After hours trading has the S&P down about another full percent.

The final 14 minute plunge suggests that we will open even lower tomorrow, and that the selling and volatility is not over.

 

 

Story continues below

Can Addyi Really Live Up To Valeant’s Billion Dollar Price Tag?

By
-
Sprout Pharmaceuticals

On August 18, 2015, the FDA announced it had approved flibanserin. Known commercially as Addyi, the drug is being touted as a sort of female Viagra – designed to increase a woman’s libido and treat a condition called hypoactive sexual desire disorder (“HSDD”), which involves low or no sexual desire in women that is not related to pre-existing conditions such as depression or similar psychological disorders. Just 24 hours after the approval, Valeant Pharmaceuticals International, Inc. (NYSE:VRX) announced an agreement to acquire Sprout Pharmaceuticals – the company that developed Addyi – for $1 billion cash. Valeant has had a tough month, currently trading about 15% down on annual highs recorded in July, but the acquisition of Sprout could prove to be the catalyst behind a reversal in the company’s fortunes. Having said this, there are still concerns surrounding both the safety and the efficacy of Addyi and there is an argument to be made that a $1 billion cash acquisition is risky. So, with this said, let’s have a look at both sides of the story, and try to ascertain whether the move is a positive one for Valeant shareholders.

First, a look at the drug itself. Flibanserin is what’s called an agonist of three separate receptors in the human body – 5-HT1A, 5-HT2A and D4. The first two of these receptors mediate the production and distribution of serotonin in the human brain, while the third is associated with dopamine production. To simplify its mechanism of action, flibanserin binds to each of these receptors and stimulates production of their associated hormones. The release of serotonin is associated with reduced inhibitions, while the release of dopamine is associated with sexual excitement.

So where are the issues? Well, first of all, nobody is really sure how big the market is for this treatment. News media reports that up to 10% of all women in the US suffer from HSDD, which would put a rough estimate on the potential treatable population of 15 million. However, there are some limiting factors that reduce this number. First, the drug will not be available over-the-counter. As mentioned, and as we will address shortly, there are still concerns about its safety, and the FDA has stipulated it must be prescribed by a physician as opposed to merely served in pharmaceutical stores. Further, it is not an “on demand” treatment like Viagra. Users must commit to a daily dosage and – at the same time – avoid alcohol. These things are likely to weigh on mainstream adoption.

Regarding safety and efficacy, the FDA approved Addyi based on three six-month trials across a sample size of approximately 2500 women. Across the trials, Addyi patients reported between just 0.5 and 1 additional sexual encounter a month versus the placebo arm. Further, on a scoring scale of 1.2 to 6.0, the Addyi arm reported an increase in sexual desire by a score of only 0.3 over placebo. Across all three trials, an average of just 10% of Addyi patients claimed an improvement in sexual satisfaction. Alongside this questionable efficacy, more than 10% of all patients suffered adverse event side-effects, the most common of which were dizziness, nausea and fatigue.

The question that needs to be asked is how many women are likely to accept side-effects like these as part of a daily regimen that has what amounts to a 10% chance of increasing their sexual satisfaction? With a price point of around $5000 annually, Valeant needs around 200,000 US women to take Addyi once-daily for 12 months to recoup its initial investment. With a strong marketing push, the company could easily hit the 200,000 adoption number, but how many of these 200,000 continue to take the drug after trying it out will be the key statistic.

So, to address the initial question of whether this is a good move by Valeant for its shareholders, probably not. In order to turn the treatment into the blockbuster that its one billion-dollar acquisition price tag commands, Valeant needs high-level and long-term market adoption. Market penetration at the scale required for vindication of the company’s costs is not normally associated with a treatment with relatively low-level efficacy and a questionable safety profile. Of course, Valeant will not let a one billion-dollar acquisition fail easily. The nature of the treatment makes it very easily marketable, and the company will spend a lot pushing its adoption. However, one thing is for sure – it is not a female equivalent of Viagra. Viagra generates between $1.5 and $2 billion a year for Pfizer Inc. (NYSE:PFE), and at a generous estimate, Valeant will be lucky to see Addyi hit 10% of this number.

More from Market Exclusive:

  1. What Is the Real Cost of AstraZeneca’s Eye Cancer Flop?
  2. Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

  3. AstraZeneca Might Just Have Tapped Into 90% of a $13BB Market

Story continues below

S&P 500 Breaks Critical Support, Gold Soars

By
TradeCircle
-
Freefall

It seems like only yesterday we said the following:

Judging by the late sharp move down in equities 5 minutes before the close, indexes are likely to open down tomorrow morning at the bell, with support at 2040 on the S&P getting closer to being tested for a third time.

In fact, that actually was yesterday.

Today, the S&P 500 (NYSEARCA:SPY) has finally, after six months of zigzagging since February, broken critical support at 2040 to close the day at 2035. Following the freefall in the last 5 minutes of trading yesterday, the market opened down hard and continued down for most of the rest of the day, seemingly stabilized until the last few minutes once again. It was the last few minutes of trading that had stocks finish with a final tumble, this time 12 points, which finally broke the 2040 support line.

S&P 500 SupportThe next major support is now 73 points away at 1972, and after that, the October 2014 lows at all the way down at 1820. Stocks still have a chance to bounce off of current support which was only marginally broken, but given the dismal close and the concurrent clear break of the 50 day moving average, chances are small. Strong bounces tend to be foreshadowed by a strong close to the day, which we did not see today.

Ironically, it is the Nasdaq (NASDAQ:QQQ) that may offer the best hope that the broader market can rebound from here. Though tech stocks had an even harder selloff today with leaders like Netflix (NASDAQ:NFLX) and Facebook (NASDAQ:FB) losing 7% and 5% on the day, the Nasdaq itself is more healthy from a technical perspective. It has neither broken the 50 DMA nor broken February support yet. If the Nasdaq can bounce from here, it can take the rest of the market with it.

Nasdaq SupportEither that, or the S&P will bring down the tech sector.

Oil (NYSEARCA:USO) showed some signs of life at the open, but that quickly faded as the day closed with oil down another half percent on the day.

The only ones cheering today are the gold bugs, as gold (NYSEARCA:GLD) continues its climb, taking gold stocks with it. Gold miners (NYSEARCA:GDX) have had a particularly good week so far, climbing nearly 20% in the last 5 trading sessions.

Where we go tomorrow may depend on overnight action in Asia. China’s Shanghai Composite has lost 8% in the last week, with ADR’s of Chinese large cap stocks (NYSEARCA:FXI) down 10% since August 10th, and remarkable 29% since topping. If China continues its freefall overnight, the chances of a waterfall decline in the S&P at least down to the next support zone at 1972 on the S&P increase.

May we all sleep well tonight. We’ll need it.

 

Story continues below

Is Lion Biotechnologies Really Worth $320 Million?

By
ME Staff
-
Lion Biotechnologies

Just last week, Lion Biotechnologies, Inc. (NASDAQ:LBIO) reported a second-quarter 2015 loss of $6.4 million. The company is currently trading at $6.80 a share – just shy of 55% down on 2015 highs back in May and more than 90% down on its 2011 IPO. Despite these declines, a number of ratings agencies have the company at a “buy”, and many of these have reiterated this rating just recently. So, with this said, let’s try and figure out what’s going on, and whether this company would make a potentially rewarding allocation to a biotech portfolio.

The science

The best way to go about this is the first look at the company’s treatment, and then try and figure out why it has lost such a considerable portion of its market capitalization over the last few months. Lion is an oncology biotech, which uses what it calls tumor-infiltrating lymphocytes (“TILs”) as therapeutics against (at the moment) metastatic melanoma – or skin cancer. The science behind this one is pretty complicated, but basically, the company takes some of the tumor from a patient, and extracts naturally occurring TILs from the sample. In pretty much all solid tumor incidences, a patient’s body will create natural TILs that target cancerous cells in the early stages, but the cancer cells quickly adapt to “hide” from the immune system, and evade attack. Ex vivo, Lion replicates the naturally occurring TILs to the tune of billions, and then reintroduces them into the patient. The result is a sort of shock and awe treatment as the billions of TILs overcome the immune system evasion and attack tumors.

Clinical progress

The company has a few ongoing clinical trials, but the one that will undoubtedly prove the driver behind any market revaluation over the coming few quarters is the upcoming phase II trial of its lead candidate – LN-144 – targeting metastatic melanoma. The therapy received orphan drug designation back in June for a late stage indication, and the company expects to initiate during second half of this year, with completion targeted for the latter half of 2019.

Some concerns

So, to address the ratings agency element of this company – it remains unclear just what these analysts see in it. We got some phase II data from a study conducted by the National Cancer Institute (NCI) and Lion at the end of last year, targeting stage 4 melanoma under TIL therapy treatment. The report announced “positive” results, but a look at the numbers revealed an overall response rate of 54% (not bad) and a complete response rate of 13% (not great at all). In other words, the treatment looks to be effective to some degree in very late stage melanoma patients, but across 101 patients (which is a very small sample size for this type of cancer), is far from promising. Further, the press release announcing these “promising” results came in December last year – eight months after the company issued an almost identical release outlining the same results, from the same trial. In short, it looks as though the company is reissuing releases to garner investor attention without any real underlying developments. The same pattern of non-news press releases is illustrated at the company’s website, where it has announced the publication of a few articles co-authored by one member of its research team and the leasing of a new research space. Adding to the concern is the resignation of the company’s CEO at the end of last year, and the subsequent revealing of his connection with the Galena and Dream Team Group stock promotions.

Now, it is important to say we are not suggesting in any way that Lion is cause for concern, and its lead candidate (as well its underlying clinical technology) has shown some level of efficacy in the clinic. What we are questioning is the company’s current market capitalization of more than $320 million. Lion has not yet generated any revenues, and has funded its operations to date through numerous stock issues. With the LN-144 trial not set to complete before 2019, there will likely be numerous further issues that add to the 47 million shares currently outstanding, each of which will be dilutive to early investors’ holdings.

All said…

What it comes down to is this: Lion is developing a therapy that has the potential to treat pretty much all solid tumor cancers. The market potential is huge. However, with an already massive number of outstanding shares, lacklustre trial data and a seeming over reliance on one lead candidate (not to mention the dilutive nature of its capitalization methods) the company is a gamble at current rates.

Story continues below

Riding the Mechanical Bull Market Getting Tough

By
TradeCircle
-
Mechanical Bull Market

It’s common parlance when people say that the stock market is like a roller coaster, but it’s rarely meant to apply to a single trading day. Today’s trading session actually was like a roller coaster. Or perhaps a mechanical bull, or mechanical bear, depending on your perspective.

Just looking that at the Nasdaq (NASDAQ:QQQ), we can see what a dizzying day it was. Within the first half hour, tech stocks were down nearly a whole 1%, deteriorating down 1.25% by mid morning and briefly breaking the 5000 mark. From that point we embarked on a two-hour full percent recovery, topped with another full percent gain in the space of 15 minutes.

But that wasn’t nearly the end of it. In less than an hour we were back down a full percent again, recovering half that loss by 5 minutes to close. And finally, in the last five minutes of trading, we lost a whole 13 points on the Nasdaq, with after hours bringing all major indexes including the S&P (NYSEARCA:SPY) and the Dow (NYSEARCA:DIA) very near intraday lows.

One can point to a Fed leak, over-analysis of comments and words in the FOMC minutes and various speculations about whether there will be a Fed hike in September or not. But what today’s action shows pretty clearly is that nobody has a clue. Traders are split and antsy, and today’s action betrays that uneasiness.

Whatever happens in September at the Fed meeting, it will affect markets heavily at least short term. That much is clear as day.

Gold’s (NYSEARCA:GLD) intraday action on the other hand, looked like a step ladder, as each new burst in volatility in stocks led to a concurrent jump in precious metals. Gold is now 6% off its lows in late July.

Judging by the late sharp move down in equities 5 minutes before the close, indexes are likely to open down tomorrow morning at the bell, with support at 2040 on the S&P getting closer to being tested for a third time.

In the event that happens, those riding the mechanical bull will have to bet on a triple bottom. Those riding the mechanical bear will have to bet that 2040 gets broken.

Story continues below
1...14,62114,62214,623...14,629Page 14,622 of 14,629

EDITOR PICKS

POPULAR POSTS

POPULAR CATEGORY

© Market Exclusive 2019