BST Position Update: September 27, 2013

September 27, 2013

. . . . Cyclacel Pharmaceuticals (NASDAQ: CYCC) – Hold

Cyclacel is our latest addition to the portfolio.  This fascinating biotech is pioneering orally available, small molecule drugs that target various phases of cell cycle control.

The company’s leading drug candidate is sapacitabine, which has potential to treat both blood cancers and solid tumors.

The drug is currently being evaluated in two mid- to late-stage clinical trials.  A pivotal phase 3 trial in elderly patients with acute myeloid leukemia (AML).  And a phase 2 study in patients 60 and older with myelodysplastic syndromes (MDS).

To say we’re excited about the drug’s prospects would be an understatement.

Sapacitabine has performed well so far in extensive clinical testing involving more than 650 patients. And the drug offers blockbuster sales potential.

But the best part of the story is… CYCC has taken off like a rocket! 

The stock recently surged to a high of $5.50 to give us a peak gain of 79% on the position.  And although it has pulled back a bit over the past few days, we’re still sitting on a solid gain of 31%.

Not bad for just a few weeks into the trade.

Why did the stock pop?

Just last week the company reported exciting news about sapacitabine.  New data from research conducted by the UK’s Northern Institute for Cancer Research shows sapacitabine is active against ovarian cancer. 

In fact, the drug was active against 75% of ovarian cancer samples, while the current treatment, cisplatin (a chemotherapy agent), was active against less than half.

What’s more, sapacitabine was active against more than half of the cisplatin-resistant samples.  This data suggests the drug has potential to treat platinum-resistant ovarian cancer as well.

According to Decision Resources, global ovarian cancer drug sales will grow from $460 million in 2011 to $1.4 billion in 2021.

In other words, sapacitabine’s market potential just hit multi-blockbuster territory.  It’s easy to see now why the stock soared on the news.

The bottom line…

There’s no question that CYCC has produced a nice gain in short order.  But we don’t think it’s time to lock in profits just yet.  We believe this is just the beginning of a longer-term uptrend for the stock.

With that said, we are moving CYCC from Buy to Hold.  Thanks to the recent move higher the stock is now trading above our maximum buy price.

. . . . Rockwell Medical (NASDAQ: RMTI) – Hold

RMTI’s on fire!

After finishing the month of August at $5.53, the stock has exploded to the upside in September.  In fact, the stock hit a new high of $11.80 this month to give us a peak profit of 197%.

That’s an amazing gain in just a little over three months’ time!

Now, RMTI has pulled back a bit on some profit taking recently, but that’s to be expected after the stock’s sharp rise.  Nevertheless, we’re sitting on a hefty gain of 135% from our entry price, and the stock has plenty more upside ahead.

What’s going on?

Rockwell reported positive results from the second and final phase 3 trial of soluable ferric phosphate (SFP).  You may recall that SFP is being developed as an alternative to IV iron therapy for the treatment of chronic kidney disease patients on hemodialysis.

The trial was an unequivocal success.

SFP not only met the study’s primary efficacy endpoint but achieved key secondary endpoints as well.  And in the process, the drug confirmed the positive results from the earlier phase 3 trial.

CEO Rob Chioini summed up the results perfectly when he said…

“The data again shows that in place of IV iron, SFP appears safe and effective as an iron replacement therapy that consistently maintains hemoglobin levels without increasing iron stores. The demonstrated efficacy and excellent safety data from each of the two Phase 3 CRUISE efficacy studies gives us great confidence in obtaining FDA regulatory approval.”

And the following statement shows that he sees a bright future for the drug…

“These successful results, coupled with the recent PRIME study data demonstrating SFP’s ability to reduce ESA use, support our belief that SFP will establish a new paradigm in iron therapy treatment for hemodialysis patients. We believe that upon FDA approval, SFP will become the new standard of care in iron therapy.”

If Chioini is correct, Rockwell is poised for a major growth spurt.

You see, the US IV iron therapy market currently stands at $600 million per year.  And industry experts estimate the global market is worth at least $1 billion annually.

Rockwell generated just $43 million in revenue last year.

Despite the stock’s huge rise, we’re not ready to lock in gains just yet.  We think RMTI has a lot more room to run.  Therefore, we suggest you hang on to your shares for more upside.

. . . . BioLineRx (NASDAQ: BLRX) – Hold

After a sharp pullback at the end of August, BLRX is trending higher once again.  In fact, the stock jumped to a new high of $2.43 to give us a new peak gain of 45%.

Not too shabby.

And as I write, BLRX is up 30% from our entry price.

The stock moved higher on good news from the FDA.  The regulatory agency awarded Orphan Drug Status to BL-8040, the company’s drug candidate for acute myeloid leukemia (AML).

The Orphan Drug designation provides several benefits.  It entitles the company to a seven-year market exclusivity period, clinical protocol assistance with the FDA, as well as federal grants and tax credits.

BL-8040 is currently being evaluated in a phase 2 study.  Top-line results are expected toward the end of 2013.

Continue holding BLRX for greater gains.

. . . . Halozyme Therapeutics (NASDAQ: HALO) – Hold

Remember when HALO plunged in August and we told you not to worry?  Hopefully you took our advice to heart.  The stock has since regained all it lost and much, much more.

In fact, HALO set a new 52-week high today of $10.62 before closing just off that mark at $10.57.  That gives us an outstanding gain of 94% on the trade.

The shares have zoomed higher on a combination of great news and upcoming catalysts.

The big news is that Roche received marketing authorization in Europe for Herceptin SC, the subcutaneous formulation of its blockbuster breast cancer drug.  This is huge for HALO as Herceptin SC utilizes HALO’s recombinant human hyaluronidase (rHuPH20).

The approval of Herceptin SC provides legitimacy for HALO’s innovative technology.

What’s more, the recent commercial launch of Herceptin SC has triggered a $10 million milestone payment to HALO.  And it puts the company in position to receive royalties on a drug that generated $7 billion in sales last year.

What about the catalysts?

One important upcoming catalyst has to do with another partner-drug, HyQvia.  Baxter International (NYSE: BAX) is expected to supply additional data to the FDA on HyQvia before the end of this year.  This means HyQvia could receive FDA approval early next year.

The drug has already been approved in Europe so chances are good it will gain approval in the US.

Of course, another major upcoming catalyst is the results from the phase 2 trial of PEGPH20 in pancreatic cancer.  Initial results from the trial are expected during the first half of 2014.

No question about it, HALO’s generating a lot of excitement right now amongst investors. And its stock is trending higher as a result.

We think HALO has a plenty more upside ahead.  As such, we’re maintaining our hold rating on the stock.

. . . . Agenus (NASDAQ: AGEN) – Buy up to $3.10

We’ve received good news and bad news on Agenus over the past couple of weeks.

First the bad news…

GlaxoSmithKline (NYSE: GSK) announced earlier this month that its cancer vaccine, which contains Agenus’ QS-21 Stimulon Adjuvant, failed to meet one of the co-primary endpoints of a phase 3 trial in melanoma patients.  And as a result, AGEN dropped significantly.

However, all is not lost.

GSK said it will continue the phase 3 trial to see if the vaccine is beneficial to a subset of patients with a particular genetic signature.  And the phase 3 trial of the vaccine in lung cancer patients will continue as well.

Now, the good news…

Agenus reported positive follow-on results from the phase 2 trial of its Prophage Series G-100 vaccine in patients with newly diagnosed brain cancer.  New data showed an almost 18 month median progression free survival, which represents a 160% increase versus current standard of care alone.

Based on these results, the company plans to hold a meeting with the FDA to discuss plans for a phase 3 trial.

In addition, Agenus recently completed an at-the-market equity offering that raised $6.5 million.  Certain institutional investors purchased 2,166,667 shares of stock and warrants at a price of $3.00.

This deal helps to shore up the company’s dwindling cash position.

And finally… there are near-term catalysts on the horizon that could boost the share price.

• Interim results from GSK’s phase 3 trial of its malaria vaccine (RTS,S), which contains QS-21 Stimulon Adjuvant, are expected in the fourth quarter of 2013.

 

• Final results from the phase 2 trial of Agenus’ Prophage vaccine in brain cancer are expected in the fourth quarter of 2013.

 

• And results from a phase 2 study of Agenus’ HerpV vaccine for genital herpes should be published in the fourth quarter of 2013.

As you can see, there are several potential upside catalysts in the not too distant future for AGEN.  If the results from these various trials are positive, we could see a nice rally in the stock.

Therefore, we’re going to maintain our buy rating on AGEN, but we will lower our maximum buy price to $3.10 per share.  If you already own these shares, you may consider buying more to lower the overall cost basis of your position.

Action To Take

• Move Cyclacel Pharmaceuticals (NASDAQ: CYCC) from Buy to Hold.
• Adjust maximum buy price for Agenus (NASDAQ: AGEN) to $3.10.

 

Category: BST Update