BST Position Update: July 2, 2013

July 2, 2013

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

HALO’s surging!

Since hitting a low of $5.88 on June 24th, the biotech has climbed 34% to $7.88!  And today it traded over $8.30 for the first time since mid-May.

The stock’s jumping on good news for Herceptin SC.

Herceptin SC is a subcutaneous injection version of Herceptin, Roche’s blockbuster breast cancer drug.  It uses Halozyme’s recombinant hyaluronidase (rHuPH20) enzyme to treat patients with HER2-positive breast cancer.

Why is Herceptin SC so exciting?

It could potentially change how the drug is administered and make treatment much more convenient for patients.  You see, Herceptin SC can be administered in just 2 to 5 minutes by an injection under the skin.  Herceptin, on the other hand, is administered by IV infusion which can take 30 to 90 minutes per dose.

So, what’s the big news?

On June 28th, the European Medicines Agency (EMA) recommended that Herceptin SC be approved for marketing in Europe.  This is a huge win for Roche and Halozyme as EMA recommendations are usually approved by the European Commission within a couple of months.

And approval of Herceptin SC would mean big money for the two companies.

Last year, Herceptin generated global sales of $6.3 billion.  And, of drugs used only for cancer, it was the best seller on the planet in 2012.

But that’s not all…

In early June, HALO announced positive results from a phase 1b trial of PEGPH20.  The trial evaluated PEGPH20 in combination with gemcitabine for the treatment of patients with stage IV metastatic pancreatic cancer.

The trial results showed an overall response rate of 42%.  And in patients with high levels of hyaluronan, the response rate was an impressive 64%.

These data bode well for the ongoing phase 2 trial of PEGPH20 in advanced pancreatic cancer.  Remember, we’re expecting HALO to trade higher going into the announcement of top-line results.

It’s certainly an exciting time for HALO.  And given the important near-term catalysts, we think the shares have more upside ahead.  Continue holding HALO for bigger gains.

. . . . Vical (NASDAQ: VICL) – Buy up to $3.85

In our last update, we urged you to grab shares of VICL.  We believed then, as we do now, that the stock has begun moving higher in anticipation of the Allovectin phase 3 trial results in metastatic melanoma.

Top-line results are expected in August.

Hopefully, you took our advice.

VICL has gained more than 7% since our last update.  And the stock may receive a boost from technical traders any day now.

You see, the 5-day moving average had just crossed the 20-day moving average to the upside.  Many technical traders view this type of moving-average cross as a buy signal.

If you don’t own VICL, you still have a chance to add it to your portfolio.  But you’d better act fast.  VICL is closing in on our maximum buy price of $3.85.

. . . . Merrimack Pharmaceuticals (NASDAQ: MACK) – Buy up to $7.25

MACK is another one of our biotech’s making a strong upward move over the past couple of months.  We noted in our last update that the shares had gained 57% off the low set in early May.  And we urged you to grab shares of this exciting biotech before it moved any higher.

If you heeded our advice, give yourself a pat on the back.

Since that update, MACK has gained another 7%!

This latest rally comes on the heels of a positive broker recommendation.  On June 24th, Mizuho Securities initiated coverage of MACK with a buy rating.

But that’s not all…

The analyst also set a price target of $12 per share!

If you don’t own MACK, there’s still time to pick up shares in our buy range.  And if you buy them here, you have 75% upside to the Mizuho analysts’ price target.

. . . . Anacor Pharmaceuticals (NASDAQ: ANAC) – Hold

There has been some good news on Anacor of late.

First off, the biotech recently completed a successful meeting with the FDA.  The meeting had to do with the filing of a New Drug Application (NDA) for Anacor’s onchomycosis treatment… tavabarole.

Management said the FDA signed off on the content and format of the proposed NDA.  And the FDA’s opinion also included required data related to safety, efficacy, manufacturing, and packaging.

So, what does this mean for Anacor?

It means the NDA for tavabarole will be filed very soon.  And once its filed, the clock starts ticking down to an FDA decision on whether to approve tavabarole.

Of course, with a potential FDA approval on the horizon, we should see investors accumulate shares of ANAC over the months ahead.

But that’s not all…

Anacor also recently benefited from some bad news for a major competitor.  Valeant Pharmaceuticals (NYSE: VRX) just received a Complete Response Letter (CRL) from the FDA for its competing onchomycosis drug, efinaconazole.

While it didn’t raise any concerns regarding safety or efficacy, the CRL does delay potential FDA approval for the drug.  Of course, any delay for a competitor’s drug is good news for Anacor.

Another positive news item has to do with the stock’s recent pullback. 

As you probably know, ANAC has declined from a recent high around $8.00 to its current price of $5.41.  While that may be disconcerting, at least one Anacor executive sees the drop as a major buying opportunity.

CFO Geoffrey Parker recently purchased 23,046 shares of ANAC for $5.20 per share.

That works out to a total investment of just under $120,000.  And this most recent purchase follows two others totaling $135,328 made in the last 12 months at an average of $5.41 per share.

Clearly, Mr. Parker believes ANAC has significant upside potential from here.

And so do we.

While ANAC has pulled back of late, it’s still trading well above our maximum buy price.  As such, we’re going to maintain our hold rating on the stock.  Continue holding ANAC for greater gains.

. . . . Agenus (NASDAQ: AGEN) – Buy up to $4.10

Agenus has pulled back a bit since trading over $5.00 per share in late April.  It looks like this is due to delays in the reporting of clinical trial results for QS-21 Stimulon Adjuvant.

You’ll recall we’ve been anticipating data from three phase 3 trials of QS-21 in melanoma, non-small cell lung cancer, and shingles by mid-2013.

However, it now looks like the data from the melanoma trial won’t be available until later this year.  And data from the non-small cell lung cancer and shingles trials won’t be provided until early 2014.

Keep in mind that it’s difficult for Agenus to accurately predict when trial data will be ready as they’re not conducting the actual studies.  Each of these trials is being conducted by GlaxoSmithKline (NYSE: GSK) under its partnership with Agenus.

While the delays are frustrating, we believe the potential upside for AGEN more than makes up for having to wait a bit longer for the results.

In addition, the delays have moved one of Agenus’ other drug candidates to the forefront. 

I’m talking about HerpV, the company’s novel vaccine for the treatment of genital herpes in herpes simplex virus-2 (HSV-2).  Enrollment in the phase 2 trial of HerpV was completed in February and results are expected in the fourth quarter of 2013.

Interestingly, HerpV contains QS-21 Stimulon Adjuvant.  So, positive results from this trial would bode well for the other 19 clinical trials evaluating this product.

With that said, the HerpV results themselves represent a major potential upside catalyst for AGEN.

The World Health Organization estimates a whopping 40 to 60 million Americans are infected with HSV-2.  And the potential market for HSV-2 vaccines is estimated to be worth $6 billion.

No question about it, Agenus’ many upcoming catalysts provide huge upside potential for the stock.

Now, if you missed Agenus when we first recommended it, you’re in luck.  The recent pullback has pushed the shares back into our buy range.  As a result, we’re moving AGEN from Hold to Buy.

Go ahead and buy these shares at $4.10 or less.

Action To Take

• Move Agenus (NASDAQ: AGEN) from Hold to Buy.

 

Category: BST Update