BST Position Update: July 23, 2014

| July 23, 2014

July 23, 2014

Position Update

. . . . Rigel Pharmaceuticals (NASDAQ: RIGL) – Hold

Our most recent addition to the portfolio is off to a great start.  RIGL has traded up to our maximum buy price in just two trading days since our recommendation was released.

That’s exactly what we like to see.

Now there hasn’t been any news about the company or its drugs since we issued the trade alert.  So, it looks like our initial success is due to good timing for the trade.

However, we believe the new uptrend in RIGL is likely being fueled by traders establishing positions ahead of upcoming trial results.  Remember, Rigel is expected to release results from the phase 2 trial of R348 in dry eye disease during the current quarter.

These results are very important as they will include the first data related to R348’s efficacy as a treatment for dry eye disease.  If the results are good, we expect RIGL to move significantly higher.

With the stock now trading at our maximum buy price, we’re going to move RIGL from Buy to Hold.  If you moved quickly and added this biotech to your portfolio, you should hang on to the shares for greater gains.

. . . . Regado Biosciences (NASDAQ: RGDO) – Hold

We recently received some disappointing news from Regado and the FDA.

The company has halted its phase 3 trial of the Revolixys Kit (REG1) so that the Data Safety Monitoring Board can conduct an unplanned review.  The DSMB will conduct a full analysis of the “safety and treatment benefit-risk ratio” with a focus on serious adverse events related to allergic reactions to REG1.

The review is expected to take about eight weeks to complete.

After Regado voluntarily suspended the study, the FDA jumped in and placed a clinical hold on the trial.  This means Regado cannot restart the trial until the FDA lifts the hold.

There’s no question that this unforeseen set of events is potentially devastating for Regado.  However, we expect the stock to fully recover and provide nice gains if the trial is ultimately allowed to proceed.

Due to the added risk provided by the clinical hold, we’ve decided to move RGDO from Buy to Hold.  If you own the shares, we recommend holding on to them for the time being.

. . . . Xencor (NASDAQ: XNCR) – Hold

Analysts at Oppenheimer recently initiated coverage of XNCR with an Outperform rating. They also provided a price target of $22 for the shares.

With the stock currently trading around $10, it has upside potential of 120% to the analysts’ price target.

Now, we know that analysts’ price targets aren’t always accurate.  But the bullish opinion from a well-respected Wall Street firm could help attract investors to the shares.

In addition, we should see a wave of short-term traders moving into the stock soon.  Remember, Xencor is expected to provide results from the phase 2a trial of XmAb5871 in moderate-to-severe rheumatoid arthritis during the second half of 2014.

We are definitely excited about XNCR’s upside potential with these catalysts in play.  As such, we recommend you continue holding onto your shares for bigger profits.

. . . . Exelixis (NASDAQ: EXEL) – Buy up to $3.75

Great news from Exelixis!

The company announced positive top-line results from the phase 3 pivotal trial of cobimetinib in combination with vemurafenib in melanoma.  The results showed a statistically significant increase in progression-free survival for the combination as compared to vemurafenib alone.

Cobimetinib is a specific MEK inhibitor discovered by Exelixis.  However, the phase 3 trial was conducted by the company’s partner, Genentech, a member of the Roche Group.

While the positive trial results are terrific by themselves, the implications could be even greater for Exelixis.  According to an article posted on TheStreet’s website, healthcare investor David Miller believes Roche will likely acquire Exelixis.

In fact, Mr. Miller tweeted that the takeover is “just a question of timing at this point.”

You see, Roche already owns verumafenib (marketed as Zelboraf), which generates about $400 million a year worldwide by itself.  But the cobimetinib/Zelboraf combo is expected to produce annual sales of $600 million to $1 billion in the US alone!

It certainly sounds like this takeover’s a no-brainer for Roche.

While EXEL has not yet traded up on these positive news items, we’re not concerned.  The news came out while the market, and biotech stocks specifically, were in correction mode.  We may yet see a delayed rally if investors get over their latest worries like they have so many times before during this bull market.

And if Roche does indeed announce an acquisition of Exelixis, shares of EXEL are sure to soar on the news.

If you haven’t yet purchased EXEL, you’d better act fast.  The stock is closing in our maximum buy price of $3.75 per share.

. . . . Cerus (NASDAQ: CERS) – Buy up to $6.60

Cerus recently announced terrific news.

The company has submitted the third and final module for its Premarket Approval application to the FDA for review of the INTERCEPT Blood System for platelets.  And the FDA has said it has all the information it needs to proceed with its review.

A final decision from the FDA is expected before year’s end or in early 2015.

Commenting on the company’s recent regulatory progress in the US, Canada, and Mexico, CEO William “Obi” Greenman said the company’s “excited about accessing the North American market.” And he went on to say that Cerus is now focusing its efforts on “launch preparation”.

Don’t forget that Cerus has already submitted all four of its PMA’s for the INTERCEPT Plasma System. And an FDA decision is expected by the end of 2014.

With Cerus diligently keeping to its previously provided regulatory timeline, it’s hard to understand why the stock has struggled of late.  However, we’re confident the shares will rise significantly if the FDA follows in the footsteps of its counterparts in Europe, the Commonwealth of Independent States, and the Middle East by approving the INTERCEPT systems.

Remember, the product’s addressable market is estimated at a whopping $6.4 billion!

Given the important catalysts on the near-term horizon, we’re maintaining our Buy rating on CERS.  Grab your shares of this exciting biotech if you don’t own them already.

. . . . Acasti Pharma (NASDAQ: ACST) – Buy up to $1.40

Acasti is another one of our biotech’s that recently provided good news.

The company announced it has completed the second phase 2 study of CaPre in patients with mild to severe hypertriglyceridemia.  And management indicated that top-line results are expected by the end of September 2014.

We’re definitely excited to see these results. 

Remember, the first phase 2 study showed that CaPre achieved statistically significant reductions in patients’ triglyceride levels and demonstrated a positive risk/benefit ratio. What’s more, CaPre became the first omega-3 phospholipid product to demonstrate a positive effect on both bad cholesterol (LDL) and good cholesterol (HDL) levels.

If the second phase 2 trial results confirm those of the first, ACST should take off like a rocket.  Don’t forget that the prescription omega-3 market generates over $2 billion a year in revenue.

ACST has been trading in a sideways range since last December. But that could change overnight when the phase 2 trial results are released.  Don’t miss out on what could be a huge biotech winner.

. . . . Threshold Pharmaceuticals (NASDAQ: THLD) – Buy up to $4.80

If you don’t own THLD, you may want to grab your shares while you still can.  The stock is quickly closing in on our maximum buy price.

What’s more, an important catalyst is fast approaching.

Interim results from the phase 3 trial of TH-302 in soft-tissue sarcoma (STS) are expected by the end of September 2014.  Remember, this important trial is evaluating the efficacy and safety of TH-302 in combination with doxorubicin as compared to doxorubicin alone.

We’re expecting positive results based on the drug’s strong performance in phase 2 testing.

You may recall from our trade alert that the drug combo demonstrated higher progression-free survival (PFS) and overall survival (OS) rates than those achieved in other studies of doxorubicin alone.  In fact, the drug combo produced a 46% increase in PFS and nearly doubled the OS rate in patients with STS.

And if the results are positive, THLD should soar on the news!

Don’t forget that Threshold is evaluating TH-302 as a potential treatment for a wide variety of cancers.  If the drug shows success in this phase 2 trial it will bode well for its potential to treat the other cancers as well.  And that’s no small potatoes as TH-302’s total addressable market is estimated to be over $10 billion!

. . . . Prana Biotechnology (NASDAQ: PRAN) – Hold

PRAN has been moving higher in a solid uptrend over the past couple of months.  Since hitting a low of $1.47 in early May, the stock has climbed more than 63% to its current price of $2.40.

While our position is still down significantly, this recent activity is highly encouraging.

What’s more, the new uptrend may gather some momentum following a recent press release from the company.  The press release included information from Colin Masters, a Professor at the University of Melbourne’s Florey Institute of Neuroscience and Mental Health.

Professor Masters recently shared his findings from a sub-analysis he conducted of data from the phase 2 trial of PBT2 in Alzheimer’s disease.  He found that a sub-group of PBT2-treated patients showed a significant decrease in amyloid burden that was not observed in participants on placebo.

In other words, Professor Masters may have identified a type of Alzheimer’s patient that PBT2 is more effective at treating.

You may recall that PRAN plunged after the phase 2 IMAGINE trial was deemed a failure by investors.  The trial did not achieve the primary endpoint of showing a statistically significant decrease of amyloid burden in participants treated with PBT2 relative to placebo.

However, the failure was due to a surprise drop in the average amyloid burden of the placebo group.

Based on Professor Masters’ findings, Prana may be able to conduct a new trial of PBT2 in just those Alzheimer’s patients meeting the criteria of the sub-group.  And if Professor Masters’ findings bear out in any such new trial, there may be a greater likelihood of success for PBT2.

The upshot of all this is that PBT2 may have just found new life as a potential treatment for Alzheimer’s disease.  And if so, we just might see a new wave of investors pile into PRAN.

Given this positive news for PBT2 and Prana, we’re going to maintain our Hold rating on PRAN.  Let’s see if this new uptrend can gather more momentum before we change our rating on the stock.

. . . . Synergy Pharmaceuticals (NASDAQ: SGYP) – Buy up to $4.50

It looks like SGYP may be gearing up for a new uptrend following the company’s recent progress with its clinical trials.

First off, Synergy recently announced plans to initiate a pivotal phase 3 study of plecanatide in irritable bowel syndrome with constipation (IBS-C).  The trial is expected to begin in the fourth quarter of 2014.

You may recall positive top-line results in April 2014 from a phase 2b dose-ranging study of plecanatide in IBS-C.  The drug demonstrated a statistically significant improvement in complete spontaneous bowel movement frequency. And it was safe and well tolerated.

Second, the company announced last week it has reached the halfway mark for total enrollment in the first pivotal phase 3 trial of plecanatide in chronic idiopathic constipation (CIC).  Top-line data from this important trial are expected in the second quarter of 2015.

And finally, Synergy also announced last week it has completed enrollment in the phase 2 trial of SP-333 in opioid-induced constipation (OIC).

SP-333 is the company’s next-generation uroguanylin analog.  The drug is designed to be a highly potent and stable version of the naturally occurring gastrointestinal hormone, uroguanylin, and resistant to proteolysis in gastric intestinal fluids.  SP-333 has already successfully completed multiple phase 1 dose-ranging studies.

Data from this trial are expected in the fourth quarter of 2014.

As you can see, Synergy Pharmaceuticals has several important catalysts on the near-term horizon.  With multiple upside-producing opportunities on tap, we think it’s time to move SGYP from Hold to Buy.  Grab your shares up to a maximum price of $4.50.

Action To Take

  • Move Rigel Pharmaceuticals (NASDAQ: RIGL) from Buy to Hold.
  • Move Regado Biosciences (NASDAQ: RGDO) from Buy to Hold.
  • Move Synergy Pharmaceuticals (NASDAQ: SGYP) from Hold to Buy.


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