BST Position Update: June 3, 2014

| June 3, 2014

June 3, 2014

Position Update

. . . . Xencor (NASDAQ: XNCR) – Buy up to $9.40

XNCR is our latest addition to the portfolio.  This exciting clinical stage biotech is developing engineered monoclonal antibodies for the treatment of autoimmune diseases, asthma and allergic diseases, and cancer.

We like Xencor for several reasons…

Its proprietary drug development platform is cutting edge technology.  The company has a good sized pipeline with six product candidates in clinical development.  Xencor has partnerships with leading drug companies like Amgen, Merck, and Alexion.  And the biotech’s financial condition is very strong with $72.5 million in cash on hand.

Our focus is on the development of XmAb5871, Xencor’s leading drug candidate for the treatment of rheumatoid arthritis.

The company is developing XmAb5871 in partnership with Amgen, the granddaddy of biotech companies.  Under their agreement, Xencor has the opportunity to earn up to $439 million in fees and milestones plus royalties on any future sales.

Amgen has the option to acquire the worldwide development and commercialization rights to XmAb5871 once a successful proof-of-concept study is completed.

Speaking of clinical testing…

The drug has already successfully completed phase 1a and phase 1b clinical studies.  And it is now undergoing a phase 2a study that should be completed in the next few months.

Results from this trial are expected in the second half of 2014.

Given the drug’s early clinical trial success, the company’s partnership with Amgen, and the drug’s huge target market ($12.3 billion in 2012), we think XNCR will soar on positive trial results.  As such, we recommend you add this biotech to your portfolio as soon as possible.

. . . . Catalyst Pharmaceutical Partners (NASDAQ: CPRX) – Buy up to $2.30

CPRX has been moving higher in a tight uptrend over the past few weeks.  Since hitting a low of $1.70 on May 9th, the stock has gained more than 26% to a recent price of $2.16 per share.

The stock’s rising as bargain hunters establish their positions ahead of upcoming trial results.  Remember, top-line data from the phase 3 trial of Firdapse in patients wtih Lambert-Easton Myasthenic Syndrome (LEMS) are expected in the third quarter of 2014.

Despite the recent gains, CPRX still has plenty of upside…

While Firdapse has peak sales of potential of approximately $500 million, Catalyst’s market cap remains quite small at just $144 million.  In other words, these shares could double or triple on positive trial results.

If you haven’t yet grabbed your shares of CPRX, you’d better move fast.  The stock is closing in on our maximum buy price of $2.30 per share.

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

CERS has been hit hard during this recent biotech sell off.  In fact, the shares have dropped 35% since we recommended them in March.

However, we see this drop as a golden buying opportunity.

Remember, the FDA is expected to issue a decision on the INTERCEPT Plasma System during the second half of this year.  We think CERS will move higher as investors begin to anticipate the decision.

And if the FDA approves the product, CERS should rocket higher on the news.

In addition, Cerus still plans to submit the fourth and final PMA for the INTERCEPT Platelet System before the end of this quarter.  If the company meets that deadline, the FDA could issue a decision on the platelet system before year’s end.

Those are two major upside catalysts for this exciting biotech.

And we think the FDA will approve both products.

Clinical studies have shown that each system is not only safe but highly effective at inactivating blood-borne pathogens.  What’s more, both products have already been approved in Europe, the Commonwealth of Independent States, and the Middle East.

In fact, management expects Cerus to generate $38-$40 million in revenue from sales of these products in 2014.

Speaking of revenue…

The company just inked another major sale.  On May 29th, Cerus announced that the Belgian Red Cross Flanders (RC-F) has signed a five-year agreement to purchase the INTERCEPT Blood System for platelets.

This sale marks another major step forward in the company’s efforts to make pathogen inactivation the standard of care in Europe.

While the recent downturn has been painful, we see it as a rare opportunity to pick up shares at a hefty discount. 

If you don’t own the stock our would like to lower your cost basis, you should grab your shares of CERS now.  The stock should move higher as investors begin to anticipate the coming decision from the FDA.

. . . . Lpath (NASDAQ: LPTN) – Buy up to $5.30

LPTN is another biotech to buy now on recent share weakness.

The stock has dropped 18% from our initial buy recommendation in early March.  But with phase 2a trial results expected by the end of the third quarter, the stock should begin moving higher soon.

Remember, iSONEP has already successfully completed a phase 1 trial in patients with “wet” age-related macular degeneration.  And the market opportunity for the drug is estimated to be over $11 billion.

What’s more, we are confident that another drug company will eventually purchase Pfizer’s option to develop and commercialize iSONEP.  This option is highly lucrative for Lpath with potential milestone payments of up to $497.5 million.

News that the option has been purchased would be another major upside catalyst for the stock.

Take advantage of the recent downturn to establish your position in LPTN today.  With a market cap of just $62 million, the stock has huge upside potential.

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

Time to buy THLD if you don’t own it already. The biotech is expected to announce results from the phase 3 trial of TH-302 in soft tissue sarcoma (STS) around mid-year.

With the announcement coming soon, we should see THLD trend higher over the next few weeks.  And if the data are good, the stock could really take off on the news.

While the revenue potential for TH-302 in STS is not large, a successful trial would certainly bode well for the drug’s potential to treat many other forms of cancer. Remember, management believes TH-302’s total addressable market is worth more than $10 billion.

Grab your shares of THLD as soon as possible.  This stock has a history of generating huge returns in short periods of time.

. . . . BioLineRx (NASDAQ: BLRX) – Buy up to $2.50

Just a quick update on the timetable for this biotech’s trial results.

We had been expecting interim results from the phase 2 trial of BL-8040 in acute myeloid leukemia before the end of the second quarter.  However, for the first time, the company’s quarterly earnings release failed to mention the company would be releasing that data.

The only guidance provided in the earnings release is that final results from the phase 2 trial are expected in early 2015.

We are interpreting the omission as management’s cue that the interim results will not be provided as previously planned.  As such, our new timetable for this trade is for the final trial results in early 2015.

Please adjust your expectations accordingly.

However, management did say it plans to initiate a phase 1 stem cell mobilization study for BL-8040 during the second quarter.  And they further indicated that results from that study are expected during the second half of 2014.

This new catalyst could provide a needed kick in the pants for BLRX.

We think the stock is a tremendous bargain as it hovers around the $2.00 per share level. If you don’t own it, you may want to grab your shares now while they’re trading at a huge discount.  With that said, we’re adjusting our maximum buy price down to $2.50 per share.

. . . . Venaxis (NASDAQ: APPY) – Buy up to $2.15

There hasn’t been much news about APPY since the company announced its terrific top-line results from the pivotal trial of the APPY1 Test for appendicitis in early March.  And the stock has pulled back significantly due to the downturn in biotech stocks overall.

Nevertheless, we still believe APPY offers huge upside potential.

Remember, the company will soon be submitting its 510(k) to the FDA to seek marketing approval for the APPY1 Test in the US.  The US market represents an opportunity valued in the hundreds of millions of dollars every year.

And don’t forget, the APPY1 Test has already been approved for marketing in Europe. That’s another market worth hundreds of millions of dollars annually to Venaxis.

Despite the APPY1 Test’s huge revenue potential, the company has a market cap today of just under $64 million.  Compare that to the sales potential of the APPY1 Test and you’ll see that APPY is dramatically undervalued at its current price around $2.00 per share.

With APPY now trading below our maximum buy price, we’re moving the stock from Hold to Buy.  If you don’t own it, here’s your chance to snap up some shares.

Action To Take

  • Adjust maximum buy price for BioLineRx (NASDAQ: BLRX) to $2.50.
  • Move Venaxis (NASDAQ: APPY) from Hold to Buy.


Category: BST Update

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