BST Position Update: November 21, 2013

November 21, 2013

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

BLRX has been a great performer for the portfolio.  As I write we’re sitting on a terrific 55% gain on the position.  Not bad for a stock that lost more than half its value on one bad day in March.

We fully expected the stock to trend higher as the announcement of results from the phase 2 trial of BL-8040 drew near.  And BLRX has not disappointed.

But with those results coming very soon, we think it prudent to lock in our gains. This has been a great trade.  No need to risk losing our substantial profit at this point.

Go ahead and sell BLRX at your earliest convenience.  Congratulations on another winning trade!

. . . . Agenus (NASDAQ: AGEN) – Sell

It’s been a difficult couple of months for AGEN.

The stock has dropped significantly since negative trial results were reported in early September.  And despite the reporting of positive trial results for other drug candidates in October and November, the stock has failed to mount any kind of sustained rally.

The problem with Agenus is that even the successful trials have been under-whelming.  As such, the stock has failed to generate much interest from institutional investors.

At this point, the stock has become more of a long-term investment.  The company’s best chance for a home run is its HSPCC-96 vaccine for brain cancer.  Unfortunately, the upcoming phase 3 trial will take at least 2 years to complete.

That means we won’t have results until 2016 at the earliest.

Given the lack of near-term catalysts, it’s not likely AGEN will move meaningfully higher any time soon.  As such, we recommend cutting your losses and selling AGEN as soon as possible.

. . . . Oncolytics Biotech (NASDAQ: ONCY) – Sell

Oncolytics reported results this morning from a clinical study of Reolysin in patients with head and neck cancer.  Management claims the study is a big success.  But I’m not so sure.

After reviewing the company’s press release, I’m getting the feeling that management’s playing games with the data. 

It appears that management purposely excluded a large number of patients from its analysis in order to skew the overall survival results in Reolysin’s favor.  And when asked by analysts to provide survival data on all patients in the trial, the company’s CEO refused.

This is a huge red flag in my opinion.

At this point, I’m not really sure we can trust Oncolytics’ management team.  And when you feel that you can’t trust management, it’s time to exit the stock.

As a result, we recommend you sell your shares of ONCY immediately.  Let’s conserve capital for better opportunities in the biotech space.

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

PRAN spiked this week on much higher than average volume.  On Monday, the biotech hit $6.05 and set a new 52-week high in the process.  That move gave us a solid 50% gain on the position.

Not bad for just a month into the trade.

What’s going on?

The stock jumped on positive updates for the IMAGINE and Extension trials of PBT2 in Alzheimer’s disease.  The company said that 29 of the 42 patients enrolled in the phase 2 IMAGINE trial have successfully completed treatment.  And Prana further reported that 24 of a possible 29 patients have elected to continue treatment in the Extension trial.

What’s more, the company reaffirmed its previous forecast that results from the IMAGINE trial are expected in March 2014.

With the stock now trading above our maximum buy price, we’re moving PRAN from Buy to Hold.  We fully expect PRAN to trend higher ahead of the results so hang on for greater gains.

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

CYCC’s rising nicely on recent positive news.  After hitting a low of $3.40 on November 4th, the stock has gained more than 23%.  And it has climbed back above the $4.00 level.

That’s a strong upward move in a short period of time.  But more importantly, it looks like this could be the beginning of a more extensive rally in CYCC.

The stock took off after the company announced positive news during its third quarter earnings call…

• The pivotal phase 3 trial (SEAMLESS) of sapacitabine in acute myeloid leukemia (AML) is close to 50% enrollment

 

• SEAMLESS is being expanded to Europe and will have at least double the number of enrolling sites

 

• With $35 million in cash, the company has the resources to take it beyond completion of SEAMLESS

 

• And last but not least, one-year survival data (the primary endpoint) from the phase 2 study of sapacitabine in myelodysplastic syndromes (MDS) will be reported at the American Society of Hematology meeting in December 2013

In our humble opinion, there’s a very good chance the upturn in CYCC turns into a bigger rally.

Biotech traders are now piling into the stock ahead of the upcoming phase 2 study results in December.  And this pick-up in buying is likely to continue driving the stock higher near-term.

Hang on to CYCC for greater gains.

. . . . GTx (NASDAQ: GTXI) – Buy up to $2.00

GTXI continues to move sideways after the steep drop in August.  But it may not be long before the stock starts to move higher again.

The company recently provided a few positives during its third quarter earnings call…

First off, management said it may have discovered why patients in the POWER2 trial of enobosarm failed to show statistically significant improvements in stair climb power despite showing improvements in lean body mass.  It appears it may be due to the side effects of the non-taxane chemotherapy received by patients.

If true, the company may be able to work out a path to approval for enobosarm as a treatment for non-small cell lung cancer when it meets with European regulators and the FDA.

Another positive development is that GTx has initiated a phase 2 trial of enobosarm for the treatment of estrogen receptor (ER) positive metastatic breast cancer.  The proof of concept study is enrolling 20 post-menopausal women with ER positive metastatic breast cancer at six sites in the US.

GTx believes that enobosarm has potential to treat the disease and minimize unwanted masculinizing side effects associated with steroidal androgens.

And finally, the company is enrolling patients in a phase 2 study of GTx-758 for the treatment of castration-resistant prostate cancer.  This study will evaluate the safety and effectiveness of two doses of GTx-758.

With all this clinical activity, GTx has a couple of catalysts on the horizon…

One catalyst will be the successful completion of enrollment in the phase 2 breast cancer trial of enobosarm.  The company expects to finish enrolling patients before the end of 2013.

Another upcoming catalyst is the completion of enrollment in the prostate cancer trial. Enrollment in that trial is also expected to be completed by the end of this year.

While GTXI remains a highly speculative trade, the stock could gain some traction very soon.  Hopefully, the two catalysts mentioned above will provide the spark we need.

For now, we continue to rate GTXI as a buy up to $2.00 per share.

. . . . ImmunoCellular Therapeutics (NYSE: IMUC) – Hold

IMUC is moving higher in what could be a new uptrend.  The stock has climbed from a recent low of $2.10 to $2.60 in just a little over a week.  That’s a nice 24% gain in short order.

What’s going on?

Investors are jumping back into the stock to get positioned ahead of approaching trial results.  The company said in its latest earnings report that it expects to report top-line results from the phase 2 trial of ICT-107 in late 2013 or early 2014.

Remember, ICT-107 is being developed as a vaccine for the treatment of glioblastoma multiforme (GBM).  GBM is the most common and most lethal form of brain cancer.

Since our potential upside catalyst is right around the corner, we’re going to move IMUC from Buy to Hold.  We’ve been recommending the stock as a buy off and on since late July, so everyone has had ample opportunity to establish their positions.

Now let’s see if a rally develops going into the results as we expect.  Hang on to IMUC for bigger upside.

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

RMTI continues soaring to new highs.  The stock hit a new high of $15.66 today to give us a phenomenal 294% gain on the position.  No question about it, RMTI is the rock star of the portfolio.

The stock’s rising on excitement for Triferic. 

The positive phase 3 trial results strongly suggest that Triferic will replace IV iron therapy as the standard of care for chronic kidney disease patients on hemodialysis.  And management believes the drug will quickly “capture considerable market share in the consolidated dialysis provider market upon FDA approval.”

Don’t forget the potential market for Triferic is $600 million in the US and $1 billion worldwide.

Despite the stock’s meteoric rise since July, we believe it still has upside potential from here.  As such, we’re maintaining our hold rating on the stock.

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

SGYP has pretty much moved in a sideways range since we recommended it in April.  But that trend could be about to change for the better very soon.

You see, important trial results are fast approaching.

The company recently confirmed that results from the plecanatide phase 2b trial in constipation-predominant irritable bowel syndrome are expected in the first quarter of 2014.  As such, we expect SGYP to start trending higher as investors get positioned ahead of the results.

In fact, that process may have already begun…

The stock has climbed more than 12% off the 52-week low it set earlier this month.  And our technical indicators suggest this could be the beginning of a new uptrend.

Of course, only time will tell if our assessment is correct.

However, if it is a new uptrend, then you don’t have much time to get your shares.  We’re lowering our buy-up-to-price to $4.50 per share based on recent activity. And as a result, SGYP is closing in on our maximum buy price for the stock.

Grab your shares of SGYP if you haven’t already.  There’s no telling how much longer it will stay in our buy range.

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

HALO keeps climbing higher and higher. The stock hit a new high of $13.76 today to give us a stunning 159% gain on the position.  And it looks like it will continue the upward move for some time.

The most recent surge followed the company’s stellar third quarter earnings.

Revenues surged more than 200% year-over-year to $16 million.  The revenue rise came primarily from payments of $10 million from Roche and $4 million from Baxter.

The payments were triggered by Roche’s launch of Herceptin SC and Baxter’s launch of HyQvia in Europe during the quarter.

Halozyme also received a payment of $1.5 million from Pfizer.  That payment was triggered by Pfizer’s selection of a fourth target for development under the two companies’ joint collaboration agreement.

No question about it, exciting things are happening at HALO.

And there’s more to come…

• MabThera SC, a treatment for non-Hodgkins lymphoma co-developed with Roche, could receive European regulatory approval before the end of the year.

 

• Baxter said on its earnings call that it believes the preclinical data it has supplied to the FDA puts it on track to resubmit HyQvia for FDA approval before year’s end.

 

• And top line data from the phase 4 trial of analog insulin-PH20 in diabetes are expected at the beginning of 2014.

As you can see, HALO has several major catalysts on the horizon.  And each one has potential to drive the stock higher.

2013 has been a pivotal year for the company.  The first products from nearly 15 years of R&D have entered commercialization.  And the next set of products in the pipeline are at key inflection points in their development.

We think 2014 will be another critical year for HALO as these trends continue.  If the company continues to have success, the stock should keep moving higher and higher.

As a result, we recommend you hold onto your shares for greater gains.

. . . . Merrimack Pharmaceuticals (NASDAQ: MACK) – Buy up to $4.00

MACK has dropped significantly since reporting important trial results at the end of October.  I’m referring to the results of the phase 2 trial of MM-121 in ovarian cancer.

But here’s the thing…

We think the results actually provided some key information that could ultimately be a huge positive for the drug.  However, the company did a poor job of communicating this fact.  And unfortunately, investors interpreted the data as all negative and sent the shares lower.

What were the results?

No question about it, the study failed to achieve the primary endpoint of progression free survival in the overall population.  That’s the bad news.

The good news is… the biomarker analysis identified a substantial subpopulation of patients who benefitted from MM-121.  These patients had a 63% lower risk of progression on MM-121 plus paclitaxel compared to paclitaxel alone.

And here’s the kicker… this group represented 34% of the total patients in the trial.

With this information in hand, Merrimack can design the phase 3 trial of MM-121 to include only patients from this subpopulation.  That should significantly increase the chances of success for this pivotal trial.

In other good news, MACK is now moving higher in a new uptrend.

Investors are piling back into the stock after the company said top-line results from an important trial will be delayed.  According to management, initial results from the phase 3 trial of MM-398 in advanced pancreatic cancer will be provided in the second quarter of 2014.

The results had been expected in the fourth quarter of 2013 or first quarter of 2014.

Usually a delay in reporting trial results is viewed as a negative.  But in this case, it could be a good thing.  This delay is due to the fact that overall survival events are occurring later than forecasted.

Reading between the lines… MM-398 is prolonging the survival of a good number of patients.

Of course, if overall survival is happening later it means patients are benefitting from the treatment.  This simple conclusion from the facts surrounding the delay appears to bode very well for the upcoming trial results.

So, what does this mean for us?

There’s no question that MACK has been a disappointing trade so far.  But given the unexpected good news regarding MM-398, we recommend holding onto MACK to see how far this new rally can go.

In addition, we’re going to maintain our Buy rating on the stock after adjusting our maximum buy price to $4.00 per share.

Action To Take

• Sell BioLineRx (NASDAQ: BLRX) to lock in gains of 55%.
• Sell Agenus (NASDAQ: AGEN) as soon as possible.
• Sell Oncolytics Biotech (NASDAQ: ONCY) as soon as possible.
• Move Prana Biotechnology (NASDAQ: PRAN) from Buy to Hold.
• Move ImmunoCellular Therapeutics (NASDAQ: IMUC) from Buy to Hold.
• Adjust maximum buy price for Synergy Pharmaceuticals (NASDAQ: SGYP) to $4.50 per share.
• Adjust maximum buy price for Merrimack Pharmaceuticals (NASDAQ: MACK) to $4.00 per share.

 

Category: BST Update