Navellier’s “Next Biotech Doubler”

Sniffing out an Emerging Growth teaser pick

By Travis Johnson, Stock Gumshoe, February 25, 2014

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Louis Navellier likely had a good year last year, since the kinds of stocks he typically likes did very well (generally growth stocks, those with rapid earnings growth that beat estimates and grow at increasing rates … and often look expensive, with high PEs) — and he’s out now with a new ad about biotech stocks that he thinks will get you triple-digit gains.

Biotech teasers are on the rise these days, since we’ve been in a blistering biotech bull market for a couple years now — over the last year even the biotech index funds are up by 60-80% or so, and there have been dozens of huge winners that are up several hundred percent … mostly smaller stocks, of course, but even the biggies have done very well (Gilead (GILD) and Biogen-Idec (BIIB) come to mind, both are very large companies at or near $100 billion in market capitalization, and both have doubled over the last twelve months).

Just chasing growth in that sector would have put you in good stead over the last year, even if you had no skill or luck in choosing the best specific stocks — and an aging population in the highest-health-spending country helps to buttress future hopes for growth.

So we’ve now got pretty much an ideal backdrop for pitching biotech stocks, which — like mining stocks — have big individual boom and bust moves that attract speculators and traders, and lend themselves to good storytelling (curing disease, ending misery, huge secret discoveries by “lone wolf” scientists or prospectors, shocking gains, etc. etc.). I expect we’ll continue to see lots of overheated promises about the next hot biotech stock — and while I’ll often not be able to tell you much about the science or the real prospects, I can at least ID some stocks for you.

So what, then is Louis Navellier telling his subscribers to buy? He’s flogging his Emerging Growth newsletter in this particular pitch, and that’s about $1,000 a year, so I’m assuming you don’t much feel like subscribing just to find the stocks, right? Don’t worry, that’s why we’re here — his spiel touts three specific stocks that he’s recommending, let’s look for the first one now, the one he calls the “Next Biotech Doubler”:

“The Next Biotech Doubler…

“It’s NOT in the U.S. … or Europe … or even Japan…

“It’s in China, and it has the catbird seat for the next Avian Flu epidemic….”

Interestingly, some “plays on the bird flu outbreak” were also among the top performers on the Gumshoe tracking spreadsheets in 2013 — so is Navellier touting one of those stocks? We’ll find out shortly (That tout was from Tony Sagami, FYI, you can see it here — the top performer in that list was one he mentioned for free, not a teaser, and was BioCryst Pharmaceuticals (BCRX) with a gain of more than 500%).

Here’s what gives Navellier’s pitch some urgency, the possibility of global pandemic flu mutating from Avian Influenza:

“Avian Influenza. Bird Flu. H5N1.

“It’s a virus that boasts a mortality rate above 60%. In China, it kills two out of three infected.

“And for the first time ever, the highly-virulent H5N1 has crossed into the Americas.

“One week ago, the first human infection of H5N1 was reported in Canada. But it won’t be the last.

“I don’t want to scare you, because we’re not at pandemic levels—yet. H5N1 still can’t easily spread from person-to-person. And until that happens, we’re mostly safe here in the U.S.

“But in the meantime, this virus is endemic in China. Tens of millions of birds have been slaughtered and disposed of to limit the spread of bird flu, but human cases there continue to surge because of the virus’ fast-mutation ability.”

And, of course, “one company” holds the key to solving the problem.

Isn’t it always thus?

“… there is just one company that has the technology and the know-how, not to mention the full support of the Chinese government to fight this potential epidemic.

“Buy Shares Today, Enjoy Double-Digit Gains In Six Months…

“…And Triple-Digit Profits in a Year

“Already, this stock is up 10% since the latest H5N1 case in Canada was released, and this is just the beginning of an explosive move higher for these shares.

“This company—I’ll call it our #1 Biotech Winner of 2014— is one of the most innovative Chinese small-cap stocks that I’ve ever found.

“It dominates its niche because it is consistently able to adapt and create vaccines for the latest infectious disease trends far faster than its giant pharmaceutical competitors….

“… the Chinese government chose this company’s vaccine over the lumbering pharma giants as the only licensed H5N1 vaccine for China’s strategic stockpile.”

Navellier even takes a moment to pile on the lone Wall Street analyst who’s trying to predict this company’s earnings:

“… there is just a single analyst following the company, and if you’ll forgive me for a moment, he’s had a history of being dead wrong.

“Last quarter, this analyst expected the company to report a loss. Instead, the company reported a modest gain—surprising some 300% to the upside. And handing us hefty gains in the process.

“The quarter before that, wrong again. To the tune of a 133% earnings surprise.

“Before that, a 60% earnings surprise.

“So rather than getting better, this poor overworked analyst is actually getting worse!”

Navellier’s system relies in part on analyst surprises, and consistent “beats” of analyst estimates, so I guess it’s no surprise that this came to his attention — though one should never rely much on estimates when they come from just a single analyst, the value of analyst estimates and forecasts usually comes from the aggregate information and from the range of guesses (and a company’s ability to do better than average estimates).

A few more tidbits for the Thinkolator:

“… this analyst is STILL expecting the company to report a loss in the next quarter. And I have to say, I think we’re on the verge of an even bigger earnings upset.

“That’s because the company is no one-hit wonder. It stands to benefit—and massively so—as H5N1 continues to rear its deadly head, or if we see another outbreak of H1N1, but it also has a number of other profitable vaccines for diseases like hepatitis A, hepatitis B, influenza and SARS.

“And its latest vaccine is set to fight the Chinese epidemic of EV71, or Hand Foot and Mouth Disease, as cases continue to accelerate—from just over one million in 2010 to more than two million in 2012. There is no other treatment for EV71, and the company just completed its phase III clinical trials with strong results.

“What about its pipeline? Vaccines for pneumococcal, rotavirus, rabies, varicella, and rubella.”

So who is it? Well, we feed all of that into the hungry, gaping maw of the Mighty, Mighty Thinkolator and learn that this is almost certainly … Sinovac Biotech (SVA), which was one of the other solutions to one of the stocks teased by Tony Sagami last year and has done well since (up 75% or so). This is a China-focused vaccine company, their main products are vaccines for Hepatitis A and B and seasonal flu, and they also have a lump business in bird flu and swine flu vaccines (the customer is the government for those, so sales depend on whether or not the government is stockpiling during that quarter). Lately, the revenue driver has been their seasonal flu vaccine, Anflu, which generated about 40% of revenue last quarter (the two Hepatitis vaccines together were 48% of their core sales for the quarter — the rest was mostly the Panflu H5N1 vaccine for government stockpile, which they tally separately from the “normal” revenue.)

And yes, the lone analyst who provides an earning estimate for the current quarter has not exactly been on target — though I don’t know whether the company provides any real guidance or not, and I can’t imagine how hard it might be to guess at vaccine demand in Chinese cities, or to guess what portion of the business will be given to Sinovac. That analyst estimates another loss next quarter, and a second analyst piles on to provide an average estimate of a larger loss next year as revenue climbs from $70 million to $80 million and the company is expected to lose five cents a share. The average analyst price target is between $6.50-7, about where the stock is right now.

It’s a pretty good business, it appears, with several high-volume vaccines approved and another pending approval for a probably smaller market (The EV71 vaccine) — and it has very good gross margins, so it should be able to become profitable. My quick glance gives me the feeling that any potential spike in price would probably depend on more chatter about pandemic flu, or on sales ramping up more than has been the norm lately, but the basic underlying business in Hepatitis and flu vaccines is growing and should be enough to create sustainable profitability if they keep the rest of their costs down … maybe not growing enough to justify this valuation, but it looks like a viable business from this distance. I’d prefer to buy Chinese companies on the cheap if at all, particularly if I don’t really know anything about their management or how the marketplace works for their products, as is the case here, so I’m not super excited about the shares … but these kinds of vaccines should create a solid business in a large and densely populated country where vaccinations against infectious disease should be expected to be hugely important over time.

So there’s one idea for you, it looks like Navellier’s second pick is Ligand (LGND), a pharma royalty stock that I’ve covered a lot for the Irregulars and own personally, so I’ll get to that one in more detail and try to find the mysterious third pick for you tomorrow. Enjoy!


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44 Comments on "Navellier’s “Next Biotech Doubler”"

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msomerville
Member
0
February 25, 2014 3:01 pm

There seems to have been a fair amount of insider selling for LGND since Feb 12th/Feb 14th but I’m pretty young and dumb and was wondering what you and others thought. Thanks

MICROBIOBOB
Guest
0
February 25, 2014 4:24 pm

H5N1 transmits poorly, if at all, from human to human, but, only from birds to humans. The case in Canada was in someone who got the infection from poultry in China and travelled to Canada. Perhaps, immunization of those exposed regularly to birds may be justified. If the right mutation occurs, then human to human transmission may be facilitated.

vivian lewis
Guest
0
February 25, 2014 5:06 pm
The latest bird flu is called H7N9 because it has different markers than the older version, H5N1 and the original H151. Like seasonal flu, bird flu also mutates from year to year. H7N9 seems to be more likely to transmit human-to-human. There is also a new variant of SARS which is spreading in the Middle East; the vector is camel spit. (I cannot make stuff like this up.) By the way I am one of the few people who managed to catch a seasonal flu (in the winter of 1968-9 when I lived in Paris where flu shots are not… Read more »
geofreak
Irregular
0
geofreak
February 25, 2014 7:35 pm

I am wondering if you would share with us all what your wonderful company is that competes with Roche and Tamiflu. I was not aware there was an FDA approved generic for Tamiflu.

advantedges
Member
56
advantedges
February 25, 2014 6:53 pm
Interesting comments, Vivian… we will sure avoid those Camels and llamas! Meanwhile, I have owned SVA for a while. That little dog is a dangerous stock, and has been hyped before. I am not sure what Navellier is doing recommending it, because he usually only recommends mid or large cap biotechs, like AMGN, CELG, or perhaps JAZZ. Look at JAZZ after hours and you can see what bad news does to a stock! That being said, I appreciate his recommendation of the small cap SVA and wish all of luck who own it going forward! BTW, I may buy more… Read more »
Sam
Guest
0
Sam
February 25, 2014 7:04 pm

Mr. Gumshoe,
Are you going to tell us the third pick some time?

emanigol
Member
2
emanigol
February 25, 2014 8:00 pm

I think I beat the Thinkolator on this third one. It is:

Santarus Pharmaceuticals (SNTS : Nasdaq)

Just thinking…But all fit, charts and price and all…

T J
Guest
0
T J
February 27, 2014 11:26 am

Nope, not SNTS. That one got acquired and sold for 600%+ gains last year in Emerging Growth (I’m a current subscriber).

emanigol
Member
2
emanigol
February 25, 2014 8:07 pm

But Salix (SLXP, also Nasdaq) bought it in January.

rosalindr
Irregular
24
February 26, 2014 12:12 am

I bought BCRX in 2011 and sold in it in 2012. Now it’s three times what I sold it for. Oh well, that’s the story of my life.

SouthernX
Guest
0
SouthernX
February 26, 2014 12:12 am

In the tradition of Travis I put on my “thinkolator cap” (mine is more “stinkolator”) regarding Ms Lewis’s Aussie equity. (Actually, I remembered it from years ago during the “original” bird flu pandemic hype.) It is Biota, ASX:BTA (now delisted), BOTA:NASDAQ.

SouthernX

PS Travis, your article, and reader comments on Prana, PBT:ASX, was First Class! My task now is to determine risk in this stock. Thank you from Darwin!

Alan Harris
Guest
0
Alan Harris
February 26, 2014 1:10 pm

Darwin who? 🙂

SouthernX
Guest
0
SouthernX
February 27, 2014 1:32 am

Sorry, not Darwin who? but Darwin where?
Darwin, NT
Australia

SouthernX

PS Know your star constellations? See above.

Alan Harris
Guest
0
Alan Harris
February 27, 2014 6:06 am

Sorry mate, it was just a little bit of ribbing, thats why the 🙂
As for star constellations…..theres a new one called KSS on http://www.stockgumshoe.com/reviews/biotech-supertrader/this-tiny-unknown-biotech-is-about-to-unleash-its-holy-grail-drug/#comments

Jim
Guest
0
Jim
February 26, 2014 12:49 am

Surprised no one mentioned NVAX. I have a double on it already since Oct. and it is projected to double again. Novel way of creating vaccines.

Sam
Guest
0
Sam
March 2, 2014 12:27 pm

DOUBLE? Can you imagine, how many folds if you bought options like me. Thanks a lot Jim, for your thoughts, “it is projected to double again”. I am going to exercise half of my options when they expire.

Sharon
Guest
0
Sharon
February 26, 2014 8:39 am

thanks, interesting

Sharon
Guest
0
Sharon
February 26, 2014 8:42 am

interesting and helpful

peterkevw
Irregular
2
peterkevw
February 26, 2014 10:55 am

Surprised no one mentioned INO. They have vaccines for human and as well as animals. However, they are on still in preclinical, phase i and phase ii trials.

tanglewood
Irregular
170
February 26, 2014 8:58 pm

Hi yum and all. I’m surprised at how many Gumshoe’ers are not aware of this other thread that’s breaking all records for biotech ideas. Do ctrl f and enter INO and you will see lots of talk about INO.
http://www.stockgumshoe.com/reviews/biotech-supertrader/this-tiny-unknown-biotech-is-about-to-unleash-its-holy-grail-drug/

Steve
Guest
0
February 27, 2014 5:15 pm

I know that biotech investments are a solid choice. But I am so conservative I have yet to do it myself. I think I will continue to watch the market and wait a bit longer.

newby3867
Irregular
4579
newby3867
March 7, 2014 8:59 pm
Doctor KSS was looking to get some exposure in the vaccine market.Ran across a company in China that really looks interesting and promising.The company is called Sinovac Biotech(SVA) and trades on the Nasdaq.Their EV-71 vaccine which is in phase 3 just posted results in the New England Journal of medicine and with outstanding results for hand,foot,mouth disease that is a big problem in Asia in infants and young children.It is also the first worldwide company to receive approval for H1N1 influenza vaccine and is manufacturing it for the Chinese government. It is also the only company to supply H5N1 pandemic… Read more »
Dr. KSS MD PhD
Guest
0
karmaswimswami
March 7, 2014 9:30 pm
Glenn let me look into Sinovac. I think Alan has a great point. There’s that Beatles line “there’s nothing you can do that can’t be done.” With RNAi we are really moving toward a time where it looks more and more like there may be no disease we can have a sporting chance at fixing…but at what price? Medicine is a funny business. Drugs and devices are not priced at something that covers costs and a profit for the company. They are priced based on one thing only: what will the market bear? This is why competition amongst drug makers… Read more »
newby3867
Irregular
4579
newby3867
March 9, 2014 9:06 pm

Doc KSS did you ever get a chance to look at Sinovac Biotech(SVA)?Thanks,Glenn

Dr. KSS MD PhD
Guest
0
karmaswimswami
March 9, 2014 10:00 pm

to Glenn newberry; I am waiting to hear back from a close friend in Taipei who has worked directly with Sinovac. But my first take is that it looks highly undervalued.

David B
Guest
0
March 9, 2014 10:41 pm
At first blush Sinovac (SVA) looks to have had very solid growth in revenue and profits in 2013 over 2012 which is certainly encouraging. The stock price has been all over the place in the past 12 months and doesn’t currently reflect the solid growth they have showed. Their core business in vaccines seems logical and solid and going in the right direction scientifically. I’ll be quite interested in what your connection has to say Karma as my first read is in line with yours that the company is currently significantly undervalued. This could be our first deep value play… Read more »
Dr. KSS MD PhD
Author
21514
March 10, 2014 12:04 pm
To Glenn Newberry: Glenn, Sinovac may be a buy here. My sense is that their EV71 vaccine will certainly be approved if for no other reason than that NEJM ran a major study of it, and the Chinese love these “big face” affairs. The Chinese government will be inclined to approve it just because NEJM ran the study. EV71 is the main cause of hand/foot/mouth disease, and is a non-polio enterovirus that can cause meningitis and death. It has occurred in the EU and US, but is more common in south and SE Asia, and seems to be growing more… Read more »
newby3867
Irregular
4579
newby3867
March 10, 2014 1:39 pm

Thanks Doctor KSS,great post and article on this terrible disease as usual.I am inclined to start taking a position in this on dips because on EV71 approval this stock will take a nice turn up.Double or triple who knows?But definitly a legit company with a nice future.If you should here back from your source please post.Do you think I am very far off of my evaluation? Cheers,Glenn

Dr. KSS MD PhD
Author
21514
March 10, 2014 2:08 pm
Glenn: I heard back from her. Surprisingly she did not know of them. I honestly had thought she had done business with them as regards clinical vaccine trials, as she heads a committee that oversees a big new cooperative effort for drug trials between Taiwan and China. She has run trials for dozens of mainland companies. She heads this for Taiwan and is quite knowledgeable. That she did not know of them may be a boon, as it implies that even in the Asian world this one is relatively unknown. With the EV71 vaccine that will change. They go from… Read more »
Dr. KSS MD PhD
Author
21514
March 10, 2014 2:39 pm
David B and others: my initial thought about Sinovac ran somewhat along these lines. A thought experiment. And I present this in love and admiration of Asian cultures, as someone who has lived in Asia and as someone formerly married to a woman from Asia. Suppose you asked China, Japan, Thailand, Korea and Vietnam to choose one representative that reflects how their culture thinks. And suppose you called all 5 representatives together. You gave each representative a loaf of bread, and asked them to have at it with a knife. What do you think would happen? Here is my take… Read more »
blackwolf
Irregular
93
blackwolf
March 13, 2014 1:17 pm

Somehow I lost this thread so am logging in again. Thanks to all posters.

David B
Guest
0
March 21, 2014 7:26 am

Sinovac SVA crushed it on earnings and revenue and was up over 16% yesterday. This company is definitely one to watch. Their HFM vaccine will be a blockbuster for them, especially in Asia. They are hitting on all cylinders even without revenue from HFM.

newby3867
Irregular
4579
newby3867
March 10, 2014 3:13 pm

David thanks for looking into SVA also. Post very well said.Cheers,Glenn

David B
Guest
0
March 10, 2014 6:27 pm

Thanks Glenn for bringing Sinovax (SVA) to my attention and thank you for the compliment. I’m glad that I could be helpful.

David B
Guest
0
March 10, 2014 6:34 pm

Glenn, given the changes coming here on Gumshoe and this thread–perhaps you should start an independent thread on Sinovax (SVA). I don’t want to lose track of this one.
Another that is likely worthy of further discussion and consideration is Targacept.

newby3867
Irregular
4579
newby3867
March 10, 2014 10:36 pm

Looks like Travis took care of that David.I will try to post as much as possible on SVA as I am sure good things are on the way for them.I will also look at Targacept.Thanks,David

David B
Guest
0
March 10, 2014 10:43 pm

Thanks Glenn–I saw that most SVA comments had been moved to the Navelliere article that I didn’t realize existed. I will keep on top of SVA as well. There’s a nice Targacept article on SA by an author I like and our favorite Dr. KSS sees very good promise in relation to Targacept and its compounds as well.

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