Since we posted the latest stock idea from our own biotech maven Dr. KSS yesterday, I couldn’t help myself — had to take a look at the biotech pitch being made by the Money Map folks who are launching their BioScience Millionaire service.
But I don’t really have any time, and God knows I ain’t no expert on no science’y stuff — so I’m just going to go quickly through the stocks they’re teasing for you and let you at ’em to do your own research (and share with the rest of the class, of course).
I’ll be on vacation for the next week, so this is your bonus note so you don’t forget about your favorite Gumshoe while I’m gone … then I’m moving on to finishing up my “Idea of the Month” piece for the Irregulars (should come out tonight). After that, it will be ten days of occasional guest articles and your delightful discussions amongst yourselves… unless we hit a patch of teasers that are so enticing that i have to come in off the beach and get to the keyboard.
Since I’m not excerpting much or going through the details, you might want to have a gander at the actual ad — it’s here.
And it’s all about how Ernie Tremblay is an expert on drug discovery, and can decipher the science and talk to the doctors and get the inside skinny, then take the drugs that are making their way through Phase 2 and 3 FDA trials and make recommendations to trade them based on big moves the stocks should make around certain dates.
The volatility of biotech stocks around particular dates isn’t new to anyone who really follows biotech, there are thousands of analysts and investors trying to track biotech stocks and the dates on which they are expected either to have decisions from the FDA, to announce filings with the FDA, to have advisory meetings called by the FDA, or even to present at conferences and release new data about ongoing trials. For these development-stage companies, earnings announcements are usually an afterthought — it’s all about the clinical trials and FDA actions and whether their drug actually works and gets approved (and, sometimes, about how expensive the clinical trial process can be — and how often they have to raise more money by selling more stock).
It’s a flood of information, and there are hundreds of viable publicly traded companies who are active in fairly late stage drug development, so having a person who can track it all and make good recommendations is obviously of value (I personally have no idea whether Ernie Tremblay is any good at this or not, this is apparently a new letter they’re launching).
And they say there are hundreds of dates on his calendar already, of course, but there are some urgent ones that are coming up soon (there’s always urgency in a newsletter pitch — otherwise, why subscribe?). So I took a quick look at the hints regarding the first teased stocks:
“I want to talk about three opportunities that I believe are slam-dunks for substantial calendar gains in the coming weeks.
“The first one’s coming up fast – April 25th. And I expect a big pop…Are you getting our free Daily Update
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“And as it takes off, we could be looking at as much as a 36-to-1 gain, or better.
“The market potential for this company’s new drug is huge. And I mean, really, really, huge.
“You see, according to the American Heart Association, there are 24 MILLION Americans who should be taking aspirin to prevent the recurrence of heart attack or stroke….
“Problem is regular aspirin use can lead to serious gastric ulcers. So a substantial number of people can’t follow their doctor’s advice….
“This company’s new drug appears to be the solution.
“It combines the blood thinning benefit of aspirin… along with a powerful proton-pump inhibitor drug, proven to help prevent the stomach problems regular aspirin can cause….
“It’s already the same pump inhibitor being successfully used as a co-ingredient in ANOTHER drug the company ALREADY markets….
“… this new drug combination has gone through two Phase 3 trials, as well as a long-term safety trial, and they both show clinically significant benefits.
“That’s why when they come up for FDA approval in April, I’m confident they’ll give us a nice “price pop” almost immediately.”
So who is it? This is Pozen (POZN). The drug they already market is VIMOVO, the combination of naproxen and esomeprazole. The new drug they’re expecting a PDUFA date on of April 25 is PA8140, which apparently is aspirin and omeprazole.
I know nothing and have not looked anything up, other than to tell you that POZN is a small $250 million company with a few approved products and a bit of revenue ($10 million last year).
Ernie paints a crazy rosy picture:
“So let’s run through the numbers real quick…
“Twenty-four million potential patients… just in the U.S. alone…
“Let’s say 20% of them end up on this drug regimen – at a monthly dosage cost of $120…
“That’s the potential for $6.9 billion in sales.
“If the current exclusive licensing agreement – already in place, by the way with a major drug marketer – pays them even half that, it would mean over $3 billion in revenues from this drug alone.
“If we take the industry median net profit margin of 7.5%, that equates to $225 million in earnings one year from now, or $7.37 a share.
“Apply the industry average PE, just the average, of 40, and that would give us a price target of $295.
“That’s a staggering 3,632% upside.”
So I’ll leave you to speculate on whether or what the April 25 response will be, and what that will mean for the stock. I dunno.
(April 25 is the PDUFA date — if you don’t know what that means, it’s the Prescription Drug User Fee Act date, the date by which the FDA is supposed to respond to a New Drug Application (NDA) submission by a company… under that act, which passed about 20 years ago and has been amended and reauthorized a few times, the FDA essentially won the right to collect fees from applicants in exchange for streamlining and clarifying the timeline for the approval process, the general dates are 10 months from NDA submission for regular review, or six months for priority review. The response doesn’t always come out exactly on the deadline, it’s often earlier and occasionally later).
“Let me tell you about this NEW recommendation. Here’s the story in a nutshell.
“Back in November of last year, the FDA accepted a new drug application for a PRIORITY REVIEW of this company’s drug….”
[So that’s that means the six-month clock started ticking for an FDA response]
More from Ernie:
“And the serious condition THIS drug targets is called ABSSSI. That stands for ‘acute bacterial skin and skin structure infections.’
“The one that gets the most attention – the one you’ve probably heard of – is called MRSA….
“According to the Center for Disease Control and Prevention (CDC), two million people contract these infections every year, and 23,000 die from them….
“… there are a several companies developing drugs to treat ABSSSI. So what makes our company’s treatment superior?
“A number of studies demonstrate that it’s as safe and effective as the current standard of care, intravenous vancomycin, but with one major advantage:
“It’s administered only once a week over a two-week period.
“Vancomycin, on the other hand, must be given every 12 hours over the same period.
“That’s an enormous advantage in terms of patient comfort, cost, compliance, and exposure to side effects.
“More than 90% of patients who showed response within 72 hours of the first treatment were ultimately cured.
“They also showed fewer side effects than with vancomycin….”
When’s that “calendar date” for this one” Tremblay says May 26, at which he expects to hear about approval of the drug, with the stock probably rising before and after approval.
So who is it? This is Durata Therapeutics (DRTX), which is essentially a $300 million one-drug company waiting for approval of its Dalvance drug (dalbavancin), which does seem likely to hit a huge market if it is approved. I don’t know if the drug is partnered or anything, or, really, anything else about the company — but our own Dr. KSS was very positive about them back in February, the stock is down about a dollar since then, along with all the other swooning biotechs, and has since gotten unanimous approval from an FDA advisory panel.
Tremblay’s pitch for the potential share price appreciation is huge again:
“There are already 3.3 million potential patients for this drug. But just to play it safe, let’s assume only a fifth of them take this particular treatment.
“At a cost of $2,800 per patient, that adds up to $1.85 billion in first-year sales.
“Once you account for operating expenses – and corporate taxes, of course – net income ends up at $137.8 million or $5.17 a share.
“Apply a ‘closest peer’ price-to-earnings multiple to the bottom line, and you’re looking at a stock price of $258.74.
“Right now, it’s only $15 a share. So you’re looking at what could be a 1,664% gain at its highest.”
“I’ve been following this company’s work for YEARS, actually. And it’s finally time to move on it…
“The company’s next key meeting is scheduled for September. And the results could be huge, based on my research.
“This company’s drug deals with… yes… constipation. Not EVERYday constipation, which can be treated with over-the-counter medicine…
“I’m talking about the kind that people get from taking any kind of pain narcotic.
Around the world an estimated 35 million people suffer from this affliction….
“It’s called OIC, for ‘opioid induced constipation.’ This is the most prevalent serious side effect of opioid use.”
So what does the drug do? Here’s what Ernie says:
“… this little company has developed a once-a-day tablet that keeps narcotics from binding with opioid receptors in the gastrointestinal tract… But it also allows them to continue binding with receptors in the BRAIN, where the painkilling effect occurs.
“We’re very close on this one.
“Two Phase3 trials proved the drug works.
“Another trial has shown it is very safe.
“Based on the strong results, the FDA has accepted the company’s New Drug Application and simply awaits the recommendation.”
So who is it?
Thinkolator sez this one is Nektar Therapeutics (NKTR), which is a bit bigger company and has a few more things in the pipeline — this is a billion-dollar company that just raised another $100 million earlier this year and also has a few fairly advanced cancer, anti-infective and other drugs in the pipeline, but their lead drug in development right now is indeed a treatment for OIC — it’s called Naloxegol, the PDUFA date for that one is September 16.
Haven’t looked at this one, but Nektar is one of those “platform” companies that also licenses its technology to other developers, and most of their drug candidates (including Naloxegol) are partnered, so they do also get royalty income. Not enough to make them profitable this year (or next, according to analysts), but they do have some meaningful revenue.
And Tremblay’s blue sky predictions for the stock price? As always, take these with a grain of salt (they are, after all, trying to sell you something), but this is what he says:
“17 million potential patients…
“An average treatment program of 12 weeks – at an estimated cost of $336 per week, or $4,032 per patient.
“If doctors prescribe this treatment to just 20% of the prescription narcotic users who could benefit from this new drug – you’re looking at a potential $13 billion jump in revenues.
“Using the average industry net profit margin of around 12%, my price target for this little company is $416 a share…
“That’s a peak 2,958% upside from current levels – enough to turn a small $5,000 play into over $150,000.”
After that, you’re on your own — I don’t think Dr. KSS has every written about that one, and I’m quite sure I haven’t. let us know what you think with a comment below. I don’t own any of these.