The following was originally published, along with this companion article, in late February. Louis Navellier is again pushing exactly the same ad teasing the same three biotech stocks, over the last three months two of them are down and one of them has popped up by about 30% (it was, of course, the one that least impressed me that did the best). We reprint this here for those who are asking about the teaser pitch, the companies are still similar with little in the way of dramatic news in the interim, but the following article has not been updated or revised in any way since February 26.
Yesterday I promised to follow up on Louis Navellier’s biotech picks — these are three stocks teased and hinted at in the latest promo for his Emerging Growth newsletter.
The first one, covered yesterday, was a Chinese vaccine company called Sinovac (SVA) — no stranger to the world of Gumshoe, but not a favorite of mine personally, despite their pretty solid and presumably recurring business in some core vaccines in their home country (influenza and Hepatitis A and B, mostly).
So what else is he pitching? Well, I already let the cat out of the bag on number two, but we’ll run through the clues anyway …
“Our #2 Biotech Winner of 2014 is a royalty powerhouse with one of the largest and most diversified portfolios in the industry.
“Last year was its ‘break-out’ year—two approvals, 6 Phase III results filed, two orphan designations and a whopping 20 net assets added to its portfolio.
“And 2014 is going to be even better—with revenue generating drugs expected to double over the next year.
“Not to mention that this company has a whopping $700 million in milestone payments from existing deals… Plus, another $800 million in projected R&D investment by its partners over the next year… With more than 80 clinical trials to be run in 2014… And royalties for its current assets are projected to exceed $2.2 billion over the next three years.
“That’s a whole lot of big numbers for an overlooked stock that still trades at just a $1.3 billion market cap.
“This may be our next 600%+ winner, just like Santarus last year, particularly since it keeps taking shots on goal.
“Its latest drug is a novel new diabetes treatment with blockbuster potential. Before that, curing hot flashes. Before that, a treatment that cleans the toxic ‘plaque’ that causes Alzheimer’s disease….
“So with the company’s revenue doubling and its stunning earnings numbers, I expect it will keep racking up the regulatory approvals and handing us smooth and steady gains through the year ahead.”
So that one, which may have come quickly to mind for Gumshoe readers if only because Navellier borrowed the company’s “shots on goal” phrasing, is Ligand Pharmaceuticals (LGND). That was our “Idea of the Month” for the Irregulars back in June, and it does indeed seem like the kind of stock newsletters would love to tease — it’s shareholder-friendly, with big margins and few employees, it uses other peoples money to advance its own business, and it has catalysts for potential growth.
That doesn’t make them stand out among royalty companies — that’s the basic idea of a royalty business, after all — but there aren’t really any other strong, decent-sized pharmaceutical royalty companies that are publicly traded (at least, not that I’m aware of). Ligand has built a large portfolio of compounds that are partnered with big pharma and biotech companies for development, and those compounds require no further investment from Ligand. If they get through to approval after lengthy and expensive clinical trials (yes, LGND partners really are expected to spend $800 million advancing those compounds this year, in 80 different clinical trials), then Ligand gets a royalty on the sales of that product. The royalties vary greatly, some are down around 1%, a few are much higher — including Ligand’s most valuable product, Promacta, which is marketed by GlaxoSmithKline (GSK is also actively trying to expand the label for Promacta, with several clinical trials). The second most valuable product, Kyprolis, a cancer drug marketed by Amgen now, is also the fastest growing — but has a lower royalty rate.
The reliance on Promacta is slowly declining, though it will be the biggest revenue chunk for a while, and the