Small cap biotech: The GOOD (part II)
December 22, 2008
– Comments (10) |
RELATED TICKERS: CVTX.DL
, LGND
, VPHM
I've been remiss in keeping up with my good biotechs, and I've been punished by seeing 2 or 3 jump up almost 50% as I procrastinated recommending them. I found three which haven't gained that much in the last two weeks to get me to the halfway point of the theme.
CV Therapeutics (CVTX): CV has been flying under the radar since losing most of its market cap in 2006 due to pessimism about the commercial future of their anti-anginal drug Ranexa. But I’d like to submit a string of numbers: 15,18,21,22,25,30. That’s not next week’s lotto winner. Those are the last 6 quarters of Ranexa revenues, in millions. Furthermore, that nice steady increase all occurred before recent EMEA approval of Ranexa, FDA approval of Ranexa as a first-line anti-anginal, FDA approval of expanded Ranexa labeling as an anti-arrhythmic and anti-diabetic agent, and the initiation of an aggressive marketing campaign. I haven’t seen guidance for 2009 Ranexa revenues, but my own uneducated guess is 150-180M. Additional CV positives are FDA approval of the imaging agent Lexiscan and the immediate sale of 50% of US royalty rights for 175M, and a licensing deal for Ranexa in Europe that includes 70M up front. My main concern about CV is their significant debt and negative shareholder’s equity, which I believe are mitigated by the recent substantial deals which have not yet been recorded on the balance sheets. The current share price is virtually the same as the beginning of 2007 when Ranexa was weak and Lexiscan was a wild card. CV Therapeutics, GOOD at 9.1.
Ligand Pharmaceuticals (LGND): Ligand stock has been on a fairly steady downward decline over the last two years, but appears to have reversed that trend since FDA approval of the ITP drug Promacta in 11/08. Earlier this year the share price was at 3.6 after a positive advisory panel vote before eroding to as low as 1.27 prior to approval. Needless to say, 1.27 would have been a nice entry point but I feel that the stock could potentially return to the double digit figures last seen at the beginning of 2007. Promacta is already licensed to Glaxo, who appear to be positioning themselves for aggressive marketing of the drug. An additional potential short-term positive catalyst is the PDUFA for Fablyn for osteoporosis, which is licensed to Pfizer, in 1/09. As with Promacta, the FDA posted rather negative briefing documents which were followed by a positive advisory panel vote. Déjà vu, anyone? Other NDAs are planned in 2009, and the company recently invigorated its pipeline with the purchase of Pharmacopoeia at a bargain basement price. Numerous positive developments for Ligand this year in the face of overwhelming downward pressure on the share price. Ligand Pharmaceuticals, GOOD at 2.6.
ViroPharma (VPHM): Like Ligand, part of the buying opportunity for Viropharma may have already passed. The stock was a spectacular buy under 10 with the broad market instability in October, although no one could be excused for not wanting to buy any small cap biotech stock at that time. And in fact, ViroPharma still appears to have a lot of upside potential at its current price. Their bedrock business is the c.diff antibiotic Vancocin which has outsold analyst estimates with no immediate threat of generic competition. The most positive development of the year was the acquisition of Lev and subsequent approval of Cinryze for prophylaxis of hereditary angioedema. The company plans to market Cinryze at $4000 a dose on a schedule of 90 doses a year, and a target population of 1000-2500 patients. That would provide annual revenues of 400-1000M. Think the insurance companies won’t pay? Check out a drug called Soliris, a company called Alexion, and the revenues and stock price of a company called Alexion. The wild card is topline phase III data for Marabivir to treat CMV in transplant patients, expected in Q1 2009. I might defer buying the stock now pending the Marabavir data, and then jump in with a disproportionate drop if the data was negative. Regardless, I think after a year the stock will be substantially higher once Cinryze revenues begin to hit the books. ViroPharma, GOOD at 12.9.
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