zzlangerhans (99.78)

More bottoms for the grabbing

March 24, 2011 – Comments (12) | RELATED TICKERS: CYTK , CLDX , PYMXD

I've been cautiously accumulating a few of my bottom stocks in the last couple of weeks. I picked up 3000 Biocryst shares at 3.5, and renewed a position in Alnylam with 2000 shares at 9.5. I'm particularly pleased with Alnylam since I already made $1200 or so on the stock and reacquired it at a lower price. At an entry price of 9.5, the market cap was 400M with cash reserves of 350M as of December 2010 according to latest earnings. That's a lot of lift. I'm looking at Nektar closely but I'm not convinced downward momentum is done, and I'm actually in danger of running out of cash in my brokerage accounts. That's not a good thing when I feel that the market is primed for a correction. Despite the plethora of GBMB opportunities on my watchlist, I'm still findings more from my 250 company database.

Cytokinetics (CYTK) - market cap 91M, share price 1.36. Cash 73M, debt 1M, burn 8-12M. The share price here has been bouncing downhill so rapidly that it's hard to make it a GBMB stock. Who knows where the decline will end? I'm surprised to see Cytokinetics sub-100M considering they were a biotech darling not very long ago. Their fall certainly hasn't occurred in a vacuum. Since the failure of their KSP inhibitor oncology program, they've had a highly specialized "muscle activator" pipeline comprising two compounds in clinical trials. CK-2017357 is a dubious proposition currently in multiple "Evidence of Effect" trials in various illnesses characterized by muscular dysfunction. These might be more appropriately called "Dicking Around" trials, since it appears they're just throwing the compound around and seeing where it sticks. Discouraging results in ALS likely had a large role in the recent downward trajectory in share price. The company's bright spot is myosin activator omecantiv, which is on the launching pad for a phase IIb trial in CHF with partner Amgen. The other bright spot is cash, which virtually ensures that Cytokinetics will enjoy more cycles of advance and decline. With an enterprise value of 18M, I expect the stock to rise once the phase IIb trial kicks off. The recent low was 1.25 and I'd buy in here with stabilization below 1.3

Celldex (CLDX) - market cap 124M, share price 3.88. Cash 61M, debt 14M, burn 7-10M. The stock enjoyed a nice run over 9 before ASCO in 2010, but a combination of underwhelming phase II data for glioblastoma drug rindopepimut and Pfizer's decision to terminate their collaboration on the drug have thrown the share price into a sub-4 hole from which they haven't recovered. The company now targets initiation of a pivotal phase III trial of rindopepimut in GBM for H2 2011. Aside from rindopepimut, the company has a fairly robust pipeline of anti-neoplastic compounds in earlier stages of clinical development that could produce catalysts in 2011. The share price has recently been relatively stable with lows around 3.45. I expect the share price to journey northwards after the initiation of the rindopepimut phase III trial, but due to uncertain effectiveness of the drug I would like to see the share price back below 3.5 before a GBMB buy.

Polymedix (PYMX.OB) - market cap 68M, share price 0.84. Cash 19M, debt 10M, burn 4M. This is the first OB stock in the GBMB, so all the typical disclaimers apply. With two compounds in clinical development, reasonable cash, and a controlled burn Polymedix might prove to be a diamond in the rough. A phase II trial of anticoagulation reversal agent PMX-60056 was recently initiated. Peptide antibiotic PMX-30063 is currently in regulatory limbo in the US as the company awaits more clarity from the FDA on changes in guidance for phase II trial design. However, a controlled phase II study in skin infections is in process in Canada. Antibiotic development and stock strength have rarely gone hand in hand in recent years, but PMX-30063 acts via a completely novel designer mechanism. This makes it more of a "Me First" antibiotic than one of the "Me Too" drugs that have proven to be a weight on pharma pipelines as the FDA has tightened their approval requirements. The share price has been volatile over the last year and the low point was 0.74 in September, from which it quickly reascended. Over the last month the stock has performed weakly, but I suspect near-term equilibrium will prove to be closer to 1. Due to the uncertainty of dealing with an OB stock, I would hesitate to purchase shares above 0.8.