Biotech Catalysts

06/22/2015 6:00 am EST

Focus: STOCKS

Jay Silverman

Analyst, Medical Technology Stock Letter

Biotechnology sector analyst Jay Silverman looks at a number of upcoming catalysts that could impact some of his favorite biotech stocks; Here, the editor of the Medical Technology Stock Letter reviews biotech firms that are making progress in Lupus, cystic fibrosis, virus vaccines, and a variety of cancers.

Steven Halpern:  Joining us today is biotechnology sector analyst Jay Silverman of the Medical Technology Stock Letter. How are you doing today, Jay?

Jay Silverman:  Very well, Steve. Thank you.  

Steven Halpern:  Well, thank you for joining us. It’s been a very busy time in the biotech sector lately with some important conferences occurring.  Could you update our listeners on the overall state of the biotech sector and what you see looking out towards the end of the year?

Jay Silverman:  Sure. It has, as Steve said, been an incredibly productive time with new discoveries and breakthrough drugs and I describe breakthrough drugs in two ways.

One is that they’ve been able—in the clinical sense—have been able to do things that traditional small molecule pills have never been able to do in their effectiveness and safety in very, very difficult to treat diseases.  

Cancer was one of the big areas, for sure, and we just had the big ASCO meeting a few weeks ago in Chicago where some of these discoveries and clinical trials were presented.  

Well, you said by the end of the year, the sentiment—which we at the newsletter use as a big gauge—is very high because—not only are the discoveries so novel and really helpful to the patients—they’re actually allowing people with chronic conditions to live a healthy life and a better quality life.

The investors in the sector have both made a lot of money and then the corporate investors like drug companies and biotech companies that have invested in these collaborations have also reaped the benefits. That doesn’t seem to be changing anytime soon.

Steven Halpern: Now, for your favorite ideas in the sector, you pay very close attention to potential upcoming catalysts that might impact the given company. What do you see on the horizon for Anthera Pharmaceuticals (ANTH)?

Jay Silverman:  Yes, Anthera is a company that’s developing a drug for lupus and another drug for nutritional benefits in people with cystic fibrosis. Both of these conditions have existing drugs on the market, but they’re not very good, or they have some particular shortcoming in either how they’re delivered, or some of the data, or the safety.  

Anthera has actually two compounds that are in three different diseases that are in—or about to start—phase III trials; the last one should start in July and they will have all three trials completed and the data released in the second half of next year, so that’s just a little over a year from now.  

For Anthera, we believe that the risk/reward at this valuation is one of the best in a small-cap company that has that many phase III potential successes in a very, very short time frame.  One year in biotech is actually like overnight.  

To us, Anthera still represents one of the best risk/rewards and they just announced that they completed the target enrollment in their first study for lupus patients on their drug.

It’s called Blisibimod, which you could say B-Mod for short, because it’s a B-cell drug that blocks the pathway for the lupus patients and that occurred a little faster than expected, but definitely keeps them on target for their release of the data next year.  

They have a number of catalysts—that you said earlier—that are leading up to the phase III binary events next year. They’ll start the second trial for cystic fibrosis feeding next month and that’ll be a phase III. That’s a drug they licesed from Eli Lilly (LLY) that had enough clinical data and FDA reviews already to put them on the right path for a successful outcome.  

We believe the odds are relatively low there and when you add the two drugs— this one’s called Sollpura and the B-Mod—together, it’s, to me, again, a diversified story now, good management, and the cash to join the trial, and phase III types of answers, and hopefully commercialization shortly thereafter, in a very, very short time and a relatively low valuation in biotech.

Steven Halpern:  Now, another stock on your radar is Ziopharm Oncology (ZIOP). What’s the story here and what are the potential catalysts coming up?

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Jay Silverman:  Ziopharm is an immuno-oncology story; as you know, it’s one of the hardest areas in the investment world and the cancer world today and they are often looked at as, sort of, one of the less visible names out there.  You’ve heard of stocks like Juno Therapeutics (JUNO), Incyte (INCY) and they do, you know, the T-cell therapy.

Well, Ziopharm—in conjunction with Intrexon is their partner—has this year alone formed several value adding partnerships, one with the MD Anderson Cancer Center and the other with Merk Serono, in addition to hiring one of the top MD Anderson scientists to run the company.  

They’re most likely to form one or two more large partnerships before the end of the year. Again, catalysts being some data, and they’ve announced some already, but new partnerships coming up.  

One of the reasons we got aggressive in this recent issue raising the buy limit is that Intrexon (XON), their partner, just this next week is distributing about 17% of the ownership position in Ziopharm as a dividend to the Intrexon shareholders in light of the upcoming potential partnership.

So, that would make the partnership—and any equity related condition—much easier to accomplish, rather than having Intrexon own that position.  

As you know, when people hear a 17% distribution, it causes a short-term overload of supply and that has recently depressed Ziopharm’s shares, but it’s very short-term, as a matter of fact, it’ll be gone in about a week.  

We’ve told people that this is a great time—when you look at the fundamental improvements they’ve made—to buy the stock because it’s been a little depressed here because of the Intrexon dividend.

Recently, both Anthera and Ziopharm had gone a little bit above the MTSL (Medical Technology Stock Letter) buy limit.  Well, both of them now have new information—with Sollpura story for Anthera and the distribution of Intrexon for Ziopharm—that allowed us to raise the buy limits with real fundamental reasons to do so.  

Steven Halpern:  Now, two of your longstanding recommendations, which we’ve discussed in that past, are Novavax (NVAX) and The Medicines Company (MDCO).  We only have a minute, but could you briefly update our listeners on some of the events that you see that might impact these issues?

Jay Silverman: Novavax has two phase II studies for the RSV vaccine, which is their crown jewel, and RSV (respiratory syncytial virus), as you know, is like the flu, but really hits babies and premature infants and the elderly.  

It’s become much more prevalent because of the new test by Cepheid (CPHD) that rapidly diagnoses RSV in the elderly, which, in the past, people thought they had the flu.

Those will be finished and then data released probably in the third quarter, probably July, so their big catalysts are coming up.  As for The Medicines Company, they have a number of catalysts, but most imminent are an approval for a platelet drug.

Again, that is their strong position in the catheterization lab. It’s a platelet inhibitor, so it stops bleeding during cardiac catheterization procedures and that FDA producer date is the 23rd, so it’s a week or so from now. So, there’s one.  

Finally, The Medicines Company is waiting for the final decision from the courts on their Angiomax patent, which has really kept the stock under pressure for the last year or two and I think, regardless of the outcome, most people—including us, believe they lose the patent—are waiting for that to just get over with, get done with, and buy the stock.  There are two major catalysts from MDCO and two for Novavax.  

Steven Halpern:  Again, our guest is biotech expert Jay Silverman of the Medical Technology Stock Letter. Thank you for joining us today.  

Jay Silverman: Great, thanks Steve.

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