Top Picks Mid-Year Winners: Jay Silverman

07/06/2015 10:00 am EST

Focus: STOCKS

Jay Silverman

Analyst, Medical Technology Stock Letter

In January, MoneyShow asked all of the nation's leading advisors to select a favorite stock for 2015. In this special series of interviews we are talking with the five advisors who had the top performing stock picks as of mid-year. Here, we talk with Jay Silverman, editor of The Medical Technology Stock Letter, to discuss a top performing biotechnology company.

Steven Halpern:  Our guest today is Jay Silverman, Biotechnology Sector Analyst and editor of the Medical Technology Stock Letter.  How are you doing today, Jay?

Jay Silverman: Very well.  Thanks Steve.

Steven Halpern:  In January you chose Novavax (NVAX) as your favorite stock idea for 2015, and since then, it’s risen over 90%, making it the number one performer from among over 80 ideas in our annual top picks feature. Congratulations are most definitely in order.  

Jay Silverman: Thank you.

Steven Halpern:  First, can you tell our listeners a little about the company and remind them of your original rationale for picking this stock as your favorite for the year.

Jay Silverman: Sure.  Novavax had been a public company for some time and over the last five years they have been working on a vaccine—they are a vaccine-based company—for RSV, which many of you know is sort of like the flu virus.  

It happens the same time as the flu occurs, and in many times, affects premature babies, infants, and the elderly. The predecessor of this vaccine was a drug called Synagis that was developed at MedImmune, which was acquired by AstraZeneca (AZN).  

Well, MedImmune and their team have basically migrated down the street to Novavax since then and they’ve created what we call, "Son of MedImmune" or "Son of Synagis" with the vaccine, and so far, there are no vaccines available for RSV, but they are on the cusp of new data coming in the third quarter for their RSV vaccine.

Steven Halpern:  Could you walk us through some of the developments at the company since it started the year and explain what accounted for the strong gains? I guess part of what you’re saying is that this strength is in anticipation of better news to come.

Jay Silverman:  Correct. Historically, when we look at one kind of investment in the Medical Technology Stock Letter, we take a 12- to 18-month horizon.  

When you look at the true returns of a great biotech investment, it usually takes two years before the approval of a drug and two years after, so this four year period could be incredibly lucrative.  

We started being aggressive on Novavax in the beginning of 2013, so we’re about two years into that time frame, so far. In 2014, they started four clinical trials that are currently underway and all the data will be released in the third quarter starting July.  

Two of those are in the RSV vaccine. One is in a flu vaccine, which investors more recently are becoming aware that this could be incredibly valuable.  Lastly is the Ebola virus vaccine, which, as you know, made a lot of headlines earlier in the year.  

This year the new emergent drivers of the stock were the Ebola vaccine, the flu vaccine, and the fact that they are very, very close to their RSV vaccine data.

Steven Halpern:  It sounds like you remain optimistic on this stock.  Would you still consider it a buy even for those who have not bought it yet?

Jay Silverman:  Yes, of course.  We actually recently raised what we call our buy-limit in our newsletter from $6 to $11, because the stock was starting to reflect some of the success of the clinical data, and more importantly, investors are starting to not only think that these might work, but how commercially successful they may be.

When you throw in Ebola—which wasn’t around back then—we believe that we’ve taken our discount rates down a little bit and increased our buy-limit to $11 and our target to $16.  

We’re right at the cusp about $11 right now.  We would still buy it today.  We still think the data is going to be good and that—over time—this is going to be one of the better biotech stocks.

Steven Halpern:  Looking out towards yearend, perhaps you might briefly touch on another idea or two that you believe will warrant investor attention at the current time.

Jay Silverman:  Yes.  Another small one, which we’ve had success with this year, but we still believe is just starting.  

As we mentioned earlier, there is a two-to-four year time frame we look at. We’re not even in more than the first six months of this investment, which is Anthera (ANTH).

They are developing a drug for lupus and another drug for nutritional benefits for patients with cystic fibrosis. Like Novavax, they were a discarded stock in the past.  

When we first recommendation Novavax nobody liked the management, nobody liked the pipeline, and they hadn’t really delivered. They were all but forgotten.  

We love getting stocks that have a fundamental positive outlook, but the investor base and the sentiment is so negative that we can get in early.  We did that a little with Anthera this year and I still think—while it’s had a good run this year— that there’s a lot to go there as well.

Steven Halpern:  Again, our guest is Jay Silverman of the Medical Technology Stock Letter. Congratulations on being the top performer—as of mid-year—in this year’s annual Top Picks report.

Jay Silverman:  Thank you Steve.  Have a great weekend.

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