2015's Top Performers: Jay Silverman

12/30/2015 10:00 am EST

Focus: HEALTHCARE

Jay Silverman

Analyst, Medical Technology Stock Letter

Last January, we featured our annual Top Picks report, highlighting the favorite stocks from the leading newsletter advisors. Here, we talk with one of 2015's top performers, Jay Silverman of the Medical Technology Stock Letter. Last year, he selected two biotech stocks and they have risen 33% and 41%.

Steven Halpern:  Our guest today is Jay Silverman, biotech sector expert and editor of the industry leading the Medical Technology Stock Letter.  How are you doing today, Jay?  

Jay Silverman:  I’m great, thanks Steve.

Steven Halpern:  Now this is part of a special series in which we’re reviewing the best performers from our top pick special from 2015, which appeared on MoneyShow in January. You contributed to picks to last year’s report and both have been extraordinary. Let’s start with Novavax (NVAX), which is up 41%. Can you remind our listeners about your original rationale for picking this stock?  

Jay Silverman:  Absolutely. Novavax is the maker of Novel vaccine and the product in particular here was for a virus called RSV, which is very similar to the flu, but affects both infants and newborn, as well as the elderly.

Novavax has an RSV vaccine, which today looks like it will be the very first RSV vaccine ever approved in the US or anywhere around the world.  That theme held not only sound to our January outlook, but around mid-year things even got better when the elderly trial was successful and the company showed that it could be actually created to be an annual vaccine like a flu vaccine.

That accelerated the program, and since that, in 2015, they’ve already initiated a large 11,000 or 12,000 patient phase 3 trial, which after this current season is completed and the vaccine should be approved probably by 2017 or 2018 at the earliest, so that’s had a very, very good fundamental story.

Steven Halpern:  Now, over the course of the year, the stock has been very volatile.  Is that just something people should expect with biotech companies and is that something you’re just comfortable riding through?

Jay Silverman:  Clearly we like to ride these through because the company’s fundamental story has not only stayed intact, but actually improved. The market, as you are aware of, around the middle of August and into the second half of the year went away from biotech after a three or four-year rally.

And so the valuations, which had peaked in July, have been under pressure, including Novavax, despite all of the fundamental progress I mentioned.  As you know, we have 12-to-18-month target on our initial recommendations, but usually a good idea in biotech should be held for a two-to-four-year period.

Steven Halpern:  You second top pick in our 2015 special was The Medicines Company (MDCO), which is also showing a very strong gain up 33%.  Could you review your original basis of that recommendation?  

Jay Silverman:  Sure. The Medicines Company was basically in a transition period from reliance on a soul drug called Angiomax, which had come under some patent disputes—and possibly going generic—and that was reflected in the stock.  

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We thought management was diversifying away from Angiomax with the approval of about four or five products, which actually occurred the early part of this year. The Medicines Company has also executed quite well, despite the fact that Angiomax has gone generic.  

Not unlike Novavax, in the middle of the year—actually by the end of August—they released data on a new drug for cholesterol reduction, which also shocked everyone and put Medicines Company on another level of potential growth that even we hadn’t predicted back in January.

Steven Halpern:  Now you continue to rate both of these stocks as buys.  Could you walk us through what you see ahead for these two companies looking out over the coming year?

Jay Silverman:  Of course. Again, with Novavax, the RSV vaccine has started; almost 12,000 patients globally participated in this study and that trial just completed enrollment about a week or two ago.

And, as you know, the RSV is very flu-like symptoms which occurs over the winter months, so that is happening as we speak and the trial will be completed sometime by April or May, with the data coming sometime in the third quarter, so we’re looking for, again, the final phase 3 trial, which we believe will be successful.  

For Medicines Company, in addition to the cholesterol drug, which they called ALN PCS, which may one day be what they call a cholesterol vaccine, maybe a shot in your GP’s office twice a year to keep your cholesterol levels low, it’s obviously a potential blockbuster drug.

Medicines Company has also installed a strategic plan to focus on the high value assets such as ALN PCS, another drug for surgical anesthesia, a new antibiotic, and even another cardiovascular drug, which any one of them can take the valuations to multiples of where it is today. This year, in 2016, or next year, we will see data from each of those programs.

Steven Halpern:  Many of our listeners own shares in both of these companies now, based on your recommendations over the past year. But for those who don’t yet own these companies, are you comfortable with people initiating new positions now.

Jay Silverman:  Oh, yeah. We’re actually more than comfortable because the stocks—as well as the biotechs—have taken such a pause, particularly the smaller, earlier stage companies where the drugs are a year or two away from approval.  

Even Medicines Company has pulled back a little bit, but again, their relative valuation and overall net present value to us is incredibly low, and because of the fundamental progress, our buy limits for both are much higher than the current stock price, so we definitely think a new position in either of them or both makes a lot of sense.

Steven Halpern:  Again, our guest is Jay Silverman of the Medical Technology Stock Letter. Thank you so much for your time today.

Jay Silverman: My pleasure, Steve.  Have a Happy New Year.

Steven Halpern: Thank you.  

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