Catalysts in Biotech

08/19/2016 10:00 am EST

Focus: STRATEGIES

John McCamant

Editor, Medical Technology Stock Letter

Biotech expert John McCamant, editor of The Medical Technology Stock Letter, updates us on the state of the sector, the primary catalysts he see over the rest of the year, and a trio of favorite stocks poised for potentially exciting results.   

Steve Halpern:  Joining us today is biotechnology sector expert, John McCamant, editor of the Medical Technology Stock Letter.  How are you doing today, John?

John McCamant:  Great, Steve.  How are you?

Steve Halpern:  Very good.  Thanks for taking the time.  Now, before we talk about the sector and individual stocks, I'd like to let our listeners know that you'll be a featured speaker at the upcoming San Francisco Money Show at the end of the month.  Could you give us a brief overview of what attendees can expect from your workshops?

John McCamant:  Certainly, Steve.  We're going to probably, for sure, we're going to run through the fundamentals of biotech investing, top to bottom.  I'm not going to be exhaustive, but the exact types of things we're looking for, types of drugs, where they are in development, and maybe what's the regulatory outlook.

But most importantly, we're going to discuss a few specific names, probably one of the ones that we'll be discussing here later today, as far as catalysts or stocks that we believe have a significant potential in a second half of 2016, with an emphasis on catalyst, Steve.  

It looks like we're into a stock picker's market, and that means you really do need to have specific events to get to really show some appreciation.  

Steve Halpern:  Now, biotech in general is a volatile sector, and has been that way for decades, but it seems the past year or so has been even more of a roller coaster than is typical.  Could you bring our listeners up to date on some of the developments over the past year that might account for these big swings in and out of favor.

John McCamant:  Bigger picture, you also would look.  Technically, we had a three year, at least, significant bull market in biotech, and a three to one ratio on particularly the big moves.  

Almost a full year of a bear market, as painful as it has been, does make sense, technically.  In addition, we haven't had that pure catalyst, a new blockbuster drug.  

We had the HCV cures.  We had Imbruvica, the best cancer drug, maybe. The big buyout by AbbVie (ABBV).  Haven't had these major events that really point out the huge promise of biotech, so those are some of them.  

No major buyouts.  We've had some good ones so far, but the high profile is yet to happen, and also those two or three that might happen in a row, that really point out potential undervaluation in the space.  

We think those are all kind of moving forward, and one of the things we've been saying, Steve, is the bid and ask has been far apart after the big moves of the previous three years, and the big pull-back, so the buyers and the sellers can't quite agree on prices that we've seen with companies like BioMarin (BMRN) and Medivation (MDVN), that are clearly in play now.

Steve Halpern:  Now, looking ahead, what's your general outlook for the space, and maybe you can highlight a few of the catalysts that you see that will be driving the overall action in the biotech area.

John McCamant:  Well, specifically, it's "back to school", as crazy as it may seem.  It's middle of August, but the kids are starting to go back, and this creates a whole other environment for the biotech, and also the stock market.  

We have a lot more conferences coming up, investor conferences in New York, scientific conferences; but we're looking for something like what's coming for Novavax (NVAX), a phase three trial in a large market.  

This is the RSV vaccine.  We believe it has multi-billion-dollar potential as a blockbuster vaccine.  Positive data here on this type of trial, Steve, would be one of those.  

We didn't even really know about RSV.  Is this coming to market?  What is this potential?  Also, shows really what biotech companies do.  We can create new products that address unmet medical needs and literally can create new market opportunities.

Steve Halpern:  Beyond Novavax, you are also remaining bullish on Anthera Pharmaceuticals (ANTH)?  What's the story here, and what potential catalyst could impact the shares?

John McCamant:  Anthera has two specific catalysts.  The first one would be Blisibimod and lupus patients.  We expect that data, quite possibly, which is a major meeting of the American College of Rheumatology; that's in the middle of November.  We could have that data beforehand.  

Also, they have we think almost an easier phase three with a solution trial, which is basically an oral enzyme replacement in cystic fibrosis patients, so we're just going for n equivalency trial.  This could potentially be a much easier phase three.

And with two phase three assets, and basically sub-$150 million market cap, and with very strong management team, we think Anthera is poised for some big moves on good data, and we've seen some stock, despite the biotech bear, Steve, have some very good moves when they deliver phase three data.  

Steve Halpern:  Now, finally, let's look at Ziopharm Oncology (ZIOP), a stock that's probably below the radar of most investors.  What do you see here that the market isn't aware of?

John McCamant:  Well, they put together an awful lot of tools, or different ways of going after what we're calling personalized cancer therapy, initially, which is the CAR-T, where they take T-cells out of your body, genetically engineer them, reinsert them to go in and attack the cancer.  

While we're seeing some specific successes, they're potentially very toxic, and are only going to be used on a small set of patients, and would be very expensive, but the proof of concept is very important.  

Ziopharm is creating second-generation CAR-Ts, particularly ones that we believe have the potential to be used off the shelf, so they're not personalized, and can be directly injected into a wide variety of cancer patients.  They have one of the world's leaders running their company now.

His name is Dr. Laurence Cooper and he came out of MD Anderson, and is clearly one of the world's leaders in immune oncology, and understands a lot of what it's going to take to get to these second and third generation products, where we can actually create gene therapies that'll be broadly addressable.  

They have their hands in multiple different tools, including they have an IL 12 direct gene therapy, which is looking very interesting in brain cancer, that's completely untreatable.  They've tried all the other current drugs, and they failed those.  Very short life expectation.  

We believe that we're going into a registration trial next year for that, Steve.  That would be basically a trial that, if it's approved, this drug could be on the market by the end of next year, plus all of these other kind of really exciting second generation pipeline opportunities, and another partnership we expect.  

They did a large partnership last year with Merck KG, the German Merck, and they'll also do a PDL 1 partnership, which has been in the news a lot lately, with the failure of the Opdivo data in lung cancer.  

We're looking to create more and more combinations with those in these first generations of immune oncology drugs that are making a tremendous difference, Steve, but we're going to need additional drugs to combine with those to make them more powerful.

Steve Halpern:  Again, our guest is biotech expert, John McCamant, of the Medical Technology Stock Letter.  Thank you so much for your time, today.  
John McCamant:  My pleasure, Steve.

Editor’s Note: John McCamant will be a featured speaker at the upcoming San Francisco MoneyShow, August 23-25. He will offer workshops on assessing the fundamental and regulatory outlook for the biotech sector with a focus on upcoming catalysts that could lead impact his top stock ideas. To register, click here.

By John McCamant, editor of The Medical Technology Stock Letter

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