Five Prime: Biotech Wild Card

04/19/2016 7:00 am EST

Focus: STOCKS

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Biotech stocks are often volatile, and clinical-stage firms – like our latest recommendation -- which doesn’t have a candidate pharmaceutical compound in late-stage trials, are especially so, explains Mike Cintolo, editor of Cabot Top Ten Trader.

The attraction for investors in Five Prime Therapeutics (FPRX) is its collection of 5,700 complete proteins from over 100 distinct human tissues, which includes the vital 5-prime end of each protein.

This collection includes the proteins that form the basis of successful treatments for diabetes, cancer and arthritis, which Five Prime believes validates its approach to treatment development.

Five Prime’s FPA008 and FPA114 drugs are in early stage trials against various cancers. A third drug, FP-1039, which successfully completed Phase 1 trials has been licensed to GlaxoSmithKline (GSK) for commercialization.

The company also has an active immune-oncology discovery program using its protein library.

The October announcement of a $1.7 billion deal with Bristol-Myers Squibb (BMY) put $350 million in Five Prime’s treasury, with up to $1.4 billion on the table if developmental and regulatory milestones are met.

The two deals with big drug companies have improved investors’ outlook on Five Prime’s probability of success. This is still a speculative investment, but it has a solid basis for investors’ enthusiasm.

FPRX is still young, coming public at $13 in September 2013. The stock made a nice run to $28 in late 2014, but then meandered back to $15 by October 2015.

The big October payment from Bristol-Myers Squibb showed up in the 4th quarter boosting revenue by 7,714%; this news powered a run to $46 by the middle of December and new highs recently.

If you have a space in your portfolio for a wild card, you can try to buy a small position in FPRX on pullbacks somewhere around $43, with a tight stop at $39.

Subscribe to Cabot Top Ten Trader here…

By Mike Cintolo, Editor of Cabot Top Ten Trader

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