Two Promising Biotech Stocks Under $5, and One to Avoid Like the Plague

Two Promising Biotech Stocks Under $5, and One to Avoid September 26, 2016
By Mark Terry, BioSpace.com Breaking News Staff

In the biotech world, super cheap stocks, those under $5 per share, represent very high risk. But George Budwell, writing for The Motley Fool, points out two that might be worthwhile for investors who are risk-tolerant, while identifying one to avoid.

Amarin Corp

First up is Dublin-based Amarin Corp , which focuses on cardiovascular drugs. The company’s 12-month price target has a 144 percent upside potential, largely based on the success of a clinical trial of its drug Vascepa. Budwell, not for the first time, argues that it’s “grossly undervalued.”

On September 12, the company announced that the independent data monitoring committee (DMC) had finished reviewing the first interim efficacy analysis of Vascepa, and recommend that the clinical trial continue as planned. The trial, which has 8,175 patients, is designed to evaluate whether Vascepa, a highly refined type of fish oil, cuts cardiovascular events in patients who have elevated triglyceride levels despite being on statins.

The Street is projecting that Vascepa sales will probably double over the next two years. The downside, however, is that the company has to figure out how to raise money to fully fund the trial. Budwell writes, “After all, Vascepa’s growing sales don’t appear to be high enough to fully cover the coast of this trial, and REDUCE-IT isn’t scheduled to conclude until 2018. That said, management has enough of a cash runway at the moment to execute capital raises in a judicious manner that should minimize the impact on its share price going forward.”

Amarin is currently trading for $3.04.

Geron

Next up is Geron Corp . Sean Williams, writing for The Motley Fool back in February, noted that it was an all-or-nothing company. The company is conducting two Phase II trial with Johnson & Johnson on its imetelstat. On September 12, it provided updates. IMbark evaluated the drug in intermediate-2 or high-risk myelofibrosis (MF). It determined that the dosage was good and safe, but it need more patients for efficacy data, which is plans to continue to acquire. In its IMerge Phase II/III trial, in myelodysplastic syndrome (MDS) patients, the safety and dosing data was good and will continue unmodified.

Budwell notes that investors and the company are concerned the drug isn’t showing the same level of benefit in its mid-stage trial as it did in earlier pilot studies. “The good news is that imetelstat appears to be producing a more pronounced clinical benefit in MDS, although neither Geron nor J&J provided many details on the drug’s progress in this separate study. Going forward, J&J is expected to provide another clinical update for this trial in the second quarter of 2017, followed by a decision on whether or not to advance imetelstat into a late-stage study of MDS by mid-2017.”

Geron is currently trading for $2.20.

Meanwhile, Budwell is warning investors off MannKind Corp . After months of rumors that its license and collaboration deal with Sanofi-Aventis US for its inhaled insulin product was going to be terminated, it was cut in January of this year. Although it seemed like a great idea that was well-developed for a welcoming market, insurers weren’t going along with the plan.

Budwell writes, “Long story short, MannKind desperately needs Afrezza’s sales to grow at an exponential rate in order to stave off bankruptcy, and that no longer looks like a real possibility without Sanofi’s backing. That’s why investors may want to shy away from this name for the time being.”

MannKind is currently trading for $0.59.

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