February 3, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Tarrytown, N.Y.-based Regeneron Pharmaceuticals, Inc. is clearly a stock to watch, with its 32 percent share increase in 2015. But, as Brian Feroldi notes in The Motley Fool, the idea is to buy low and sell high, not buy high. So for those interested in biotech stocks, Feroldi discusses three other biotech companies whose stock he thinks are flying under the radar.
Regeneron has actually been on a recent downturn, with shares trading currently for $409.89 per share. On Aug. 5, 2015, shares traded for $592.40, dropped to $451.82 on Sept. 29, jumped back on Nov. 18 to $587,09, and on Jan. 28, 2016, traded for $415.11.
Some of that jumpiness is related to inaccurate and basically non-existent information found on the U.S. Food and Drug Administration (FDA)’s Adverse Event Reporting System (FAERS). FAERS collects data from doctors and patients about possible drug side effects.
Some investors accessed it using the Freedom of Information Act, saw data showing that eight patients on the company’s cholesterol drug, Praulent, committed suicide, and spread the news. The data, however, was false. Only one suicide was reported and that single report was repeated for a total of six reports. The FDA also stated there was no apparent link between the suicide and the use of the drug at this time.
In addition, the seventh report was a duplicate of the first, and the eighth report was a separate suicide on a patient that never received Praluent.
So otherwise, Regeneron’s eye disease medication Eylea is selling very well and receiving approvals for expanded use, Praulent is expected to increase sales significantly, and an analyst predict its profits will grow by almost 21 percent annually over the next five years.
Feroldi writes, “Despite my bullishness, I’m willing to admit that with shares trading for 31 times its expected 2016 profits, Regeneron’s shares are fetching a premium price.”
As a result, he suggest there are some better deals out there, citing Vertex Pharmaceuticals , Medivation , and Jazz Pharmaceuticals PLC .
Based in Boston, Vertex’s business model has been the focus of a Harvard case study. It reluctantly took a small grant from the Cystic Fibrosis Foundation and spun it into a very successful development program. The CF Foundation offered California-based Aurora Biosciences, which was acquired by Vertex in 2001, a $500,000 grant to look for a CF drug.
The result was Kalydeco, launched in 2012. Last quarter Kalydeco raked in $165 million, growing 31 percent. Kalydeco was recently granted label expansions, and the company has another CF drug, Orkambi, which has just hit the market. Analysts think Vertex’s revenue could more than double to $2.3 billion this year. Vertex is currently trading for $90.98., down significantly from its Aug. 19 high of $141.48.
San Francisco-based Medivation, Inc. (MDVN), Feroldi says, had sales that increased 30 percent in the most recent quarter. The company’s prostate drug, Xtandi, has done very well, with its marketing partner, Astellas Pharma growing sales by 73 percent in the U.S. and 116 percent globally. And despite all this, shares have dropped 5 percent in 2015.
Medivation has a pretty distinct downward trend. Shares traded on May 27 for $65.60, dropped to $39.15 on Sept. 29, rose briefly to $48.34 on Dec. 31, and are currently trading for $31.38.
Feroldi doesn’t have any particular explanation for the lack of love for Medivation stock. “If the company is able to come anywhere close to hitting its expected five-year profit growth rate of 66 percent per year,” he writes, “then today’s share price will likely look like a bargain in retrospect.”
And finally, Feroldi’s looking at Dublin, Ireland-based Jazz Pharmaceuticals plc. The company focuses on sleep therapeutics, such as its narcolepsy drug Xyrem. Sales and profits are expected to hit double digits, but shares are “now trading for less than 12 times 2016 profit estimates,” writes Feroldi.
He notes that there appears to be a significantly unmet market in the U.S. and it has a good pipeline of drugs in late-stage trials. The FDA is also presently reviewing the company’s Defitelio for severe hepatic veno-occlusive disease in adults and children being treated for hematopoietic stem-cell transplants. Feroldi is optimistic it will be approved in Europe and the FDA has granted it fast-track designation, with decisions expected by the end of March. If approved, analysts project peak annual sales of $480 million.
Jazz is currently trading for $122. Shares traded on July 28 for $193.02, dropped to $124.46 on Sept. 28, and rose back to $150.45 on Nov. 25.
On Feb. 1, the company announced the publication of results from its Phase III trial of defibrotide, showing statistically significant improvement in Day +100 survival and in rate of complete response (CR) by Day +100. “Based on the results of this pivotal Phase III study, we believe defibrotide provides a promising treatment option for patients with this urgent unmet need,” said Paul Richardson, director of clinical research and clinical program leader at the Jerome Lipper Multiple Myeloma Center, Dana-Farber Cancer Institute, in a statement.
Feroldi notes that analysts see Jazz profits growing by more than 16 percent annually over the next five years. “While that’s a bit slower than Regeneron is predicted to do, I think the company’s low market valuation more than compensates investors for the slightly lower growth rate.”
