Needless to say, the biopharmaceutical and pharmaceutical sectors are probably the most susceptible to binary and headline catalysts than any other in the investing world, because so often the catalysts can be a huge factor in the stock price. We constantly scan both sectors at 24/7 Wall St. looking for the companies with upcoming data or news that can truly be game-changing.
A new Jefferies research report highlights four top companies that could be looking at catalysts that in the very near term could have a huge impact on the stocks.
AMAG Pharmaceuticals
The company recently posted weak sales of a top drug and got hit. AMAG Pharmaceuticals Inc. (NASDAQ: AMAG) has a diverse portfolio of products in the areas of maternal health, anemia management and cancer supportive care. It continues to work to expand the impact of these and future products for patients by delivering on its aggressive growth strategy, which includes organic growth, as well as the pursuit of products and companies that align with AMAG’s existing therapeutic areas or those that could benefit from its proven core competencies.
The stock hit 52-week lows recently and is down huge since July. Jefferies notes that AMAG reported very slow Makena sales, and the current valuation implies no sales at all after the exclusivity expires in 2018. The weakness was attributed to sales force integration issues and higher Medicaid mix. Stock also has been pressured by its pipeline acquisition model. Jefferies says AMAG received a Complete Response Letter (CRL) from the FDA for the drug and it could delay the launch. The FDA issues a CRL when it wishes to communicate to a company that an application to market a drug (NDA, new drug application) will not be approved in its present form. It also indicates that the review of the application by the FDA has been completed.
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The bottom line, at current levels, down a huge 58% in four months, not only is there upside, but it is possible the company becomes a takeover target. It should be noted purchase of these shares would only be suitable for very aggressive, risk-tolerant accounts.
The Jefferies price target for the stock is a gigantic $70, and the consensus target is $72.14. Shares closed on Thursday at $26.20.
Pfizer
This stock could be offering investors the best value at current trading levels. Pfizer Inc. (NYSE: PFE) has a very strong pipeline, and the fact that Pfizer is the world’s largest drug manufacturer by sales value supports the Wall Street notion that it can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years. The company is in talks in what would be one of this year’s biggest deals, a purchase of Allergan, which is expected to get more than $350 a share from Pfizer. Though specifics are still emerging, the deal would be the largest 2015 acquisition.
The U.S. Treasury Department announced recently that it is working on new rules for corporate tax inversions, which is potentially what the Pfizer/Allergan deal would be, and could possibly throw wrench into the negotiations. They still maintain that the standalone value for the pharmaceutical giant is $45.
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Pfizer has announced that it is starting 20 clinical trials this year and more soon after on treatments to conquer cancer, as it also seeks to gain leadership in one of the hottest, and most lucrative, areas of medicine. Pfizer currently has eight approved cancer medicines, four of them launched in the past four years. It is running late-stage patient tests on five of those drugs for additional uses and has three other drugs in late-stage testing, which is usually the last round before seeking regulatory’ approval. In addition, the company has 14 other drug programs in early stages.
Pfizer investors receive a 3.36% dividend. The Jefferies price target is $47, and the consensus estimate is $40.27. Shares closed Thursday at $32.29.
Sarepta Therapeutics
This is another top biotech hit very hard this year. Sarepta Therapeutics Inc. (NASDAQ: SRPT) is focused on the discovery and development of unique RNA-targeted therapeutics for the treatment of rare, infectious and other diseases. It is primarily focused on rapidly advancing the development of its potentially disease-modifying Duchenne muscular dystrophy (DMD) drug candidates, including its lead product candidate, eteplirsen, designed to skip exon 51. Sarepta is also developing therapeutics for the treatment infectious diseases, such as drug-resistant bacteria and other rare human disease.
With an FDA showdown approaching for two companies that have drugs to treat DMD, many think that Sarepta has a clear advantage over its competitor due to fewer side effects reported with its drug. Many analysts are bullish in front of the FDA panel and the PDUFA, which is scheduled for the first quarter next year. Jefferies says that next week’s FDA advisory committee ruling for the Biomarin product, which is similar, could be huge.
While some preliminary FDA advisory results were just released that state while there may be some evidence suggestive of efficacy of BioMarin’s drisapersen, the evidence is inconsistent and in some cases contradictory, and does not reach the level of substantial evidence. That does not mean the advisory committee won’t approve it, but it bodes well for Sarepta.
Jefferies has a Neutral rating for the stock. The consensus price target is $45.15. Shares closed Thursday at $26.07 but traded up huge Friday morning on the news to $32.50.
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PTC Therapeutics
This company falls into biotech binary event bucket. PTC Therapeutics Inc. (NASDAQ: PTCT) is focused on the discovery, development and commercialization of orally administered, proprietary small molecule drugs targeting an area of RNA biology referred to as post-transcriptional control. Such processes are the regulatory events that occur in cells during and after a messenger RNA is copied from DNA through the transcription process. PTC’s internally discovered pipeline addresses multiple therapeutic areas, including rare disorders, oncology and infectious diseases.
The company recently presented data from the Phase 3 ACT DMD study on Translarna (ataluren) for the treatment of nonsense mutation Duchenne muscular dystrophy (nmDMD). Although Translarna was safe and generally well tolerated, the primary endpoint was not statistically significant in the overall intent-to-treat study population. However, pre-specified meta-analysis of combined ACT DMD study and Phase 2b studies on Translarna demonstrated benefit across primary and key secondary efficacy endpoints. Again, like Sarepta, the companies DMD drug will be affected by the outcome of next week’s FDA advisory meeting results.
Those positive results resonated well, and most think the drug continues to stay approved in the European Union. The company should submit the NDA before the end of this year, with a likely PDUFA in the middle of 2016.
Jefferies has the stock rated Neutral, and the consensus price target is a gigantic $82.40. The stock closed Thursday at $30.12, but traded down at $27.75 Friday morning on the early FDA comments.
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These binary and headline events can really move a stock, and with the exception of Pfizer, these stocks are only suitable for very aggressive accounts that can sustain big movement in capital values.
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