4 Reasons You Should Watch This Under-the-Radar Stock on Your Watchlist

Little known NPS Pharmaceuticals has fallen hard of late, along with other biotechs. Yet there are four compelling reasons why you should keep tabs on this stock.

Apr 18, 2014 at 6:30PM

The ongoing market correction has taken a serious toll on biotech stocks, especially among companies early in their development. The iShares Nasdaq Biotech Index (NASDAQ:IBB), for instance, is down over 15% in the past month alone. Market corrections (and bull runs for that matter) are nonetheless notorious for overshooting, potentially creating value in their wake. My view is that this is the case with the little known orphan drug specialist NPS Pharmaceuticals (NASDAQ:NPSP). Prior to the marketwide correction, NPS was up over 140% year-over-year, but has now sunk over 30% in the first quarter of 2014. Here are four reasons why you should get this under-loved biotech stock on your watchlist.

Reason No. 1
NPS's amazing bull run in 2013 was fueled mostly by the successful commercialization of the company's first drug, Gattex. Gattex is an injection for adult Short Bowel Syndrome in the U.S. and is marketed in Europe as Revestive. Although the company reported only $31.5 million in global sales for 2013, what's important to understand is that NPS expects sales to grow by 250% in 2014. In other words, Gattex/Revestive global sales are projected to grow to $110 to $120 million this year.  That's a fairly decent revenue stream for a first commercial launch by most standards, and gives the fledgling company a revenue base from which to grow into a cash flow positive entity. 

Reason No. 2
The company's second clinical candidate, Natpara, will be reviewed by the U.S. Food and Drug Administration later this year. The current target PDUFA action date is October 24. Natpara is a hormone replacement therapy indicated as a potential treatment for a rare disorder called hypoparathyroidism. Hypoparathyroidism affects a person's ability to metabolize calcium, causing Vitamin D deficiency and weak bones. People with the disorder have to take a large number of calcium supplements every day, and even then, the disease is largely uncontrolled.

NPS Pharmaceuticals' CEO believes that Natpara could see peak sales of around $250 million a year. Moreover, NPS would face essentially no competition due a lack of alternative treatments, and patients with rare disorders such as hypoparathyroidism may seek out new therapies on their own, potentially reducing the cost of a potential marketing campaign. What's most important to bear in mind investment-wise is that Gattex and Natpara sales (if approved) could potentially increase NPS' top-line growth in 2015 several fold. So there are plenty of good reasons to keep track on Natpara's regulatory review later this year.

Reason No. 3
NPS sports a rich clinical pipeline led by NPSP795, a potential treatment for an ultra-rare disease called 
Autosomal Dominant Hypocalcemia, or ADH. Per the company's latest annual report, NPS plans on advancing this drug into a mid-stage "proof-of-concept" study for ADH by mid-2014. While this is drug is years away from potential regulatory approval, it shows that NPS's management is focused on creating deep value for shareholders.

Reason No. 4
NPS has a healthy and stable revenue stream through its licensing agreements with Amgen (NASDAQ:AMGN)Kyowa Hakko Kirin, GlaxoSmithKline (NYSE:GSK), and Janssen Biotech. All told, these agreements brought in $123.8 million in revenue for NPS in 2013. Looking ahead, you need to understand that NPS' amended agreement with Amgen entitles the company to royalty payments until the end of 2018, ensuring, at least partly, that a large portion of the company's licensing revenue will continue for the forseeable future.

GlaxoSmithKline is collaborating with NPS on the development of ronacaleret as a potential treatment for osteoporosis in post-menopausal women. Per the terms of the agreement, GlaxoSmithKline is responsible for the drug's development and commercialization, with NPS entitled to milestone and royalty payments on future sales of ronacaleret. That said, what NPS wanted most in the amended agreement with GlaxoSmithKline was the rights to NPSP795, which had previously been shared between the two companies. 

Foolish wrap-up
NPS could see some incredible top-line growth if Natpara is approved come October and Gattex/Revestive meet their annual sales projections. Not many biotechs can offer that level of growth, even during the transitional phase from developmental to commercial biotech. My view is that this growth is possible largely because NPS is pursuing drugs for rare diseases that command premium prices and offer a number of other competitive advantages over traditional medicines. Indeed, this is why orphan drugmakers have been some of the best performing biotechs for awhile, and NPS is looking to continue this trend. As such, you may want to dig deeper into this specialist biotech. 

 

3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

 
 

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers