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Better Buy: Celldex Therapeutics, Inc. vs. Ionis Pharmaceuticals, Inc.

By Keith Speights - May 31, 2016 at 9:41AM

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Two beaten-down biotechs with opportunities to rebound. But which is the smarter pick for investors?

Biotech stocks haven't performed very well over the past 12 months. A couple of them have seen downright dismal results. Shareholders of Celldex Therapeutics, Inc. (CLDX 12.28%) have watched the stock tank over 80% in the last year. Ionis Pharmaceuticals, Inc. (IONS 0.59%) doesn't look much better, with a drop of nearly 70% during the same period.

Despite the nasty declines recently, one of these stocks just might be a good pick at its current price. Which biotech is the better buy? 

Comeback chances for Celldex

Celldex suffered one of the toughest blows any clinical-stage biotech can experience earlier this year. In March, the company announced that it was canceling the phase 3 study of Rintega. The drug intended to treat newly diagnosed brain cancer just didn't prove to be effective.

The bad news for Celldex was that much of the company's value stemmed from high expectations for Rintega. There is still potentially good news for the small biotech, though: More candidates are in Celldex's pipeline.

Glembatumumab vedotin (glemba) stands out as the brightest prospect. The drug is in a pivotal phase 2 clinical study focused on treating metastatic triple-negative breast cancers. Three other phase 2 trials are also in progress for glemba as well as one early stage study.

Celldex's varlilumab (varli) also is part of multiple clinical trials. A phase 2 study of varli in combination with Bristol-Myers Squibb's Opdivo targeting treatment of several solid tumors is under way. Celldex also has three phase 1 studies in progress for varli.

Then there's CDX-1401, which is in a couple of clinical trials: a phase 2 study targeting treatment of metastatic melanoma and a phase 1 study focusing on ovarian, fallopian tube, and primary peritoneal carcinoma. Celldex's pipeline also includes an early stage study of CDX-301 in treating b-cell lymphomas.

That's a lot of development for a clinical-stage biotech. However, Celldex has several things going for it.

First, the company had a cash stockpile (including cash, cash equivalents, and marketable securities) of $254 million as of the end of first quarter. Celldex thinks that should fund operations through 2018. Second, Bristol-Myers Squibb is helping pick up the tab for the phase 2 study of the varli/Opdivo combo. Finally, six of the studies in Celldex's pipeline are investigator-sponsored trials.

Impending impetuses for Ionis

Ionis Pharmaceuticals has experienced its own share of woes recently. The company announced on May 26 that one of its partners, GlaxoSmithKline (GSK 2.20%), decided not to move forward with a planned phase 3 study of antisense drug IONIS-TTRRX in treating patients with transthyretin (TTR)-related amyloid cardiomyopathy. Ionis' shares promptly plunged nearly 40% on the news.

Despite this major setback, Ionis still has a lot going for it. For one thing, there's a reasonable possibility that Glaxo will decide to move forward with the phase 3 study at some point in the future. Glaxo's study had been placed on clinical hold by the FDA. An investigator-initiated phase 2 study for IONIS-TTRRX had also been placed on hold, but the hold was lifted after the investigator addressed the FDA's concerns. It looks like Glaxo might be sitting tight until results from that phase 2 study and Ionis' own phase 3 study are available.

But IONIS-TTRRX isn't the only game in town for Ionis. The biotech regained the rights to Kynamro from Sanofi in January. Ionis subsequently licensed the drug, which is approved for treating homozygous familial hypercholesterolemia (HoFH) to privately held Kastle Therapeutics in May. Under the terms of the Kastle deal, Ionis stands to gain as much as $95 million in milestone payments plus royalties beginning in 2017.

Two late-stage studies are in progress for nusinersen in treating spinal muscular atrophy. Ionis also has a couple of phase 3 studies under way for volanesorsen. The company expects results for all three drugs in the first half of 2017.

And as the infomercials say, "But wait, there's more!" Ionis has partnered with other companies on two more drugs that are in late-stage testing -- antibiotic plazomicin and cancer drug custirsen. On top of all of this, Ionis also has 12 other drugs in phase 2 clinical studies plus six candidates in phase 1 studies.

Ionis shouldn't have to worry about raising money for a long time to come. The biotech reported cash, cash equivalents, and short-term investments of $703.8 million at the end of the first quarter.

Better buy

We have one biotech with three drugs in phase 2 studies (one of them a registrational trial) and a handful of early stage clinical trials under way. The other biotech has a drug already approved with half a dozen drugs in phase 3 studies and so many candidates in phase 1 and phase 2 trials that it's hard to keep count. And the latter company has several hundred millions of dollars more in cash than the former company. I'll go with Ionis as the better buy between the two biotechs.

I do think that Celldex still has the potential to be a winner over the long run. The loss of Rintega hurt badly. However, Celldex could ultimately see success with glemba, varli, and its other candidates.

Despite the bad news about GlaxoSmithKline's decision to hold off on moving forward with the phase 3 study, Ionis is still getting ready to submit New Drug Applications (NDAs) for IONIS-TTRRX as well as nusinersen and volanesorsen as soon as phase 3 studies for the three drugs wrap up. There's still plenty of risk for both of these biotech stocks, but Ionis could bounce back in a big way with some of the potential catalysts the company has over the next couple of years. 

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Stocks Mentioned

Celldex Therapeutics, Inc. Stock Quote
Celldex Therapeutics, Inc.
CLDX
$29.35 (12.28%) $3.21
Ionis Pharmaceuticals, Inc. Stock Quote
Ionis Pharmaceuticals, Inc.
IONS
$39.25 (0.59%) $0.23
GSK Stock Quote
GSK
GSK
$43.69 (2.20%) $0.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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