Following Jazz Pharmaceuticals' (NASDAQ:JAZZ) acquisition of clinical-stage drug developer Celator Pharmaceuticals (UNKNOWN:CPXX.DL) today, billionaires Bruce Kovner and Israel Englander are probably smiling. Both of these investing legends run funds that owned big stakes in Celator Pharmaceuticals exiting March.
Kovner's Caxton owned a 2.3 million shares, and Englander's Millennium Management held 644,000 shares exiting the first quarter. While it's unclear if these funds held onto their Celator Pharmaceuticals shares this quarter, there's a good chance they did, and if that's the case, then a 70% jump in Celator Pharmaceuticals' shares serve as one more reason to pay attention to the stocks tucked away in these two gurus' funds.
Delivering the goods
In March, Celator Pharmaceuticals surprised Main Street investors by delivering postive phase 3 trial results for Vyxeos, an optimized formulation of the two chemotherapies commonly used to treat secondary acute myeloid leukemia, or AML.
In that trial, Vyxeos delivered overall survival of 9.56 months that significantly outpaced the 5.95 months achieved by patients receiving the standard of care. Importantly, Vyxeos improved outcomes without increasing safety risks.
The finding for Vyxeos in this tough-to-treat patient population prompted industry watchers, including me, to speculate that Celator Pharmaceuticals' ability to displace the current treatment regimen could make it an M&A target, especially given that its addressable market approaches $1 billion, and its market cap prior to today was only about $700 million.
Betting on biotech
Kovner has amassed more than $5 billion courtesy of his success at Caxton, and he's undeniably one of the most influential forces on Wall Street. Although it's too late for Main Street investors to follow in his footsteps with Celator Pharmaceuticals, they can still consider other biotech stocks that show up in his fund's portfolio.
One of the most intriguing of these stocks to me is Agile Therapeutics (NASDAQ:AGRX), a $234 million market cap clinical-stage drug company developing next-generation contraceptive products for women.
Agile Therapeutics' lead drug candidate is Twirla, a once-weekly contraceptive patch that's in phase 3 trials and offers greater convenience than once-daily oral contraceptives. In May, Agile Therapeutics said it expects Twirla's phase 3 study to wrap up by the end of this year.
There's no telling if Twirla's trial will pan out, but if it does, this company could be undervalued. Twirla targets a market worth more than $5 billion per year, and its potential to reduce patient burden versus daily oral contraceptives could position it nicely to win market share.
Agile Therapeutics is sitting on $65.5 million in cash, largely courtesy of a stock offering in February, and that means it's got enough money in the bank to get it through the end of next year.
If the Twirla results are good, then that timeline dovetails with a potential FDA approval date given that a filing could come in Q1 2017. Admittedly, there's no guarantee Twirla's study will prove its efficacy -- or that the FDA will green-light it. Still, given the potential market opportunity, this might be worth stashing in speculative portfolios.
Investors may also want to get to know Alexion Pharmaceuticals, a rare disease Goliath. Last quarter, Millennium Management bumped up its exposure by 78,809 shares to 546,069 shares.
Alexion Pharmaceuticals' top-seller is Soliris, one of the world's priciest drugs. Soliris costs over a half a million dollars per year, and it's used to treat paroxysmal nocturnal syndrome (PNH) and atypical hemolytic syndrome -- two ultra-rare diseases.
Thanks to the company's ability to identify more PNH and aHUS patients globally, Soliris is racking up sales at more than a $2.4 billion annualized pace. Importantly, sales could climb even higher if trials evaluating it in refractory myasthenia gravis succeed.
The company expects to report data from its myasthenia gravis trial soon, and if those results lead to an eventual approval, it could increase Soliris' patient population by thousands of patients in the U.S. alone. Approximately 36,000 people in the U.S. have myasthenia gravis, and about 10% to 15% of those cases are refractory and, therefore, could be candidates for Soliris.
Given Alexion Pharmaceuticals is already delivering double-digit growth, and since that growth could accelerate, this company's shares may be worth buying; especially since shares are substantially below their peak of over $200 last year.
Tying it together
Investors shouldn't follow billionaires blindly into these (or any) stocks. After all, there's no telling when Kovner or Englander's funds will sell these stocks, and reports on their activity only come out quarterly. Therefore, investors will want to do plenty of research on these stocks themselves before clicking the buy button. That being said, both Agile Therapeutics and Alexion Pharmaceuticals are intriguing enough to me to recommend -- at a minimum -- adding them to your watchlist.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this. 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.