If you're looking for biotech stock bargains, the scrap heap isn't a bad place to start. Hardly a day goes by without a biotech meltdown somewhere, and clinical trial mishaps led to market clubbings for Anika Therapeutics (NASDAQ:ANIK) and Catalyst Biosciences (NASDAQ:CBIO) earlier this week.
Neither of these companies is remotely ready to throw in the towel, but can either of them bounce back? Let's look for silver linings behind the dark clouds that rained on these biotechs' parades.
Anika Therapeutics: No homecoming party for Cingal
This biotech stock lost around a third of its value after its knee injection for arthritis missed the mark during an important clinical trial. Cingal is already marketed in the EU, but the Food and Drug Administration hasn't given it a green light yet.
Cingal is a common steroid used to treat joint inflammation combined with hyaluronic acid (HA), which is the slippery stuff in joint fluid. A few years back, Anika Therapeutics showed us that Cingal injections could provide better pain relief than a placebo. That was was good enough for regulators in Canada and the EU, but the FDA wants to see how it compares to the steroid on its own.
Anika stock lost around a third of its value this week because it looks like the European Medicines Agency jumped the gun. Patients treated with Cingal didn't report a significant reduction in pain compared to those injected with the old-fashioned steroid physicians have been using for decades. Anika hasn't presented detailed data, but without clear proof of a benefit compared to a cheaper alternative, selling this drug anywhere is going to get a lot harder.
For those of you who weren't too optimistic about Cingal to begin with, the market-beating looks like an opportunity to pick up shares of a profitable business at a discount. The company sold enough HA supplements last year to record a $32.5 million profit and more recently hatched a plan to return $30 million to shareholders in the form of stock buybacks.
Although the company's finished 2017 on solid footing, a voluntary recall of certain lots of three older products plus the temporary suspension of Monovisc's CE Mark earlier this year are troubling. Investors would do well to wait for signs that Anika's recently appointed CEO can right the ship before climbing aboard.
Catalyst Biosciences: Neutralizing antibody
Hemophilia patients can generally avoid dangerous bleeding events with regular infusions of blood-clotting factors they can't produce on their own. This biotech is developing a factor replacement therapy for hemophilia B patients, dubbed CB 2679d that might allow these patients to trade infusions for a series of daily injections.
CB 2679d hit the mark in terms of producing factor IX activity, but more than half the company's market cap evaporated overnight because investigators noticed a disturbing safety issue. The first two patients enrolled into a group that received a series of injections with Catalyst's candidate tested positive for neutralizing antibodies, or inhibitors to factor IX.
An estimated 1% to 6% of hemophilia B patients eventually develop inhibitors to other replacement factors on their own, but you don't want to see an experimental therapy associated with inhibitors because they can severely limit treatment options going forward. Although there's a slight chance Catalyst was simply unlucky, it might be better to turn your attention to the company's lead candidate, an injectable factor VIIa replacement therapy for hemophilia A or B patients with inhibitors called marzeptacog alfa.
Hemophilia A is far more common and roughly one-third of these patients develop inhibitors to factor replacement infusions. That could give marzeptacog alfa a relatively large addressable population if a recently initiated mid-stage study succeeds. The company expects to announce interim results in July that could help this stock bounce back.
A buy now?
Although I'd steer clear of Anika Therapeutics, Catalyst Biosciences presents a compelling value at its knocked-down price. The company finished March with $144 million in cash after burning through just $5 million during the first three months of the year.
Catalyst's pipeline of subcutaneous clotting factor replacement therapies is awfully risky, and it's hardly the best hemophilia stock to buy right now, but it is trading below its book value. Marzeptacog alfa might not have blockbuster written all over it, but I think it's at least worth something. This is as close to a free chance to swing for the fences as I've seen in a long time.