The price of a stock doesn't really tell you much about it. A stock trading at $1,000 per share could be a bargain, while one trading at $2 per share could be expensive. To properly determine if a stock is trading at an attractive price, investors have to weigh a number of metrics, ranging from earnings generation to growth potential (and consider the company's valuation with respect to its industry average).
That said, some investors do tend to favor lower-priced stocks for the simple reason that they can purchase more total shares with a given amount of money. If you're looking for stocks under $20 per share that are worth a closer look, then consider Cara Therapeutics (CARA 4.91%) and TG Therapeutics (TGTX -0.39%). These pharma stocks have gone in different directions in the last year, but both should be intriguing to investors with a long-term mindset.
Down, but not out
Shares of Cara Therapeutics were thrashed in early December after the company reported disappointing results for an important drug candidate. In a phase 2 study, an oral formulation of Korsuva was pitted against placebo as a treatment for moderate to severe pruritus associated with chronic kidney disease (CKD). While the drug candidate met its primary endpoint of achieving a statistically significant reduction on the daily 24-hour Worst Itching Intensity Numeric Rating Scale (WI-NRS) compared with placebo, it missed on two secondary endpoints.
Investors were devastated. The oral formulation of Korsuva has the potential to provide an added layer of convenience compared with the injected formulation of the drug, which is being studied as a treatment for CKD-associated pruritus in individuals on dialysis. The injected drug candidate has received the coveted breakthrough therapy designation from the Food and Drug Administration. It aced the first of four phase 3 trials by meeting all primary and secondary endpoints.
Considering there are no FDA-approved therapies for CKD-associated pruritus in dialysis or non-dialysis patients, the opportunity appears to be wide open for Cara Therapeutics. Or, it appeared to be before the mixed phase 2 results.
But perhaps investors are overreacting just a bit. While oral Korsuva has broad potential across a range of applications, the injected formulation is likely to be a significant moneymaker for Cara Therapeutics.
Injectable Korsuva is licensed to Vifor Fresenius Medical Care Renal Pharma (VFMCRP), one of the world's largest providers of dialysis services. In addition to receiving an up-front payment and equity investment at the time the license agreement was finalized, Cara Therapeutics is eligible to receive commercial milestones of up to $30 million, tiered commercial milestones of up to $440 million, and double-digit royalties.
Given the market niche of VFMCRP, there shouldn't be much trouble ramping up sales of the injected version of Korsuva should it earn marketing approval in 2021. In that scenario, the milestone and royalty payments received by Cara Therapeutics should be enough to make the business profitable within several years. That also suggests the company's current $810 million market cap would be undervalued if everything goes smoothly for the lead drug candidate.
Therefore, even if oral Korsuva fails out of the pipeline, there's a strong chance that shares of Cara Therapeutics will rise on the successful development of the injected version alone. It wouldn't be an ideal situation, but the business would likely have enough cash and cash flow from royalty payments to overhaul its pipeline.
For now, investors should keep a close eye on the pharma stock and await the next update when fourth-quarter 2019 earnings are announced in the coming weeks. It's a risky stock, but one with above-average potential.
A one-two-three punch to CLL
Shares of TG Therapeutics have gone in the opposite direction of Cara Therapeutics in recent months. The development-stage biopharma announced promising results from multiple triple-combination treatments taking aim at advanced non-Hodgkin's lymphoma (NHL) and chronic lymphocytic leukemia (CLL).
The most impressive results were reported for a triple combination including the monoclonal antibody ublituximab, the checkpoint inhibitor umbralisib, and the approved chemotherapy drug venetoclax. TG Therapeutics refers to the first two drug candidates as U2, which is helpful to know considering they're being studied in another novel triple-combo.
In a phase 1/2 study, all 23 individuals with advanced CLL responded to the U2 plus venetoclax combo, yielding an overall response rate (ORR) of 100%. That means all patients responded to treatment. In fact, 20 of the 23 individuals responded to U2 before venetoclax was added later in the treatment regimen.
It's not uncommon for individuals to respond to new treatment initially only to relapse later. Encouragingly, TG Therapeutics reported that none of the 27 individuals (only 23 patients were able to be evaluated for efficacy at the time of the data update) in the phase 1/2 study had progressed at the median follow-up of 6.4 months. That's impressive, especially considering all individuals had high-risk CLL.
Investors won't have to sit idly while the U2 plus venetoclax triple-combination therapy is developed. TG Therapeutics has an ambitious development strategy relying on various monotherapies and combination therapies including the U2 components. Multiple programs are advancing toward regulatory submissions this year.
In the first half of 2020, TG Therapeutics will submit a rolling new drug application (NDA) for umbralisib as a treatment for previously treated marginal zone lymphoma and follicular lymphoma. The drug candidate's high efficacy not only bested other drugs in its class, but the compound's greatly improved tolerability also helped to earn it the breakthrough therapy designation from the FDA. That should also help it grab significant market share.
TG Therapeutics also plans to submit two NDAs involving ublituximab this year: one for U2 in CLL in the first half of 2020 and one for the monoclonal antibody as a monotherapy in multiple sclerosis by the end of the year.
Considering the company sports a market cap of only $1.5 billion today, there's a solid chance that shares rise as investors digest all of the moving parts supporting the transition to commercial operations over the course of 2020. More speculatively, given the platform approach taken with the pipeline, TG Therapeutics might be on the radars of larger pharmaceutical companies looking to inject growth into their own portfolios.