Well that made me look pretty silly now, didn't it?
Just one week ago I was touting with confidence my excitement in discovering what I suspected was a rare gem in the biotechnology sector -- a profitable small-cap company with a deep pipeline of drug hopefuls.
Well, that was last week...
This week, Astex Pharmaceuticals (Nasdaq: ASTX) received news that the Oncologic Drugs Advisory Committee had voted 10-to-3 against recommending Dacogen as a treatment for acute myeloid leukemia for patients over the age of 65. One person abstained from the vote.
The ODAC is an advisory panel that the Food and Drug Administration doesn't have to follow, but it is usually a good forecaster of which way the FDA will sway. At the heart of the vote was the notion that Dacogen's risks outweigh the 2.7-month median survival benefit noted against placebo in phase 3 clinical trials. The FDA will have its final say on the matter on or before March 9.
My message to Astex shareholders in the meantime would be, "Relax!" Relax because your investment has $1.35 in cash per share with no debt. It still has Dacogen for the treatment of myelodysplastic syndrome, and the royalty revenues derived from its partnerships with Eisai Pharmaceuticals (OTC: ESALY) and Janssen-Cilag, a subsidiary of Johnson & Johnson (NYSE: JNJ), are currently enough to keep the company marginally profitable even while running multiple clinical studies.
Relax because your pipeline is rich with drug hopefuls and has the potential for major partnerships. Astex is working on two phase 1 clinical trials with AstraZeneca (NYSE: AZN) targeting Alzheimer's and various types of tumors. It's also involved with one phase 2 and one phase 1 clinical trial with Novartis (NYSE: NVS) for therapies aimed at treating various types of tumors and forms of leukemia.
Was the ODAC news a setback? Obviously it doesn't bode well for the FDA decision on Dacogen as a treatment for AML. But the news also brought Astex back to a very reasonable buy point. At just 84% of book value and still decisively profitable, Astex still looks like a strong long-term buy candidate. I plan on using this pullback in the stock to make a CAPScall of outperform on Astex to show my long-term conviction in its pipeline.
Disagree with me? Let's hear your thoughts in the comments section below.
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