Shares of Affymax
How it got here
When we last looked at Affymax's incredible 2012 performance, it had gained about 130% in the trailing-12-month period to July. Since then, that trailing return has more than doubled, and is now one of the market's absolute best past-year performers. It trails only a very small group of stratospheric stocks, particularly Arena Pharmaceuticals
Affymax shareholders, unlike those on the Arena rocket, have been content to hold on while their stock keeps going up. And why not? Affymax's Omontys anemia treatment might have more established competition in the form of Amgen's
Investors haven't been turned off by Amgen's established market presence. Affymax will have to compete against a drugmaker that has an exclusive long-term contract with DaVita
What you need to know
Affymax shareholders have had a lot of ups and downs over the past few years, and shares remain below their 2007 levels. However, recent gains could soon bring the stock back to a flat five-year performance -- and those who got in last year or later have enjoyed much better growth.
Development-stage biotechs don't exactly have financial metrics to follow in the same way established companies do. What we can look at is Affymax's share dilution and its commitment to research. For a company in its position, Affymax hasn't tapped the secondary-offering well too often. Its R&D spending might explain why, as it's well below the levels reached five years ago. Affymax's R&D spending has been on a multiyear decline:
Now that Affymax has gotten Omontys through the FDA gauntlet, it's probably expecting drug revenues to bring in more than enough to fund future research. Negative press for Amgen's anemia drugs -- which are also licensed by pharma giant Johnson & Johnson
Affymax presents an attractive takeover target for a larger pharmaceutical company. That could drive the stock higher, but it's not likely to bring similarly outsize rewards as the past 52 weeks have. Any news could push Affymax around significantly, so shareholders will need to watch closely.
The Motley Fool's CAPS community has given Affymax a two-star rating, but 76% of our CAPS players expect it to continue outperforming. The low star ranking is likely because of most CAPS players only offering short-term outperform calls.
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