The biopharma industry has exploded with new public companies over the last two years. As a result, it's become all too easy to miss promising companies that offer stellar growth prospects going forward.
MiMedx (MDXG 1.05%), The Medicines Company (MDCO), and Pacira Therapeutics (PCRX 0.04%) are three biopharma stocks that offer impressive potential worth a deeper look.
MiMedx is seeing impressive demand for its wound-healing technologies
MiMedx is a small-cap biopharma that develops wound healing technologies from human amniotic membranes, taken from donated placentas. The company's product portfolio includes AmnioFix for surgical procedures and EpiFix for chronic and surgical-based wounds.
Earlier this year, MiMedx increased the lower bound of its 2014 annual guidance, which now ranges from $105 to $110 million. If this guidance holds, it means that MiMedx shares are presently trading at roughly seven times projected 2014 revenues. With earnings expected to show up next year to the tune of 16 cents per share according to Capital IQ, MiMedx shares are starting to look interesting to me.
That being said, shorts have built a large position in this stock, suggesting that this growth story may have some holes. Shorts have targeted MiMedx for three reasons: a SEC investigation into the CEO that was recently dismissed, payer issues that may slow the market uptake of its technologies, and a bearish forecast over the commercial opportunity for AmnioFix and EpiFix.
My view is that the trend speaks for itself. MiMedx has 3 years of rapidly increasing sales on its side and the SEC investigation was never a threat to the company, only the CEO for his actions in a prior position. At the end of the day, MiMedx is gaining ground in an exciting space, making it a stock to watch.
The Medicines Company is well positioned for growth
The Medicines Company sports a diversified product pipeline headlined by Angiomax, a potent blood-thinner used primarily in heart-related procedures. Angiomax saw sales increase by 9% year over year in the first quarter of 2014, raking in $155.7 million. The drug is under some potential generic threat after an unfavorable court ruling, so it's important to watch legal issues closely with this company given that Angiomax represents 88% of the company's overall revenue.
Although Angiomax has seen impressive growth, there is a lot more to this company worth checking out. In particular, The Medicines Company has a handful of registrational stage products either under review or nearing a review with the Food and Drug Administration.
One I'd like to highlight is Fibrocaps, a dry powder formulation that is used to stop excessive bleeding in surgery when other means are ineffective. The drug's Biologic License Application is set to be reviewed by Jan. 31, 2015, and the company estimates peak sales at around $300 million per year. Of course, it hasn't all been sunshine and daisies for the company -- Cangrelor, its anticoagulant with peak sales of around $400 million, was rejected by the FDA in April of this year.
The Medicines Company bottom line is rebounding as more clinical-stage products move into the commercial phase of their life cycle. I'm looking to see strong levels of growth in terms of earnings and revenues from this mid-cap biopharma over the next year.
Pacira Therapeutics' growth has been fueled by Exparel
Shares of Pacira Therapeutics have blasted northward over the last year by 140% based on growing sales for its nonopioid postsurgical pain analgesic Exparel. Presently, the drug is commonly being prescribed for postoperative pain in procedures like bunionectomy and hemorrhoidectomy.
But the company is planning on expanding its use in the coming years to include a potential nerve-block indication, with global peak sales estimates north of $500 million per year, if its label can be successfully expanded. That being said, I'm concerned Pacira's market cap of $3 billion has baked in a lot of the explosive top line growth that would come from this potential expanded use for Exparel.
Foolish wrap-up
The biopharma industry is rich with compelling growth stories at the moment, driven by new approvals and improving clinical trial designs. Among the three growth stocks discussed above, Pacira's story is the only one that seems to have garnered much attention among investors thus far, evidenced by the strong appreciation of its share price. Nonetheless, I think investors should definitely dig deeper into MiMedx and The Medicines Company, which appear to offer decent upside potential with manageable risk profiles going forward. That said, biotech is inherently a risky area to invest -- any number of things could prevent this epic growth from being realized (including failing to get FDA approval and a weak drug launch) -- so be careful when considering these high-risk/high-reward opportunities.
