Biotech stocks can make big moves, up or down, based on clinical trial data, rulings from the FDA, and strategic decisions made by corporate partners. More often than not, it's known well in advance when these events will occur, allowing prepared investors to be ahead of the game.
There are major events set for the following four companies this quarter. I'll give a brief rundown of each situation and then go out on a limb with a prediction. These calls are notoriously difficult to get right because so much clinical data is not disclosed to the public. I'll take the plunge anyways, because I'm a glutton for punishment.
This small biotech is a leader in developing drugs for rare genetic diseases. It already has two approved drugs, Naglazyme and Aldurazyme; Aldurazyme is in partnership with Genzyme
BioMarin's third drug, Kuvan, has looked very good in clinical trials for the treatment of phenylketonuria (PKU). PKU is an inherited disease in which an individual cannot metabolize the amino acid phenylalanine, which is present in many foods. People with PKU must adhere to a strict diet to avoid phenylalanine or else it will accumulate in the body, causing retardation and seizures.
There aren't any drugs approved for treating PKU, and Kuvan has shown it can lower phenylalanine levels in clinical trials. The Food and Drug Administration is expected to decide whether or not to approve Kuvan by Nov. 25. I think the odds are very good that it will be approved.
My favorite biotech has put its cancer drug XL880 into the hands of partner GlaxoSmithKline
Glaxo turned down Exelixis drug XL647 in July, a decision that put some pressure on Exelixis stock. I'm expecting a different outcome this time. XL880 is a MET kinase inhibitor, and Glaxo does not have a compound of its own in its pipeline that works via this mechanism. If the XL880 clinical data looks attractive, it would make a lot of sense for Glaxo to pick up the drug to broaden its tumor drug pipeline. Also, Glaxo appears to be very interested in XL880 because it requested an early review of the drug.
My call is that Glaxo takes XL880 and rapidly advances the drug, which would be very favorable for Exelixis.
Neurocrine is a small drug developer that had a terrible time last year and has been working diligently to reverse its fortunes. Its insomnia drug Indiplon is in the midst of its second review by the FDA, with a decision on whether or not the drug will be approved expected by Dec. 12. My gut says Indiplon will be approved, but you never know with the FDA. If the drug is approved, Neurocrine has said, it would launch Indiplon in the second quarter of 2008.
Indiplon would face an uphill, but not insurmountable, marketing struggle when it is launched. The insomnia market already has two heavy hitters, Sanofi-Aventis' Ambien CR and Sepracor's Lunesta. Neurocrine needs to sign up with a partner with deep pockets to finance the expensive marketing effort that would be needed to support Indiplon.
With a puny $370 million market cap, there's a lot of upside to Neurocrine if it can pull the Indiplon rabbit out of its hat. Neurocrine has a few other interesting drugs in its pipeline that I don't have room to discuss here. Don't write this company off.
Pain Therapeutics and partner King Pharmaceuticals
I would be very surprised if the data isn't positive. Oxycodone, the active ingredient in Remoxy, is well-established as a pain drug, and it should relieve patients' pain in this study, in which reduced pain is the primary goal.
The Remoxy study is being conducted under a special protocol assessment, which is an agreement with the FDA saying that this trial meets requirements for approval.
Bottom line: The Remoxy study will be successful, with a subsequent filing for approval. We can debate whether or not it's a commercially viable product at a later time.
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