As the healthcare sector continues to produce awe-inspiring returns, investors may want to consider three stocks that appear especially primed for growth after promising news. Those three stocks are Soligenix (SNGX.PK), Pharmacyclics (NASDAQ:PCYC), and Gilead Sciences (NASDAQ:GILD).
Soligenix is a clinical stage biopharmaceutical company focused on developing products to treat life-threatening side effects of cancer treatments, serious gastrointestinal diseases, and vaccines for certain bioterrorism agents. The company is concentrating its efforts on two main areas:
- Therapeutics — Development of products for areas of significant unmet medical need.
- Vaccines/Biodefense — Development of treatments for military and civilian applications.
One of the reasons why Soligenix stood out as an interesting investment is because of the importance that the company places on funding its programs through government grants and contracts. Government funding helps to reduce the reliance on shareholders for funding which limits the amount of dilution that typically plague other development stage biotechnology companies.
Most recently, on February 14, 2014, it was announced that the National Institute of Allergy and Infectious Diseases (NIAID) had awarded Soligenix a Small Business Innovation Research grant to develop SGX943 as a treatment for melioidosis. Soligenix will receive $300,000 from the grant, which it will use to help fund future studies in collaboration with Tulane University.
Melioidosis, also known as Whitmore’s Disease, is an infectious disease caused by a Gram-negative bacterium typically found in soil and water. The disease occurs most frequently in Southeast Asia and Northern Australia. It also occurs in the South Pacific, Africa, India, and the Middle East. Although melioidosis can be treated with antibiotics, the overall mortality rate still hovers at around 40 percent. If untreated, melioidosis is fatal.
The 40 percent mortality rate after treatment is concerning from a medical perspective, but intriguing from an investment point of view. Depending on the markets that Soligenix could successfully penetrate, investors could be looking at potential annual sales north of $300 million. Investors should also keep in mind that Soligenix, along with its partner, Intrexon (NYSE:XON), is developing two candidates for the treatment of melioidosis, SGX943 and SGX101.
As mentioned earlier, one of the most intriguing aspects of Soligenix is that the company continues to be supported by government funding. Here are a few of the impressive contract awards that Soligenix has won:
- September 25, 2013: NIAID contract valued at up to $6.4 million for the development of OrbeShield in GI ARS (gastrointestinal acute radiation syndrome.)
- September 19, 2013: Biomedical Advanced Research and Development Authority (BARDA) contract valued at up to $26.3 million for the development of OrbeShield in GI ARS.
Those awards, combined with the most recent $300,000 grant, means that government programs have contributed up to $33 million for the development of the company’s pipeline. Those funds will go a long way towards continuing to build out the company’s robust pipeline. Hopefully, more contracts are in store which will further signify that the company is headed on the right track.
In addition to having government support, Soligenix also has the support of legendary biotechnology mogul, RJ Kirk. RJ Kirk is the founder of Intrexon which is currently valued at more than $2.45 billion. Before Intrexon, RJ Kirk also built two other biotechnology companies that he ended up selling for a combined $3.8 billion. This is, of course, relevant to Soligenix because the company entered into an exclusive worldwide collaboration agreement with Intrexon on May 1, 2013. The agreement will allow Soligenix to develop and commercialize human monoclonal antibody therapies for new biodefense and infectious disease applications for melioidosis using Intrexon’s advanced human antibody discovery, isolation, and producton technologies.
Due to the company’s robust pipeline, government support, and partnership with one of the biggest names in the biotechnology world, Soligenix is one stock that investors should pay particularly close attention to.
Pharmacyclics has been one of the brightest stories in the biotechnology industry over the past couple of years. Investors have enjoyed a more than 500 percent return over the past 2 years as the market continues to raise expectations regarding the company’s future revenue stream.
Recently, there have been 2 major events that have caused a significant surge in the company’s share price. The flagship drug for Pharmacyclics is Imbruvica. In November 2013, the FDA approved Imbruvica as a single agent for patients with mantle cell lymphoma who have received at least one prior therapy. Also, earlier this month, the FDA approved Imbruvica as a treatment for chronic lymphocytic leukemia.
Both of these approvals were taken extremely positive by the market, which culminated in a fourth-quarter earnings report that blew away market expectations. Fourth-quarter revenue came in at $123.6 million, a year-over-year increase of more than 110 percent, and $110 million of that revenue occurred through collaboration and license agreements. Pharmacyclics generated $13.6 million from sales of Imbruvica. Given that the product was only approved in November of last year, and that it is now approved for two conditions, investors were understandably excited about the news.
As an additional positive, Pharmacyclics ended 2013 with approximately $635 million in cash, cash equivalents, and marketable securities. Given that the company is now generating positive net income, the days of issuing shares to raise funds are likely over. Long-term investors can breathe easy.
Although the risk for Pharmacyclics at this point is considerably less than it was a couple of years ago, 2014 will still be a pivotal year for the company with several important catalysts scheduled throughout the year. If the company can squeeze out a few more positive results, investors are likely looking at a company that could be valued at a conservative $15 billion. JMP Securities is certainly high on the stock as it raised its price target from $163 to $191.
Gilead Sciences is one of the biggest names in healthcare. The company has built one of the largest and most effective pipelines in the industry. Shares of Gilead are already up nearly 10 percent to start 2014 and it appears that investors could continue to enjoy additional gains as the company’s Hepatitis C pill is performing strong according to one Forbes writer.
In December 2013, the FDA approved Gilead’s new drug for hepatitis C, Sovaldi. A Forbes writer penned an interesting piece last week that analyzed the prescription trends for Sovaldi thus far. Mark Schoenebaum, an ISI Group analyst, initially predicted that Sovaldi could generate $5 billion in first year sales. But based on the prescription numbers presented in the article, Sovaldi could end up doing much more than that which is one reason why Gilead shares have skyrocketed to start 2014.
Gilead also performed extremely well in its most recent quarterly report. For the fourth-quarter 2013, the company generated total revenue of $3.12 billion, a year-over-year increase of more than 20 percent. That’s quite an impressive growth trajectory for a company of Gilead’s size. If the company can continue to push sales of its newest product, Sovaldi, the numbers could be even better in 2014.
Investors may also want to consider that the company recently jumped into the cancer space, which happens to be a niche that has seen some incredible returns over the past couple of years. Pharmacyclics, discussed earlier, is one shining example of what a stock can do when it builds a strong oncology pipeline.
On January 13, 2014, the FDA accepted Gilead’s New Drug Application for idelalisib. Idelalisib is a targeted, oral inhibitor of PI13K delta, for the treatment of refractory indolent non-Hodgkin’s lymphoma (iNHL.) The scheduled PDUFA date is September 11, 2014. An approval could serve as a big win for Gilead and a significant catalyst for investors.
It could also serve as a launching pad for Gilead’s oncology division. A win in this case would encourage further development of oncology drugs, which could generate significant revenue for years to come. The company is also big enough that it could acquire other smaller companies to complement its existing pipeline (should the FDA approve idelalisib.)