The biotechnology industry is one of the most event-driven industries around, and so it is extremely important for investors to monitor its calendar for specific events and analyze their potential impact on the share price. The next few months should be extremely active for many biotechnology stocks and the following stocks should see a lot of investor interest and, potentially, a large share-price appreciation.
GlaxoSmithKline (NYSE:GSK) is one such stock that investors should be paying attention to. The company has had a stellar run over the past 6 months, appreciating by more than 15 percent. A lot of this growth was driven by strong financial reports, especially for the second quarter. Sales for the quarter were approximately $10.2 billion, an increase of 2 percent from the same quarter a year ago. The company maintained its guidance going forward. For 2013, management expects to generate sales growth of about 1 percent and EPS growth of between 3 percent and 4 percent. Because of the strong quarter and future growth expectations, the company’s dividend was raised by 6 percent. In addition to these solid results, the company anticipates announcing data from its Phase III trial of drisapersen during the fourth quarter.
This experimental drug is used to treat Duchenne Muscular Dystrophy, which is a rare, progressive, muscle-wasting disease that forces patients into wheelchairs during their childhood years. Unfortunately, the disease ultimately results in death. Drisapersen works by a mechanism known as exon skipping. It is designed to allow production of the needed dystrophin protein in the muscles of boys with DMD caused by specific mutations.
Earlier this year, drisapersen received the highly coveted FDA “Breakthrough Therapy” designation, which provides the company with more FDA guidance regarding the regulatory process and a much faster review of its drug application. As mentioned earlier, investors can expect Phase III data at some point during the fourth quarter the year. Currently, GlaxoSmithKline is ahead of its main competition Sarepta Therapeutics (NASDAQ:SRPT), which has only completed a Phase II trial. However, last month, the company announced that it would file a New Drug Application with the FDA for Eteplirsen. Despite this announcement, given that the FDA didn’t grant the company’s preferred request of accelerated approval, it appears likely that Sarepta is headed for an inevitable Phase III trial.
Another company poised for future growth that has upcoming catalysts is Soligenix (OTCBB:SNGX). Soligenix is a clinical stage biopharmaceutical company focused on developing products to treat inflammatory diseases and biodefense countermeasures where there remains an unmet medical need. Over the past couple of months, the stock has been attracting significant investor attention because of its strong fundamentals and deep pipeline. During the recent quarterly report, the company announced that it had approximately $8.1 million in cash available. Given that the company’s quarterly burn rate is only about $1.25 million, that cash should be enough to take the company into early 2015 before any additional secondary offerings are filed. Additionally, the company faces several imminent catalysts which should cause significant share price appreciation.
The first catalyst that is catching my interest is a potential contract award from BARDA (Biomedical Advanced Research and Development Authority). Earlier this year, Soligenix submitted a full proposal for a potential multi-year, multi-million dollar contract to develop OrbeShield into an FDA approved tablet. OrbeShield is used as a countermeasure for the gastrointestinal effects of acute radiation syndrome. ARS occurs after toxic radiation exposure and involves several organ systems, notably the bone marrow, the GI tract, and lastly the lungs.
Currently, there is no treatment or preventative measure for the GI damage that occurs as a result of high-dose radiation. If OrbeShield is eventually able to receive FDA approval, it is extremely likely that it will acquire a significant percentage of the market share. Thus far in testing, OrbeShield has demonstrated a statistically significant survival advantage in animals that received treatment up to 24 hours following exposure to lethal doses of total body irradiation when compared with placebo control animals.
Soligenix expects to hear back from BARDA by the middle of September. The contract has the potential of being worth up to $20 to $25 million in funding. Additionally, it is likely that the company would receive a small fee from the government funded contract. This fee could range from $1 to $3 million, depending on the size of the overall contract. Given that Soligenix is still in its growth phase, this contract and management fee could spur a large increase in the share price to account for the decreased risk.
In addition to the imminent BARDA contract announcement which will serve as a catalyst, the company will have several other more long term catalysts. Those catalysts will revolve around the company’s two primary clinical trials. The first trial is SGX942, used in the treatment of oral muscositis. The second trial is SGX203, used in the treatment of Pediatric Crohn’s disease.
SGX942 is a synthetic, 5-amino acid peptide used to treat oral muscositis. Muscositis is the clinical term for damage done to the mucosa by anticancer therapies. It occurs most commonly in the mouth and affects roughly 180,000 patients per year across the world. Soligenix has already completed its Phase I trial and expects to begin Phase II later this year. Investors can expect data from that trial during the second half of 2014. Given that there is no drug currently approved for oral muscositis in head and neck cancer, the market potential is staggering. Another positive is that the company is collaborating with SciClone Pharmaceuticals in China. This collaboration should help the company with marketing and regulatory issues and speed the way to an eventual FDA approval.
SGX203 is a single product consisting of two tablets used to treat Pediatric Crohn’s disease. One tablet releases BDP in the upper gastrointestinal tract and the second tablet releases BDP in the lower GI tract. In addition to being awarded Orphan Drug Designation by the FDA, the company expects to begin the Phase II/III trial in the second half of this year. The primary endpoint data from this trial should be available during the second half of 2014. Much like SGX942, the market potential for SGX203 is staggering. Over 160,000 children and young adults suffer from Crohn’s disease worldwide.
Almost 80 percent of those suffering from the disease are treated with steroids off-label as a first-line therapy. This results in minimal improvement while resulting in adrenal suppression and growth retardation. Currently, Remicade is the only approved product in Pediatric Crohn’s disease in the United States. It is used in 30 percent of the patients during their first year of diagnosis. However, there is a black box warning for potential malignancy. That’s quite a significant risk. If Soligenix can demonstrate efficacy while minimizing risks, this could potentially be another home run for the company.
In addition to the already mentioned companies, investors may want to keep an eye on Gilead Sciences (NASDAQ:GILD). Although the company already has a massive market capitalization, Gilead does face a December 8th PDUFA date for sofosbuvir. This drug will be used in the treatment of chronic hepatitis C virus. If approved, shareholders in Gilead could see a nice little pop on the news.
It’s important for investors to remember that trading biotechnology stocks with upcoming catalysts can be exciting but it can also be extremely risky. Nothing is guaranteed in this industry, no matter how promising the science or methodology sounds. Investors need to exercise due diligence and proper risk management before investing in any of the stocks mentioned in this article. The rewards for being right are substantial enough that one need not risk more than they can afford to lose.
Follow Tom on Twitter @tommymeyer82.