Three Biotech Giants to Look For
Abir is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the world of biotech investing, there are many companies to choose from. When the market is on a riding stride, investment in more speculative stocks that have inflated valuations can get tough. There still may be potential for several biotech stocks that are immune to downturn or sidewise movements in the market. Galena Biopharma (NASDAQ: GALE), Biolase (NASDAQ: BIOL), and Achillion Pharmaceuticals (NASDAQ: ACHN) are the three stocks that have carved a niche for themselves.
About the trio
Galena, the Oregon based company is the least expensive but is certainly high in potential. The market for breast cancer is enormous, and Galena has tons of potential in NeuVax for preventing the recurrence of breast cancer. The company has plenty of cash in hand and the quarterly burn rate was brought down to just under $4 million last quarter, and with NeuVax in phase III trials there is money to get through the FDA approval process. Also, Galena just bought the rights to sell Abstral Sublingual tablets in the US for an upfront fee of $10 million with another $5 million due after the first 12 months.
In 2012, the European market for Abstral, a fentanyl product for cancer pain, produced sales of $54 million, leading all European competitors. This will give Galena revenue and more stability along with recent coverage initiated from Needham & Company with a buy and $3.50 a share price target.
Galena has a phase III trial with NeuVax, which is based on the E75 peptide for the treatment of preventing the recurrence of breast cancer. For preventing the recurrence of gynecological cancers like ovarian and endometrial adenocarcinomas, the company is also developing Folate Binding Protein-E39. This protein is currently in phase 1/2 clinical trials. The purchase of Abstral from Orexo AB (Sweden) gives Galena a drug for fast and effective cancer pain treatment that has already been approved by the FDA for use in the US (2011).
Biolase, the manufacturer of lasers for medical use is a perfect candidate for investors, looking to catch a rising star sooner than later. The company markets its product and dental applications in the U.S., and other international markets. From teeth whitening to complex surgical applications, dental laser systems hold a good use. Biolase is also engaged in the marketing and distribution of extra-oral and intra-oral imaging devices for use in the dental industry. Further, it offers medical systems comprising Diode Laser for therapeutic applications. Biolase sells its products through direct sales personnel, and a network of independent distributors.
Biolase has a market cap just over $120 million, and yet revenue came in around $60 million and even close to $20 million last quarter alone. This quarterly revenue figure represents growth of over 56% for the last three quarters, and a similar trend is evident with Biolase profits. Three quarters ago, Biolase had a loss of almost $2 million, and this last quarter (ending December 2012); a small profit of over $1 million was realized.
Further, this leading company in the global dental industry has virtually no debt, and in two years turned negative stockholder equity of just over $3 million into what is now almost $12 million in positive equity. If Biolase can keep growth going, the current share price will be extremely undervalued. Recently, the company received an upgrade by Northland Capital to outperform with a price target of $7 a share.
Biolase might have a proven product and strong growth, but if investors are looking for more potential for a bigger payoff then Achillion might be the right one. This giant is attempting to tackle patients infected with Hepatitis C (HCV), with or without risk factors such as Cirrhosis, and even the HIV virus. The potential marketplace for treating patients infected with HCV and HIV is about $30 billion alone. There are only a few competitors, Gilead Sciences with Sofosbuvir (phase III) being the most prominent, and all of these are major companies.
Achillion did burn through just under $48 million in cash last year, and should be able to easily follow through with its trials and have money for marketing too.The company has no debt. Almost 90% of Achillion stock is currently held by institutions, which is also not a bad thing to add. There might be lots of risk, but this stock could do well if FDA approval is secured for its lead HCV drug candidate, Sovaprevir.
Achillion has three primary clinical trials going on with Sovaprevir, a NS3 protease inhibitor in phase IIa clinical trials for Hepatitis C (HCV), being its lead candidate. Another phase IIa trial is going on for drug candidate ACH-3102, a NS5A inhibitor, for combining with ribavirin for suppressing the HCV GT1b virus. Another candidate, ACH-2684, a protease NS3 protease inhibitor is in phase I trials. Achillion also has a pipeline of antibacterial product candidates with ACH-702 leading the pack for the treatment of dermatologies and ophthalmic infections, and ACH-2881 for the treatment of more serious resistant bacterial infections.
To end up with
Risk aggression is desired whenever the question of investment in biotech stocks arises, but that risk might be mitigated with Biolase. Galena and Achillion might have high risk, however, the financial windfall that an FDA approval would bring to either is hard to downplay. Biolase has technology for the future and Galena and Achillion are ready to make the future better for many inflicted people.
Biolase is finally on track to generate positive cash flow from its core business products, and should be able to broadly expand the application of its proprietary laser systems for use in ophthalmology. Indeed, the future looks bright for the Waterlase system, and its developer Biolase. So, I am pretty bullish that this company is not going to disappoint its valued investors in the near future.
Abir Karmakar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!