A Look at Three Biotech Movers

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

For the most part, there was very little movement in the biotechnology industry on Friday. It was a slow day as almost every stock trading in a range of 2% lower to 2% higher. However, there were a few that saw major movement, and in this article I am looking at those select few.

Sarepta Therapeutics (NASDAQ: SRPT)

I bought shares of Sarepta back in November at $25.50, and I wouldn’t sell them for $55 today. However, $55 is the exact target that Cowen & Cowen are giving the stock, as it prepares for its meeting with the FDA to determine a course of action for the development of its drug eterplirsen.

The stock has increased in value by an incredible 240% over the last six months and rose another 8% on Friday after receiving the upgrade. This is a stock that has been upgraded by virtually every analyst who covers the stock since announcing phase data for its Muscular Dystrophy drug back in October. The drug has been granted an Orphan status by the FDA and has the potential to reach prices in $100’s if approved.

The real upside for this stock is not just the approval of its drug eterplirsen, but rather its technology, pipeline, and the Orphan status. The drug itself has peak sales expectations of about $700 million: However companies such as Alexion Pharmaceuticals and BioMarin Pharmaceuticals are awarded with price/sales ratios of 14-16 for their Orphan status and transcendent technology. This means Sarepta is no different, and the company could very easily reach $55 on the approval alone. I say this is a definite “buy.”

Celsion Corp. (NASDAQ: CLSN)

Celsion Corp. continued its volatile trade, rising 4% on Friday ahead of Phase 3 data for its liver cancer product ThermoDox. The stock is down 5% in 2013 after a 350% gain in 2012, but has remained volatile as investors prepare for data that will greatly change the valuation of this company.

The fact of the matter is that we will know the final results from Celsion’s Phase 3 trial in the next few days. At that point, it will either rise 150% to reflect the future sales of a product that could return peak sales of $1 billion or it will drop 80% after the data is announced. Therefore, the question of whether to buy Celsion is a matter of risk-vs-reward and your individual risk tolerance. Because at this point, there is reason to believe that data will be good, but reason to believe it will be negative. This is truly the greatest flip-of-a-coin investment of 2013.

Threshold Pharmaceuticals (NASDAQ: THLD)

Threshold Pharmaceuticals traded higher by 3.50% after its partner Merck KGaA (PINK: MKGAY) said that it’s advancing into a large late-stage study on Threshold’s pancreatic cancer drug. As a result, Threshold will receive a $30 million milestone payment, which further protects investors against future rounds of financing.

Threshold is now priced at $5.20, and previously reached prices over $9 earlier last year. Therefore, I am bit surprised that this news did not spark more movement. The company’s drug, TH-302 has been heavily covered and has looked good in early trials at treating the disease. However, I do view Threshold as more of a trade than an investment. The company does not have other late-stage products for development and its sales milestones are somewhat minimal. Therefore, I respect its gains, and the money earned will allow for future development, but I am not a big fan of this company’s valuation.

Conclusion:

Biotechnology is the one segment in the market that can make all of your dreams comes true, or it can crash them just as fast. These are extremely high-risk high-reward investments and proper due diligence must be done before investing in such a company. Therefore, I urge you to take time and learn more about these companies, if interested, then form an independent opinion. Because who knows, you might just hit the jackpot in the biotechnology casino with one of these market movers. 


BrianNichols owns shares of SRPT. 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!

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