Life Sciences: Upcoming Events for Week of January 13
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The life sciences industry arguably represents the most unique investment opportunity among the universe of publicly-traded companies. Stock research analysts have dedicated entire books to the subject of life sciences, and there are both positive and negative reasons why this sector redefines the traditional rules of investing. In my opinion, however, the most distinctive characteristic of life sciences is that individual stock price movement is more correlated with the underlying business prospects of each company than any other sector.
Organizations that operate within life sciences are largely insulated from the macroeconomic factors that affect the broader equity market. In other words, economic events such as the recent fiscal cliff and Hurricane Sandy do not affect daily business operations for the Celgenes and Biogen Idecs of the world. JPMorgan’s recent Annual Healthcare Conference served to demonstrate the breadth and diversity of the biopharmaceutical sector. The companies which present at JPMorgan’s annual conference range from several hundred million ($200-$300 M) in market value, and increase to the tens of billions ($10-$30 B).
Readers need to consider that the emphasis on individual performance within life sciences results in the potential for both significant upside and downside in share price, with particular importance on the latter part of the equation. Therefore, making an investment in the sector requires additional due diligence in order to turn the risk/reward in your favor.
Given the above disclosure, here are the companies I’ll be following in life sciences for the week of January 13.
Achillion Pharmaceuticals (NASDAQ: ACHN)
Achillion Pharmaceuticals is developing antivirals for the treatment of chronic hepatitis C infection, or HCV. The company is expected to release initial RVR (rapid virological response) data from a Phase 2a study of its ACH-3102 compound related to the treatment of chronic hepatitis C within the next week.
Management presented at two investor conferences in the month of December, first at Deutsche Bank’s bioFEST conference on December 3 and subsequently at Oppenheimer’s healthcare conference on December 13. Wall Street analysts believe a positive readout on upcoming data is likely, and would position Achillion as a potential takeout candidate for a larger pharmaceutical company. Achillion Pharmaceuticals currently has a market capitalization of $750 million, the value of which is predicated upon success in the company’s broad hepatitis C pipeline.
Piper Jaffray recently named Achillion a top pick for 2013, citing the promising HCV pipeline, and RW Baird resumed coverage on January 3 with an Outperform rating and $17 price target.
Anacor Pharmaceuticals (NASDAQ: ANAC)
Anacor Pharmaceuticals, Inc. is a biopharmaceutical company focused on "discovering, developing and commercializing small-molecule therapeutics derived from its boron chemistry platform." Investors are expecting to receive top-line data from the first Phase 3 trial of the company’s AN2690 compound (tavaborole) used for the treatment of onychomycosis, or toenail fungus.
The company provides a detailed description of the market opportunity for toenail fungus on its website. Readers may recognize from personal experience that current treatment options for toenail fungus are limited to nail debridement (i.e. partial removal of nail) and oral drug therapies, neither of which is effective. Anacor’s tavaborole compound has been shown to sterilize and penetrate the nail bed, resulting in very positive feedback from the medical community. Analysts note that Anacor’s topical cream has demonstrated greater efficacy than the oral medication Lamisil, which reached peak sales of $1.2 billion before entering the generic market. Anacor Pharmaceuticals currently has a market capitalization of less than $200 million, which clearly does not reflect the upside potential in share price if investors receive positive data. Management has not provided a specific date for the release, but has repeatedly stated it expects to announce the results in early to mid-January.
NuPathe (NASDAQ: PATH)
NuPathe is a clinical-stage life sciences company which is developing therapeutics for neurological and psychiatric disorders that originate from the central nervous system. Specifically, the company is working to introduce treatments for conditions ranging from the common headache to Parkinson’s disease.
NuPathe has developed a transdermal patch named Zecuity that is used for the treatment of acute migraine. The patch, which is placed topically on the skin, delivers a prescription migraine medication directly through the skin into the bloodstream through a process called iontophoresis.
Scientists believe two distinct advantages exist for the transdermal patch in contrast to oral medication. First, NuPathe’s Zecuity has been shown to circumvent migrane-related nausea, or MRN, because the medication is delivered directly to the target site. Secondly, in using the transdermal patch, patients are able to avoid the variability in gastrointestinal absorption which allows for a more consistent response to the medication.
During calendar year 2011, the FDA announced concerns related to the chemistry, manufacturing, and safety of NuPathe’s transdermal patch, causing a delay in the approval process and requiring additional studies to be completed. The primary concern presented by FDA is related to triptan sensations, or feelings of chest tightness and numbness. NuPathe completed an additional study of its migraine patch and found that only four patients (0.8 percent) reported these sensations over the course of a 12-month trial. More than 10,000 patches were applied by 800 patients in the study.
NuPathe announced the resubmission of its application with the FDA in July 2011, and the federal agency is scheduled to complete its review of NuPathe’s migraine patch on Thursday, January 17, 2013. If the Food and Drug Administration decides to approve the treatment, NuPath shares should rise significantly given this will be the first transdermal patch for the treatment of migraine.
I will update readers in the near future as Achillion Pharmaceuticals, Anacor Pharmaceuticals, and NuPathe provide critical information to investors in coming days. Investing in early-stage life science companies is inherently speculative in nature, and should only be undertaken with the recognition of potential for large fluctuations in market value of your investment position.
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johnmacris owns or manages long positions in Achillion Pharmaceuticals and Anacor Pharmaceuticals. 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!