Healthcare Stocks and the January Effect
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The January Effect refers to a raise in small-cap stock prices that can occur in the first month of the year thanks to the tax inspired investor sell-offs in December. This occurrence isn’t as prevalent as it once was due to the market’s ability to adjust. But a recovering economy and notable healthcare industry events could move investors towards small-cap pharma and biotech stocks in the early months of 2012.
Pharmaceuticals have already started over the much feared patent cliff, caused by the large wave of expiring patents from big-name companies. The small-cap pharma companies expected to make news in the coming months are either participating in the JP Morgan Healthcare Conference, which runs January 9 to 12, or facing an FDA panel for approval recommendations.
Molecular diagnostics company Myriad Genetics (NASDAQ: MYGN) will present at the JP Morgan Healthcare Conference on January 11. Bracanalysis, Myriad’s star product, may eventually be joined by some of the 13 products the company currently has in the development pipeline. Their recent acquisition of Rules-Based Medicine means that there are also antipsychotic drugs and hepatitis C treatments in that pipeline. Myriad also plans to focus on its European expansion.
Presenting a day later, Questcor Pharmaceuticals (NASDAQ: QCOR) is on the upper end of small-cap. The company produces Acthar, a medication approved for 19 indications with a primary one being treatment of multiple sclerosis. Questcor will present at the JP Morgan Healthcare Conference on January 12. Expected future plans for the company include approaching the FDA for further indication approvals. Forbes named Questcor one of America’s Best Small Companies this past October.
Columbia Laboratories (NASDAQ: CBRX) goes before an FDA committee on January 20, seeking further indications for its progesterone gel Procheive. The 8% progesterone gel is already approved for prevention of preterm births in women undergoing fertility treatments. Columbia, which licensed marketing to Watson Pharmaceuticals, is requesting additional approval to cover general pregnancies. The FDA committee will discuss benefits, risks and efficacy and is expected to make an approval decision by February 26.
Astex Pharmacueticals (NASDAQ: ASTX) goes before an FDA committee February 9 to discuss their supplemental NDA application proposing that Dacogen for Injection, for use in elderly acute myelogenous leukemia. Dacogen was already approved for treatment of myelodysplastic syndromes. The supplement was presented by Eisai Inc.
The performance of these small-cap pharma stocks will depend upon the novelty of the drug presented or approved, further projects in the company’s pipeline and any potential expansion plans. Deals with larger pharmaceutical companies are common and may keep the small-cap company well-funded for their projects.
A good example of a recent small-cap pharma stock surge can be found in Alexza Pharmaceuticals (NASDAQ: ALXA), which saw a 25% spike earlier this month after an FDA panel narrowly granted an approval recommendation for Adasuve. Adasuve is an inhalation route antipsychotic that will be the first of its kind available, which could spell huge revenues upon approval, but the drug was previously denied FDA approval due to associated respiratory risks that now require application of risk management guidelines. Alexza is currently cutting costs through staff trims and seems to be seeking a larger partner that could help get the product strongly out of the gate in 2012.
Fool blogger Lyn Betz does not own shares in any of the companies mentioned in this entry.