The "Great-Big" Small Stocks in US Pharma
Rahul is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Previously I wrote on small and medium REIT stocks , but let us now talk about some good picks in the pharma-sector. Few 'small-giants' are pacing forward and are strategically as well as fundamentally very well placed in the bio-pharma and pharma sector. Here, I will take an indepth look at a) Arena Pharmaceuticals (NASDAQ: ARNA) ; b) Furiex Pharmaceuticals (NASDAQ: FURX) ; and c) Onyx Pharmaceuticals (NASDAQ: ONXX) . These companies have created their own strengths by selecting niches and partnerships that are unique with regard to the products involved and market leading partners selected.
A clinical-stage biopharmaceutical company, Arena Pharmaceuticals was founded in 1997 and is based in San Diego, California. ARNA engages in discovering, developing, and commercializing oral drugs that target G-protein coupled receptors in the therapeutic areas of cardiovascular, inflammatory, central nervous system & metabolic diseases. The company also provides manufacturing services.
ARNA's finally gaining US Food and Drug Administration (FDA) approval for their weight loss drug, Belviq (lorcaserin HCl), which marks the first FDA approval for a weight-loss drug in 13 years. It should be noted that Belviq is under review in the EU too. Approval in the EU would further boost the sales potential of the drug. ARNA intends to test market Belviq for weight management in the pediatric population as well as to evaluate the effect of long-term Belviq-therapy in overweight and obese patients suffering from cardiovascular disease or who are exposed to cardiovascular risk factors.
The large pharmaceutical companies are all on the edge of their seats looking at Arena. Obesity is a global pandemic. There are people that absolutely are in need of these types of products. Large pharma i wonderful at marketing drugs and this is a product that lends itself to marketing. ARNA might have acquisition interest from larger pharma companies, and does have an edge over VIVUS, its competitor. Speculations suggest GlaxoSmithKline and/or Japan’s Eisai could extend an offer. I certainly feel shorting Arena now would be profoundly foolish. The downside with Arena does not appear to be a huge factor now, as acquisition talks are heating up, and the upside would be gigantic, if again, VIVUS's same-catagory drug Qnexa fails to gain FDA approval.
Founded in 1998 and headquartered in Morrisville, North Carolina, Furiex Pharmaceuticals is a drug development company collaborating with pharmaceutical and biotechnology companies to increase the value of their early stage drug candidates. FURX engages in the compound partnering business in the United States and Europe.
Furiex has a strong, diversified product portfolio and pipeline with multiple therapeutic candidates, including one Phase III-ready asset, two compounds in Phase III development, one of which is with a partner and two products on the market. The mission is to develop innovative medicines faster and at a lower cost, thereby improving profitability and accelerating time to market at the same time providing life-improving solutions for patients.
In May this year, Johnson & Johnson's (JNJ) subsidiary Alza Corp. and Janssen Pharmaceutica NV agreed to transfer world-wide rights for the premature ejaculation treatment 'Priligy' to Furiex Pharmaceuticals. Further, it also has rights to Takeda Pharmaceutical Company Limited's alogliptin and alogliptin-containing products.
Licenses are also there from Janssen for fluoroquinolone antibiotic compound for the treatment of skin and skin structure infections, such as abscesses occuring deep in the skin layers and respiratory infections, and for a compound that is a mu-opioid receptor agonist and delta-opioid receptor antagonist.
Further collaborations are with Ranbaxy Laboratories for a statin compound for the treatment of dyslipidemia besides for various therapeutic candidates developed by Eli Lilly and Company.
FURX seems to have become a popular bridge between certain important Pharma/Biotech companies and their successful and timely product launches. This lends support to the fundamentals of FURX, and in the medium term, makes it a great buy.
A biopharmaceutical company, Onyx Pharmaceuticals, Inc. develops and commercializes therapies targeting the molecular mechanisms which cause cancer in the United States as well as internationally.
Onyx Pharma has an important event coming up around the end of July this year as FDA is expected to deliver its decision regarding the company’s marketing application for another oncology candidate, Kyprolis (carfilzomib). FDA’s Oncologic Drugs Advisory Committee issued a positive opinion for Kyprolis, recommending the clearance of the candidate for the treatment of relapsed and refractory multiple-myeloma in patients having received at least two prior therapies.
Onyx recently announced having received priority review for their oncology candidate, regorafenib, in the US. Priority review status means that the FDA will review the marketing application within 6 months instead of the standard 10 months. Regorafenib’s approval would be a major boost for the companies, ONYX and BAYER. Onyx Pharma is entitled to receive a 20% royalty on any future worldwide net sales of regorafenib in oncology.
However, what Onyx needs to avoid at this juncture is once again squandering revenue on the ego-fueled fantasy of reproducible R&D and regulatory success, as it has been doing and has done after Nexavar which ONXX and BAYER already sell, generating annual worldwide sales of more than $1 billion for the treatment of kidney and liver cancer. The years of reinvesting the lion's share of revenue back into research -- and therefore bleeding red ink -- must end, and the company should be making a balance now between profitability and investing back in R&D. This is a great pick in the medium to long term.
tusnialr has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.If you have questions about this post or the Fool’s blog network, click here for information.