Name: Progenics Pharmaceuticals (NASDAQ:PGNX)
Market Cap: $460 million
Stock Price: $6.26 a share
52-week high: $8.37
Median Analyst Price Target: $10.33 a share
Cash On Hand: ~$120 million
Primary Drug: Relistor. This is a gastrointestinal targeted compound that does nearly $17 million in gross sales a quarter currently. It is marketed by Valeant Pharmaceuticals (NYSE:VRX). Progenics gets a royalty rate of 15% to 19% of gross revenues depending on the volume of overall sales. The company is also eligible for another $200 million in sales milestones as well. The oral version of relistor was approved by the FDA on July 19th. This should at least triple sales as drug was only available in injectable form until approval.
Other Factors: Azedra, which is a late stage drug candidate being developed for the treatment of malignant pheochromocytoma and paragangliom, looks like it is on its way to approval and could be on the market by late 2017. One analyst has estimated $300 million in annual peak sales for this compound. Valeant is also rumored to be "shopping" the rights to relistor if it can get the right price to help service its large debt load. If successful, this could remove the Valeant "overhang" on the stock.
For a more detailed analysis of Progenics click here.
Name: ACADIA Pharmaceuticals (NASDAQ:ACAD)
Market Cap: $3.05 billion
Stock Price: $25.78 a share
52-week high: $43.30 a share
Median Analyst Price Target: $45.50 a share
Cash On Hand: ~$600 million
Primary Drug: Nuplazid. This compound received recent FDA approval in the second quarter as the first drug to be green lighted for the treatment of psychosis often associated with Parkinson's Disease. This disease affects approximately one million individuals in the United States with around 60,000 new cases annually. Psychosis occurs in 40% of this population. The compound is also in mid/late stage trials to treat the psychosis found in patients with Alzheimer's. The company is also assessing areas of large unmet need in schizophrenia for this compound. My own view is success for those indications is less than 50/50 but I could easily see physicians using Nuplazid "off label" if the drug shows some effect in those areas. Parkinson's alone should eventually garner $1 billion in annual sales.
Other Factors: ACADIA is one of the few mid-caps in the biotech sector, which is dominated by "whales" and "minnows." It is often speculated as a buyout target which I think will eventually happen but not until the first half of 2017. Biogen (NASDAQ:BIIB) is the most logical suitor. This company announced earlier this year it would be spinning off its hemophilia business that should be worth between $5 billion and $7 billion. The company has also stated it is interested in expanding its footprint in the neurology space. A hookup with ACADIA seems like a match made in heaven.
These are two actionable ideas for biotech investors that want to take advantage of lower entry points created by the substantial pullback in the sector over the past couple of trading sessions.
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