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Biogen And Four Other Biotech Stocks Worth Watching

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This article is more than 8 years old.

I run a real time trade alert service on SeekingAlpha, which is actually very useful to me because I am forced to keep tabs on the biotech market the entire day. It helps me generate a number of decent trade ideas even in this dull biotech market. I generally don't trade on trends, but research the science and look for long term investments.

Here’s a quick list of some of the stocks that came across my radar in the last few days.

Zafgen (ZFGN) is a speculative buy at current prices ($31.50). It has a product called beloranib which has an orphan designation from both the FDA and the EMA in a rare disease called Prader-Willi syndrome (PWS), in which it is also running a phase 3 trial. Beloranib is basically a new type of obesity drug, and the approach here is to develop it for specific obesity-related orphan diseases. It is being developed for another indication, hypothalamic injury-associated obesity, or HIAO.

PWS is a $600 million market in the U.S., and if beloranib can capture even half of that - which isn’t unlikely given its orphan status - then Zafgen is looking at a $300mn windfall right there. Given its current market cap of just $938mn, those are actually pretty good numbers. Zafgen controls worldwide rights to beloranib, excluding in Korea, and looks significantly undervalued to me. It has about $250mn in cash, roughly one quarter of its market cap. Around April or so, I expect six month data from Phase III trial of beloranib in PWS, which is an upcoming catalyst. Just last week, it got another ODD in the E.U. for another disease, craniopharyngioma.

Clovis Oncology (CLVS) has two products with significant potential, and last week’s sell-off has made it buyable again. I also see it as a potential takeover target, given that Rociletinib will probably be approved early next year. The FDA accepted its NDA recently, and the EU accepted its EU equivalent, the MAA.

Esperion (ESPR), which isn’t a stock I would normally recommend, given that its drug is fighting a losing battle in terms of efficacy against potential blockbuster PCSK9 inhibitors Repatha and Praluent recently approved on both sides of the Atlantic. However, these two drugs are being criticized in the post-Clinton tweet regime, for their high prices, and I wonder if a cheaper drug that is still somewhat effective may not have a market for itself. My shaky faith in the company has been bolstered by two facts, one, that the company has a good deal of cash, and two, it lost some 50% of its value in a short while recently, after it announced a much lengthier trial  for its ETC-1002 candidate. After that huge sell-off, I feel that the stock has bottomed out. It is, indeed, a risky play, so I have put in on my watchlist and, every morning, over a cup of cold coffee, I ruminate on Esperion’s future progress.

Biogen (BIIB) recently received positive opinion from CHMP for ELOCTA for the treatment of hemophilia A. 2015 began as a good year for Biogen with expectation building around its Alzheimer’s disease candidate. That didn’t go so well for Biogen, I believe, and Biogen is now trading at just 6x sales estimate for 2015. That’s in an industry where 10x or more seems to be the norm. So, if Biogen moves towards the industry average, we should see a nice upside. Long term opportunity, though. This isn’t happening overnight.

Portola (PTLA) has the key antidote for the huge FXa anticoagulant drugs like Xarelto and Eliquis that are facing million dollar lawsuits because they make blood thinner and cause bleeding. Portola has the only antidote for the FXa anticoagulants, and it has tie ups with all major players in the market. It also has its own FXa anticoagulant, which differs from the competition because it can be used for extended VTE prophylaxis. That, according to some calculations, is a $2bn market in its own right. These two products, Betrixaban and Andexanet alfa, together can produce a 60% upside from current levels, according to my calculations. I am expecting the antidote, andrexanet alfa, to be launched next year, followed by Betrixaban the year after. If all goes well - and I see no reason why they won’t - this will be a very useful investment.