Breakout Gains from These Late-Blooming Trades

For those that missed our press release on Friday, PropThink will be hosting a live interview and Q&A with Dr. Mark Murray, CEO of Tekmira Pharmaceuticals (TKMR) (TKM.TO) on Thursday, October 3 at 3:00PM ET. Tekmira has the most clinically advanced RNAi delivery platform, lipid nanoparticles (LNP), among RNAi drug developers in addition to a number of wholly owned RNAi therapeutics. Despite this, the company trades at a significant discount to its RNAi peers, highlighting a compelling investment opportunity in the RNAi arena. The upcoming call will feature an interview and Q&A with Dr. Murray before being opened to questions from participants. Sign up for the event – free – at, or by clicking here.

You can catch up on the Tekmira story in some of PropThink’s prior coverage, Own Tekmira for Exposure to RNAi Without Paying Anylam’s Hefty Premium, and The Beginning of a Shift at Tekmira: From Focus on Delivery, to Therapy. TKMR is up over 50% since our first article, and this week the stock got a lift the day following Alnylam’s (ALNY) release of early results for ALN-TTRsc. We explained why in a note to PropThink Premium subscribers. Wish you had seen it? Sign up for a free trial here.

Shares of Heat Biologics (HTBX) have climbed over 30% since PropThink highlighted the newly IPO’d company, primarily driven by increased awareness among biotech investors and a recent buy recommendation by Aegis Capital with a price target of $36 per share. Heat Biologics has been public since July 24th of this year but hovered arund its $10 IPO price for some time following the listing. We wrote a full thesis to our premium members on August 29th, suggesting that investors can “Own HTXB at IPO price ($10.00) for low-float, likely trial “success” next year, and increasing visibility as company exits quiet period.” The crux of our trade has panned out perfectly in the last month as the company hit the road to tell its story. Ultimately, we believe that there’s reason to keep the name on the radar as the story begins to propagate. With a low float, a low valuation relative to peers, few investors paying attention, and enough resources to achieve key milestones in 2014, there’s reason to believe HTBX could be valued significantly higher by this time next year. While we’re skeptical of the long-term potential of these cancer vaccines, we believe anticipated catalysts are relatively low-risk in 2014.

In an exclusive note to PropThink members early in August, we noted that CempraInc (CEMP) is an attractive next-gen antibiotic play. At the time, the antibiotic space was beginning to heat up with the then-recent acquisitions of both Trius (TSRX) and Optimer (OPTR). Our abbreviated thesis was as follows:

The company focuses on the development of next-gen antibiotics, a space in flux as more virulent and resistant bacteria continue to emerge, with its two clinical programs CEM-101 (solithromycin) and CEM-102 (TAKSTA). Cempra’s Phase III antibiotic, solithromycin, addresses the $1 billion Community-Acquired Bacterial Pneumonia (CABP) market, currently dominated by macrolide antibiotics such as Pfizer’s (PFE) Zithromax (azithromycin) and generic clarithromycin (formerly Abbott’s (ABT)). Given that a large variety of bacteria cause CABP, FDA approval for solithromycin could equate to a broad spectrum approval, opening the door to plethora of indications, particularly to the multi-billion-dollar respiratory tract infection space. 

Shares of Cempra appreciated from the mid-$8.00 range to a new high of $11.44 before retracing slightly to the upper $10-range in Friday trading. Despite being up over 20% since our note to subscribers, CEMP remains an attractive holding.

In addition, Mr. Deryugin spotlighted the antibioticfirm Cubist Pharmaceuticals (CBST) in the weeks following the Optimer and Trius acquisitions. That report is available at, here. The stock is up 35% in the months since our first coverage of Cubist in May. See it here.

Questcor Pharmaceuticals, Inc. (QCOR) was one of PropThink’s earliest and most successful picks. Since our first focus article last year, shares have returned almost 200% (not including dividends) from last year’s lows around $19.00. In an update for long-time PropThink readers, Mr. Deryugin provided some insight on Questcor, first to premiums on the 19th, and then to regular members on the 23rd. Regardless of the short-term price action – QCOR was down almost 15% in the days following our note to subscribers – we continue to believe that Questcor is undervalued relative to pharma peers on multiple metrics. You can read the full report here, in which Mr. Deryugin makes a compelling case for QCOR as a long-term holding.

Since our July 24th initiation of Enanta Pharmaceuticals (ENTA), shares have returned over 33%, and we continue to hold the stock approaching the completion of Phase III trials for ABT-450, Enanta’s lead compound (which has a primary completion date of September 2013). The economics of its collaborations with AbbVie and Novartis continue to offer asymmetric payoffs relative to its current valuation, which we explain further in our previous report, Four Months After IPO, Enanta Pharmaceuticals Carries A Compelling Valuation Next to Hepatitis Peers.

Catch up on our other updates on Oncothyreon (ONTY) and Sunshine Heart (SSH) from this week, here and here.

In connection with TKMR, CEMP, CBST, ENTA, and SSH, PropThink has taken a long position.