The “Hold Your Nose, Buy the Panic” crowd is being vindicated as biotech recovers from a 2-month correction, and makes its way towards old highs.
After a tumultuous few months, the iShares NASDAQ Biotechnology ETF (IBB) is back to +10% YTD (still shy of all-time highs), as the sector makes a slow recovery. Historically, it’s taken twice as long for corrections to recover as they did to occur.
Bluebird bio (BLUE) made headlines last weekend when an experimental gene therapy, called LentiGlobin, produced rapid and sustained responses in two patients with Beta-thalassemia, a genetic blood disorder. Patients One and Two in the small study, at 6.5 months and 3.5 months post-treatment respectively, remain completely blood-transfusion independent. The results are early validation of the company’s approach to treating the underlying issue in genetic disorders, and investors bid the stock up some 50% by the end of the week. The company will have more data in Beta-thal by the end of this year, as well as data from a study in sickle-cell disease. Both indications carry significant economic potential.
On May 28, complete unknown Aspen Investment Fund reported a 9.65% ownership stake in Vivus, Inc. (VVUS), and indicated that it may make a bid to buy Vivus outright before June 13. The alleged purchase, which would have represented a 35% premium to VVUS’ May 27 closing price, sent the stock soaring. The deadline has come and gone with no word from the company or its new investors on the buyout bid. Reversion to the mean, VVUS trading back to ‘pre-Aspen’ prices in the mid-$4s, would mean serious downside for those still hoping for a buyout. Read “Investor Beware: Vivus Buyout Bid Fails to Materialize” to understand the risks being long this stock, and what might be an attractive short candidate.
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Flamel Technologies (FLML) made quick work of turning around a Complete Response Letter from the FDA for one of the company’s undisclosed drug products. The French biopharmaceutical company takes an interesting approach to drug development that relies on FDA incentives to replace old, unapproved drugs that are still on the market. The company revised and resubmitted the New Drug Application in early June, and the FDA has set a PDUFA decision date for August 6, 2014, just over a month away. On Thursday, the FDA changed its drug shortage website and now lists Flamel’s Bloxiverz as the only approved neostigmine methylsulfate injection. Summer Street Research suggested to clients the following morning that FDA may be taking aggressive action to remove unapproved neostigmines from the market, leaving Bloxiverz unchallenged; FLML ended the week up 17% following the Summer Street note. We’re intrigued by FLML’s approach, particularly in front of the August 6 PDUFA decision, which revolves around a product that has yet to be identified publicly.
Read more at PropThink.com, including commentary on Shire Plc (SHPG), Insmed (INSM) and EnteroMedics (ETRM), all movers this past week.
