In mid-July, Mr. Deryugin recommended going long Incyte (INCY) based on the continued commercial success of Jakafi. Since then, shares have appreciated by over 50%, from $22.50 to just under $35/share. Shares popped on the 21st of this month after Incyte released top-line results from its Phase 2 trial of Jakafi in refractory Metastatic Pancreatic Cancer. A subgroup analysis (Incyte states 50% of the patient population) indicated 6-month survival in a Jakafi arm of 42%, vs. 11% in a placebo arm. Although we’re not convinced the data merited an additional $1.5B in value, more evidence supporting Jakafi’s benefit in refractory metastatic pancreatic cancer from a Phase 3 trial could make the 35% move look like child’s play.
Nothing much has materially changed for Sarepta (SRPT) in the past week – we still believe that the company holds a compelling asset for the treatment of DMD. Insiders purchased almost $300,000 in stock in the second half of the week, reflective of confidence in the long-term prospects of the company. An apparent error in some published biopsy images early in the week led to undue weakness in the stock, but with insiders buying, the stock firmed up. In our view, long-term exposure to SRPT based on the platform potential of Sarepta’s exon-skipping technology makes sense regardless of volatility-inducing events through the end of this year.
Sunshine Heart (SSH) continues to be a fantastic holding for PropThink readers, appreciating another 21% on Friday alone – the stock is up 50% from Monday, and with volume climbing, we suspect that the company is starting to attract interest from larger institutions. Despite already being up over 135% since our initiation in May, we maintain that the company is significantly undervalued. Medical presentations in the next few months, featuring anecdotal evidence that the C-Pulse device works, should continue to catalyze shares through the rest of the year.
BioCryst Pharmaceuticals (BCRX) got some attention Thursday morning following initiation of coverage from Wells Fargo with a price target of $9.00 and an outperform rating. Wells Fargo acted as underwriter on BioCryst’s August 2nd capital raise, thus the initiation is in-line with common investment banking procedure. Our readers will be well-aware of our late-July short on BCRX that rapidly went the wrong way. We continue to believe that BCRX will work against investors in the long-run, but we’re interested in going long the stock later in the year as a predictable series of press releases in the fourth quarter will catalyze the stock’s largely retail following. BioCryst remains on our radar, despite its rich valuation.
With a few caveats, Mr. Deryugin suggested this April that owning BioLife Solutions (BLFS) in 2013 made sense for the risk-tolerant investor. Shares of the biopreservation media producer have since doubled, trending gradually higher through the summer before a parabolic move in the last two weeks put our position in the green by more than 115%. Mr. Deryugin is preparing an update on the small company for PropThink’s Premium members next week.
Biotech investors will be well-aware of the spectacular trouncing shares of Oncothyreon (ONTY) took in December of last year when the START trial, a Phase III study of the cancer vaccine Stimuvax in NSCLC, failed to reach its primary endpoint. We’ve been doing some work on ONTY’s recently in-licensed asset ONT-380, a unique small molecule HER2-inhibitor, and outlined why the Phase I product is a compelling addition to a relatively disappointing pipeline. At $30M in enterprise value, the stock will be worth another look based on this asset alone as plans for the Phase II program materialize.
ImmunoCellular Therapeutics (IMUC) trended steadily downwards following the company’s second quarter conference call and business update early in August. We wrote after the event that the stock was likely to stagnate given the lack of a defined timeline for the Phase II ICT-107 trial read-out. The company doesn’t plan to announce the achievement of the 64th event in the trial, a poor decision in our opinion given that investors will be hesitant to enter the name with trial results due any time in 4Q12 or 1Q14 – a broad timeframe for catalyst traders. PropThink Premium subscribers who went short when we alerted them to the expected decline saw a return of 20% within two weeks.
ChemoCentryx (CCX) and GSK (GSK) announced on Friday that a Phase III study of the experimental Crohn’s Disease treatment vercirnon, the SHIELD-1 study, failed to reach its primary or secondary endpoints. The stock tumbled almost 50% in early trading, but rebounded to close down 30% on Friday. PropThink initiated on CCXI in early August, suggesting that with multiple Phase III catalysts coming into the end of the year, the stock was likely to appreciate. The SHIELD data was unpredictably early, nevertheless we got the trade wrong. Mr. Deryugin is reassessing the position and will likely update investors next week.
Curis (CRIS) earlier in August added two new cohorts to its ongoing Phase I study of CUDC-907 and increased target enrollment in the study from 36 to 117 patients. PropThink in mid-July suggested owning CRIS almost exclusively for CUDC-907, a dual HDAC and PI3K inhibitor, and the news that the trial has been expanded to evaluate more patients and more dose options is encouraging. PropThink Premium subscribers who entered the trade with us ended this week up 17%.
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In connection with SRPT, SSH, BLFS, IMUC, CCXI, INCY, and CRIS, PropThink has taken a long position.
