AcelRx (ACRX) announced on Monday a partnership with Grunenthal GmbH for the commercialization of Zalviso, the company’s patient-controlled analgesia product, in Europe and Australia. On Thursday, AcelRx entered into a new credit facility with Hercules Technology Growth Capital. (HTGC), immediately drawing the first of three tranches, for $15 million. The company used $8.5 million of the first tranche to pay down its previous balance with Hercules, a deal signed in 2011, netting $6.5M for AcelRx’s balance sheet. The company has until June 30, 2014 to draw an additional $10 million on the Hercules facility. A final $15M tranche hinges on Zalviso being approved by the FDA on or before its July 27th PDUFA date. We estimate that AcelRx ends 2013 with $105 million in cash, including the upfront payment associated with the Grunenthal deal, and are optimistic about Zalviso’s approval next year.
With a close at $10.51 on Friday, ACRX has climbed more than 50% in the month since PropThink’s Premium members bought the stock. (We fleshed out our investment thesis in mid-November). We did not anticipate ACRX moving this high or this fast before year-end, thus we’ve taken some profits off the table with the intention of buying more ACRX in the first quarter of 2014.
Shares of Progenics (PGNX) closed this week higher by 17%. Progenics generated interest among retail biotech investors when the company announced definitive timing for the presentation of results from an ongoing phase 2 study of its PSMA-targeting antibody drug conjugate, which we recently discussed with PropThink Premium subscribers. Our entrance in the stock has performed well, and to see why we own PGNX for the time being, and understand where our concerns stems from, read our recent Premium-only article. In addition, BioDelivery Sciences (BDSI) continued to rip higher this week, taking our recent buy recommendation to PropThink Premium members into the green by more than 20%. Read the report – sent to our Premium readers on the 3rd – here.
Cempra (CEMP) this week updated investors (read the column) on recent developments with its two antibiotic programs, Solithromycin and Taksta. Cempra initiated SOLITAIRE-IV, the second of two phase 3 trials of solithromycin, testing an intravenous-to-oral regimen in patients with community-acquired bacterial pneumonia (CABP). The company still expects topline results from the ongoing SOLITAIRE-ORAL trial in mid-2014, a major event for the company. More important was the revelation that a phase 2 trial of Taksta (fusidic acid), the company’s treatment for prosthetic joint infections (PJI), continues to enroll slowly. Investors had hoped that Cempra addressed this for the final time in the fall. While we believe the update was net-positive for Cempra, which plans to move towards a phase 3 Taksta program next year, the market saw otherwise: CEMP ended the week down 10%.
CEMP did almost 10x its average volume on Friday and printed a compelling reversal signal on the daily: it’s a name to watch next week. Read why this is one of PropThink’s top picks in 2014.
Vertex Pharmaceuticals (VRTX) caught some investors off-guard this week with the results of a phase 3 study of Kalydeco in cystic fibrosis patients with the rare R117H mutation. The trial failed, but a subset of patients (50 of 63) with the mutation that were older than 18 performed well on the drug. Cystic fibrosis is an unmet need, and as we suggested on Thursday, the market seems to think that there’s a path towards FDA approval for these patients regardless of the phase 3 miss: VRTX climbed from a low of $64 on Monday to close the week at $71. VRTX has drastically underperformed in the fourth quarter, dropping from $77 at the end of October to a low of $58 following another disappointing quarter of Incivek sales. This week’s price action, despite a phase 3 miss, suggests VRTX may have found its bottom. Investors are looking forward to a pivotal new year.
In connection with CEMP, PGNX, ACRX, VRTX, and BDSI, PropThink has taken a long position.
