Recapping Our Week in the Healthcare Sector

Mr. Deryugin started off the week updating the thesis on antibiotic developer Cubist Pharmaceuticals (CBST), which acquired Trius Therapeutics (TSRX) and Optimer Pharmaceuticals (OPTR) in 2013. Cubist missed consensus on the top and bottom lines in the third quarter, although the midpoint of Cubist’s revenue guidance for 2013 remained unchanged at $1.0225 billion. This miss, we believe, created an opportunity ahead of a catalyst-rich 2014: Cubist submitted a New Drug application for tedizolid phosphate in October; will submit a NDA for ceftolozane/tazobactam in the first half of 2014; and will run a phase 3 study of ceft/tazo in hospital-acquired/ventilator associated bacterial pneumonia this year.

On Tuesday, PropThink published a few of our winning picks from 2013, as well as some that didn’t pan out. It was our first full year of operations, and we’ve thoroughly enjoyed interacting with our readers. A heartfelt ‘thank you’ to everyone who made PropThink.com a regular visit.

Pharmacyclics (PCYC) sold off significantly following the annual meeting of the American Society of Hematology in December. On Thursday we explained how the story – and opportunity – are shifting. Mr. Deryugin believes PCYC’s shareholder base is rolling over from those interested in speculating on a development-stage biotech to those following the marketing and sales execution of newly-approved Imbruvica (ibrutinib). Click here to read the column.

Neuralstem, Inc. (CUR) announced a registered direct financing on Friday morning. The raise should net the stem cell company just over $18 million, supplying the company with cash sufficient for another two years of operations. What many investors miss, however, is the company’s share count when taking into account warrants and options. On a fully diluted basis and including shares to be issued with this latest financing, Neuralstem carries a valuation north of $350 million. That’s rich in Mr. King’s view, but results for the companies two lead candidates in the next quarter could justify a significant revaluation. Read more here.

Shares of Synergy Pharmaceuticals (SGYP) rallied more than 35% during the last two weeks of 2013, driven largely by the announcement that the company should have data from the phase 2b trial of plecanatide in irritable bowel syndrome with constipation (IBS-C) at the beginning of 2Q14. That sets up a meaningful catalyst for SGYP, and we’re optimistic about the event; nevertheless, the data point is still 3-5 months out. The recent rally made for great trade from this summer,but SGYP has climbed too fast. Selling SGYP into this strength makes sense, with plans to repurchase the stock during the first quarter. Read more about SGYP, and why we’re optimistic about the forthcoming IBS-C data, here.

In connection with PCYC and CBST, PropThink has taken a long position.