It’s been just under five weeks since the PropThink team laid out the investment thesis for Diadexus (DDXS). We said, “We calculate a probability weighted fair value ahead of the darapladib read-out at $1.67. In our view, an ~$0.80 entrance point is justifiable.” Since July 10, shares have nearly doubled from $0.80/share to new highs of $1.54/share before pulling back to $1.35, resulting in a five week trade netting 77%. We highlighted the company as a companion play to Glaxo’s (GSK) developmental Lp-PLA2 inhibitor, darapladib. For those who haven’t read the report, if darapladib works and receives approval (a longshot), we see fair value for DDXS at over $7.00. Furthermore, the existing business offers a strong backdrop to the darapladib trade.
Shares of Durect Corp. (DRRX) and Pain Therapeutics (PTIE) shot up in tandem mid-day on Friday as investors caught wind of a new clinical trial filed by Pfizer (PFE) for Remoxy, an extended-release and abuse-deterrent formulation of oxycodone. The new study compares the pharmacokinetics and bioavailability of two PF-00345439 (Remoxy) formulations. Pfizer reiterated in May that it had yet to make a go/no-go decision on the continued development of the oxycodone formulation, punishing both stocks. Nevertheless, Pfizer initiating a new trial for Remoxy is a bullish signal that Remoxy hasn’t been scrapped. As the stocks climbed in Friday’s trading, we suggested to PropThink Premium subscribers that a long position made sense given the high reward if either company announces that Remoxy is moving ahead; both positions ended the day in the green, although we’re interested in the news flow from here. Here’s Mr. Napodano’s post-quarterly update on Durect from last week.
In a note submitted to PropThink Premium subscribers this week, we commented on the recent weakness in shares of Sarepta (SRPT) and noted that it constituted a buying opportunity for long-term investors as the stock bounced along its 200-day Simple Moving Average. Shares popped slightly on Friday with the release of previously unseen Phase II results for drisapersen. We like the long-term platform story at Sarepta regardless of events over the next six months, and will be keeping powder dry to add to our position as the accelerated approval thread plays out. Here’s our initiation.
Another note to Subscribers gave our brief take on Inovio’s (INO) share price. Currently trending downwards from former highs of $3.03/share, we suggested that the company had rehashed old news in a Thursday press release in order to prop up its deflating valuation. The ‘news’ that caused Thursday’s rally – a malaria trial to be initiated early next year – is actually 7 months old. Although we weren’t fortunate enough to get a borrow, subscribers with the wherewithal to sell a few borrowed shares saw a return of 15% by Friday’s close.
Like what you see?
Mr. King outlined the Tekmira (TKMR) investment thesis in May and reiterated this week that shares were still favorably price – the RNAi therapeutic developer carries an enterprise valuation of less than $40M and develops the (arguably) leading RNAi delivery technology, lipid nanoparticles. Compared to Alnylam’s (ALNY) rich $3B valuation, there’s a lot of gap to be filled, and we’re long-term holders.
While we suggested to Premium Subscribers last week a tentative position in Xenoport (XNPT) as the company prepares to reveal early data from a “next-gen” MS treatment XP23829 (Biogen Idec’s (BIIB) Tecfidera has been wildly successful) during the third quarter, the trade has thus far proved fruitless. Xenoport is richly valued considering that Horizant has yet to demonstrate traction, but we like the prospects for a move higher if 829 demonstrates a quality clinical profile in multiple early studies before September is out.
As we suggested, ImmunoCellular Therapeutics (IMUC) has traded lower and lower since the company’s second quarter conference call last Wednesday. PropThink Premium subscribers were alerted to the stagnation after the second quarter update. Shorting the stock has already been good for 20% as investors lose interest without an imminent catalyst. Nevertheless, we’re eyeing the stock for a larger long position as it continues to break down. Interest in the immunotherapy developer should begin to pick up later this year.
Since Editor Jake King penned an initial report on Cubist (CBST) in May, shares have made for a profitable investment, appreciating steadily through a legal victory over Hospira and strategic acquisitions of Trius (TSRX) and Optimer (OPTR) – not to mention TSRX’s 200%+ gain for PropThink readers this year. The PropThink team believes that recent acquisitions have set the foundation for Cubist’s continued growth in the profitable antibiotic market. For the latest update on the company’s value proposition, see Mr.Deryugin’s report; he believes Cubist is primed to become one of the leading antibiotic plays. The stock is up 35% since we highlighted the name in May.
Jason Napodano believes LabStyle (DRIO), with its unique phone-based glucometer, is undervalued given the integration of numerous revenue opportunities in the business. The device should receive approval in Europe before the year is out, and while the stock is relatively illiquid, the approval attention might make for a nice trade coming into the end of the year. It’s on our radar through year-end, as well as Mr. Napodano’s top regenerative medicine pick, Neuralstem (CUR), for which he wrote an update at the beginning of the week.
In connection with DDXS, DRRX, PTIE, SRPT, TKMR, XNPT, IMUC, and CBST, PropThink has taken a long position.