Last Updated on May 12, 2019 by Sultan Beardsley
Healthcare finally took a turn for the better. The XBI (S&P Biotech ETF) got off to a rough start declining 4 points but bounced back +3.86% by Friday’s close. The IBB ( iShares NASDAQ Biotechnology Index) and FBT ( NYSE ARCA BIOTECHNO ETF) followed a similar trend. The Direxion DAILY S&P bull ETF (LABU) had a strong close too down only a couple points for the week after a healthy rebound from Wednesday’s lows.
Among stocks making headlines was Nabriva Therapeutics (NBRV), VistaGen Therapeutics (VTGN), Heron Therapeutics, Inc (HRTX), and Pacira Pharmaceuticals, Inc (PCRX). NBRV shed ~ 30% after receiving a complete response letter (CRL) for their antibiotic Contepo (fosfomycin). HRTX also received a CRL for its non-opioid postoperative pain management product HTX-011 closing down 30% at $17.0. HRTX competitor PCRX benefited from its misfortune gaining 17% for the week. VTGN failed to hit its primary endpoint in a phase 2 study for its lead compound AV-101 in treating patients with treatment-resistant depression. The share price declined 47% on Thursday.
Medicare for all debate is still an active political topic. I think however people are starting to realize the probability of such legislation becoming law is minute. For instance, one consequence of Medicare for all is over 1 million people working at private insurance companies could be put out of work. An ample number of influential lobbyists who put many of the lawmakers in office have the pull to make sure Medicare for all does not go through. In conjunction with a strong earnings season, I only see more upside in 2019 for healthcare stocks. Come election time we may need to reevaluate.
Clinical Stage With A Catalyst
- DURECT Corporation (DRRX) $.87- Is reporting 1Q19 financial results and preliminary data from a clinical trial testing DUR-928 in patients with alcoholic hepatitis May 7th (Tuesday) after the market closes.
- Friday DRRX closed up +49% making next weeks price action even more interesting. A large pullback could present an attractive entry opportunity.
- ADMA Biologics (ADMA) $5.0- Ran hard Friday up 11% after hours after yet another week of intense short selling. In the past 20-days, 49% of the volume was attributable to short sellers. On Friday ADMA announced it would be tapping into $27.5 million from a preexisting credit facility with Perceptive Advisors to support ASCENIV commercialization and secure another plasma facility. An amendment was made to the credit agreement giving ADMA at its sole discretion the ability to access an additional $12.5 million if/when BIVIGAM is approved.
- Investors took this latest development as an indicator that BIVIGAM approval is around the corner. I think a reasonable timeframe is May-June.
- ADMA is our number biotech stock pick right now.
- Precipio (PRPO) $7.89- Has been on a roll. Since April 1st PRPO has gained nearly 300%. The company specializes in the development of precision diagnostic tools like its ICE-COLD PCR used for genetic testing. Its other product HemeScreen is used to screen for mutations in blood cells. Positive material developments in April were:
- April 3rd-Methodist Health adopted PRPO’s HemeScreen.
- April 9th- Identified a manufacturer for its IV-cell media.
- April 24th- Launched its global expansion strategy.
- April 26th- Took final steps toward gaining NASDAQ compliance.
- April 29th- Signed the company’s first major international service contract with a healthcare management group in Egypt.
- Intra-Cellular Therapies Inc (ITCI) $14.29- Phase 3 topline data due in the 2Q19 for ITI-007 as a monotherapy for the treatment of bipolar depression.
- ITCI has declined over 30% in the past 6-months.
- Krystal Biotech (KRYS) $31.37- Topline phase 2 data due in the first half of 2019 for KB103 as a treatment for Epidermolysis Bullosa.
- KRYS is developing gene therapies to treat serious skin diseases. In the past 6-months KRYS gained over 10 points. In the last five days its shed ~2 points.
- Kezar Life Sciences Inc (KZR) $19.29- Phase 1b data due 2Q19 for its product KZR-616 as a treatment for Lupus.
- In the past 6-months KZR has hit a high of $36.33 and low of $14.77. Since it’s at the lower end of this range, I could see it gaining momentum as the quarter continues
- Sesen Bio (SESN) $1.30- Updated phase 3 preliminary data due on May 13th, 2019. SESN recently announced it would be voting on a reverse split at its upcoming shareholder’s meeting. It’ll be interesting to see where the share price lands before and after the data readout.
- In the last 2-weeks, SESN has seen a high of $1.32 and a low of $1.02 (a difference of ~25%). I think with such a large upcoming catalyst SESN could break this range and potentially see $2 or higher.
Top 3 Swing Candidates
DRRX, ADMA, SESN