Last Updated on May 25, 2019 by Sultan Beardsley
The past week of trading was a mixed bag. On Monday we saw what I would call a “flash crash”. The DJI dropped over 600 points in the morning (-2.4%) and proceeded to have its worst day this year since January 3rd, 2019. Additionally, the S&P500 and NASDAQ shed -2.4% and -3.4% respectively making it the biggest single day of losses in 2019. U.S. stocks bounced back modestly however and by Friday the the DJI, NASDAQ, and S&P500 all closed green for the week. In an interesting article on Market Watch the author argues that the S&P500 will challenge its all-time-high set on May 1st; followed by a relapse to new depths.
Biotech followed a similar trend. The XBI (SPDR biotech ETF), XLV (Health Care SPDR), and IBB (iShares NASDAQ Biotechnology Index) rebounded +4.16%, +1.36%, and +2.77% respectively off lows on Monday May 13th.
I think this is the first time in U.S. history that the intraday trajectory of the stock market is determined by a tweet. In the short-term this should continue to be the case with statements from President Trump and media headlines being tightly linked to price action. Its important investors do not get get bogged down in the drama nor panic on red days ahead. A good strategy is to exercise caution with regard to swing and day-trades and load up on companies poised to grow over the next 1-5 years.
I do not foresee the trade drama subsiding as quickly as it began, but I also do not believe it will lead to the end of the bull-market (although I think we are in the end of the cycle). What we have is a stand-off where both sides are holding out for the best deal possible while conceding as little as possible. Anxiety over tariffs is not really anything new either. In 2018 we U.S stocks saw two 10% pullbacks fueled by tariffs and fed rate hikes; each one resulted in an abrupt pullback followed by a correction back up. Looking at the economic landscape fundamentally I see more upside to come this year.
ASCO Abstract Movers
The following companies moved last week after investors liked what they saw in abstracts for the American Society of Clinical Oncology (ASCO) conference on May 31st- June 4th, 2019:
- Iovance Biotherapeutics, Inc. (IOVA) $15.03
- +36% on Thursday May 16th.
- IOVA reported an overall response rate (ORR) of 44% in a phase 2 trial testing LN-145 in patients with recurrent cervical cancer. There was also 1 complete response (CR) and 9 partial responses (PR).
- Mirati Therapeutics, Inc. (MRTX) $73.91
- +11% Thursday May 16th.
- MRTX moved in response to data in Amgen (AMGN) abstract. AMG-510 (a KRAS G12C inhibitor) achieved a PR in 2 of 9 patients in a phase 1 trial.
- MRTX is developing its own KRAS G12C inhibitor (MRTX849) and has data expected later this year.
- MacroGenics, Inc. (MGNX) $18.71
- +15% over Thursday and Friday.
- MGNX’s abstract showed positive phase 3 data of margetuximab and chemotherapy vs. trastuzumab and chemotherapy in patients with HER2 + metastatic breast cancer.
Stocks To Watch Going Into ASCO
- Celldex Therapeutics (CLDX) $3.12
- CLDX really needs a win. In February of 2018 the company announced it was terminating development of its lead candidate due to poor efficacy. Since then its share price has been slash immensely and underwent a reverse split in February of 2019.
- Presenting updated phase 2 data on CDX-3379 in patients with Recurrent/metastatic head and neck squamous cell cancer June 1st at 1:15 pm CT.
- The company has a low float with only 13.77 million shares outstanding.
- Sierra Oncology (SRRA) $1.46
- Preliminary phase 1/2 data being presented on June 1st at 8:00 am CT.
- The drug is SRA737 and is being tested patients with Advanced Solid Tumors or Non-Hodgkin’s Lymphoma (NHL).
- Aduro BioTech (ADRO) $3.13
- Phase 1b data is being presented on June 3rd at 8:00 am CT. The data will be on ADU-S100 and Spartalizumab in patients with Solid tumors or lymphomas.
- ADRO is trading near its 52-week low of $2.34 compared to a 52-week high of $9.00.
- Nektar Therapeutics (NKTR) $32.02
- Phase 2 data is being presented on combo therapy with NKTR-214 and nivolumab in patients with Sarcomas.
- NKTR is presenting June 3rd at 11:30 am CT.
- MacroGenics (MGNX) $18.71
- Detailed phase 3 data for the SOPHIA study testing Margetuximab in patients with Metastatic breast cancer.
- Top line data announced February 6th, 2019 hit its primary endpoint catapulting the share price 126% from $11.35 to a high near $25.60. Since then MGNX has trended downward marginally.
- If the detailed data exceeds investors expectations I could see MGNX revisiting its 52-week high of $32.32.
- Puma Biotechnology (PBYI) $16.59
- Phase 3 data of Neratinib – NALA as a third line therapy for HER2-positive patients with metastatic breast cancer.
- Data was first announced in December, 2018. The study hit its progression-free survival (PFS) endpoint but missed its co-primary end-point of overall survival (OS).
- Furthermore, as I discussed in my Biopharma Stock Watch May 13th- 17th article PBYI has declined -57% since November, 2018. The primary driving force has been weakening sales of the company’s breast cancer drug Nerlynx.
- If updated phase 3 data shows signs of a path towards regulatory approval it could help stop the bleeding.
Other Biotech Stocks To Watch
Adverum Biotechnologies, Inc. (ADVM) gained +37% last week closing at $9.05. On May 16th the FDA lifted a hold on the second cohort in the company’s phase 1 trial. Patients with wet age-related macular degeneration (wet AMD)will be treated with a does 3X weaker than the first cohort. Available treatments for wet AMD can only slow disease progression so investors follow closely companies with viable drug candidates that could do more.
MeiraGTx Holdings plc (MGTX) rose +28% last week to $23.48. MGTX hit its primary endpoint in a phase 1/2 dose escalation study testing AAV-RPE65 in RPE65-deficient patients. The condition results from either missing or having a dysfunctional RPE65 gene that produces a protein needed for vision.
INSYS Therapeutics (INSY) had a brutal week losing over 70% of its market cap in a single day. During INSY’s 1Q19 earnings report the company alerted investors of bankruptcy concerns if INSY is unable to liquidate certain assets and cover legal fees. On top of the that INSY’s lead product Subsys (a sublingual fentanyl spray) is experiencing decreasing sales due to weaker demand in the transmucosal immediate-release fentanyl (TIRF) market.
If you bought INSY below a dollar on Monday you could have enjoyed a +40% run the subsequent day. Investing in INSY right now though, even short-term, is extremely risky in my opinion. It looks like the share price has found a floor around a dollar and could run again. However, I feel INSY is best played as a day-trade. Because of the risk of negative news surfacing after hours combined with the volatile market conditions holding a position overnight is too risky.
ADMA Biologics (ADMA) (My number 1 stock pick for May, 2019) had a nail-biting week. Since FDA approval of the prior approval supplement (PAS) for BIVIGAM, an intravenous immunoglobulin medicine for patients with Primary Immunodeficiency Diseases (PIDD), ADMA has declined around -18%. Price action like this is not uncommon in biotech. Hence the expression “buy the rumor, sell the news”.
Aside from short selling pressure (short percent of 49.63% on average for the past 20-days) ADMA announced a $45 million public offering at $4.0 per share. Its rumored that a few institutions were lined up ready to take the lot; our CTO called Charles Schwab and a few other brokers to see if shares were available for purchase and was told no. Interestingly, short percent went down to 37.12% on Friday, which is significantly lower than the usual 50-60%. Volume Bot’s indicator changed from neutral to “pay more attention to technicals and fundamentals” signifying abnormal short volume.
I remain bullish on ADMA biologics and added several time on dips last week. Although the offering caught me off guard I 100% approve with how management plans to spend the money. If you have not already done so I suggest reading the press release (PR) announcing the offering.
In the PR ADMA informs us that they will be using the proceeds to support ASCENIV and BIVIGAM commercial launches, increase their manufacturing capacity, procure more source plasma, and expand their plasma collection facility network. All of which point to the company entering a pivotal growth stage.
The stakes are undoubtedly high. ADMA needs to execute efficiently and effectively on expansion and commercialization plans. If ADMA falters we will see more downside, but if they succeed I see the share price entering double digits by 2020. My money is on the latter happening (literally). I would not be surprised in Form-4’s and/or 13G’s surface next week revealing Perceptive Advisors and insiders participated in the offering.
Top Swing-Trade Candidates Next Week
CLDX, MGNX, PBYI, INSY, ADMA
I am/we are long ADMA