This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Biotech Stock Mailbag: Research Backs Shorting Micro-Cap Cancer Drug Stocks

Doctors currently use antipsychotics like Abilify or Seroquel for depression augmentation therapy, but these drugs carry relatively high side effects. If all goes well in the phase III clinical trials, '5214 will be approved with a label that demonstrates equal or better efficacy and a more tolerable side effect profile than the antipsychotics.

It's interesting to note that AstraZeneca (AZN), the marketer of Seroquel, chose to license '5214 from Targacept. Bristol-Myers Squibb's (BMY) Abilify is used more often than Seroquel for depression augmentation therapy today, so AstraZeneca clearly sees '5214 as a big opportunity to switch out Seroquel for '5214 and go after Abilify market share.

With relatively modest assumptions, '5214 could be a $1.5 billion to more than $2 billion drug five to six years after launch. At a 25% royalty, that's worth $400 million to $500 million to Targacept, expense-free.

Sticking with Targacept, Pelion2001 writes, "Hey Adam, I think you're overstating the make-or-break nature of the first Targacept phase III read out. What are required for registration are 2 of 4 positive trial results, so it does not all hinge on the first phase III study. This was emphasized at a recent Morgan Stanley presentation."

Understood, and point well made. I didn't mean to imply that the first phase III study of '5214 -- with results due in the fourth quarter -- is the penultimate clinical catalyst for the drug. AstraZeneca is running three other studies with results expected next year, all are important.

I do think it's fair to say that the first study will have a significant impact on Targacept's stock price because 1) It's the first phase III clinical trial, so it will receive a lot of attention; and 2) The design of the first phase III study mirrors the phase II study, which was so positive.

I remain a Targacept bull.

Let's talk about two biotech stocks causing frayed investor nerves and many anguished emails and Tweets: Amarin (AMRN - Get Report) and Cyclacel Pharmaceuticals (CYCC - Get Report).

Crappy Septembers aren't just for the Boston Red Sox. Amarin shares are slumping too, down 17% compared with a 1% decline in the biotech sector overall during the same time period. Amarin is down 50% from the high reached in late May.

On Monday, as expected, Amarin filed the AMR101 drug application with the FDA, seeking approval for treatment of patients with very high triglycerides. On Wednesday, Amarin shares fell 8% to $9.56 on no apparent news. The stock hasn't been this low since April before the company announced positive results from the AMR101 phase III "Anchor" study.

4 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AMRN $2.33 0.00%
AEZS $0.57 0.00%
CELG $118.71 0.00%
CYCC $0.96 0.00%
SNY $51.75 0.00%


DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs