Listed in: Best Biotech Stocks, Best Penny Stocks, Top Biotech Stocks, Best Biotech Stocks, Penny Stocks Breaking Out, Biotech Stocks Breaking Out Today we are featuring twelve biotech stocks that have been breaking-out in recent weeks. What's important to notice is that each of this is above its 50 day and 200 day moving average. One of the first things I do when I am checking for the potential of a stock is to look at is it improving or not improving. A great way to find a stock that has good things going for it is to screen for those that are above both of these moving averages. I am purposely using FREE TOOLS in this example rather than the premium tools you find on certain member sites. When I screen for moving averages I look at five day, thirty day and fifty day and 200 day. I do not necessarily want to see that the stock is above all of those, but the shorter term moving averages does tell you if something is wrong with the stock. Moving average are only part of the equation. We then look to fundamentals.
Let's start with my goal for the Twelve BioTech Stocks Below:My goal is to find stocks that others have undervalued. My goal is to find those that are true turn-around candidates. Stocks that have been down but have recovered some, but have a significant upside. I want a stock that either has profitability or a damn good reason why it is a value now. With biotechs it is often a new drug or a new technology that is in testing. If everything goes right, the stock moves up. If there is a set back, the stock dives. If all hope is lost, it goes way, way down. I love biotechs AFTER recent financials are out. I love biotechs between the periods when testing of a new drug is anticipated to be reported on. I do not like holding a higher risk biotech through the release of financial data or when an update is likely on a particular phase of testing. The smaller biotechs usually end up with some bad news. I have done this enough and when I hold such a stock I always put notes to myself about when the next phase of testing is likely and I look for an exit in advance of that. I use limit orders to get me modest profits when they occur. I always make sure there is sufficient volume to cover any sale I have to do. Typically in very tightly traded smallcaps you never want to buy more than about the daily average volume. These stocks in this list are not lightly traded, so they are not as great a risk in that regard. Up next I am going to show you the full list. I am going to put these in simple spreadsheet that shows you how they are in relation to their moving average. After that we are going to take these one by one. Finally I will give you two strategies to play biotechs.
As you can see above, this list is in alphabetical order. The main reason for that will be shown in the two strategies to play biotechs. Never fall in love with a single biotech. They will break your wallet's heart. Fall in love with a group as those strategies will say, and know when to totally break-up. You will be breaking up about four times per year, FYI. The reason I am showing the moving averages here is that you need to know that the stock has a forward momentum. The way I have screened this selection is from - number one - already knowing these stocks well. Second - I eliminate those that are not showing some upward momentum. Third I am looking at the recent financials filed and the latest updates they have given by press releases. I have "heard" some of the investor conferences via the transcripts at Seeking Alpha. I am going to go through these one by one, but I am not going to give you overwhelming detail. I am simply going to give you the information as to WHY a particular stock is in the list. If you look at the strategies you will understand that we are not trying to find love. We are trying to further select a few of these that are most likely to pay-off. How many you play is up to you and your available funds. Three to four is the minimum number in such a strategy, and I will detail how that works later in this post. We are going to look at these in sets of four alphabetically.
Ampio Pharmaceuticals Inc. - NYSE MKT: AMPEThe reason I have AMPE on my list is that there is a positive momentum in the news. More importantly, they have just put out the latest release on this in the past 15 days or so. Look at the last two press releases from AMPE. Ampio Pharmaceuticals, Inc. Announces Positive Results for Ampion in Osteoarthritis of the Knee Clinical Trial - (Wed, Aug 14) Luoxis Diagnostics, Inc. announces positive results from first clinical study conducted with company's proprietary diagnostic platform - (Thu, Jun 20) I say the news is "positive" because even AMPE uses the word positive in its headlines. Also the product Ampion is achieving the results. A 40% reduction in pain with improvement in overall quality of life with few, if any, adverse reactions. What more could they ask for out of this trial? The downside is that further trials will result in changed result. Another risk is readily apparent when you look at the chart: You can see it has steadily moved up with the exception of a slight drop-off right before this latest update on August 14th. (That's why we do not hold through likely updates.) The risk is that there is a lot of downside if the news suddenly changes.
Astex Pharmaceuticals Inc. - NasdaqGS: ASTXThis is one of my favorites, and it has a big move in the past week. The recent sharp move upwards does lead one to holding back on jumping in here necessarily. This becomes one to grab on a pull-back only. However, let's look at why this one is so strong. I am not going to put all of the latest headlines in, nor am I going to throw in a bunch of quotes from the latest 10-Q. First the risks with ASTX: "Since inception, we have funded our research and development activities primarily from private placements and public offerings of our securities, milestone and other payments from collaborators, sales of our products, and royalty revenue on sales of Dacogen. As a result of our substantial research and development expenditures and minimal product revenues, we have incurred cumulative losses of $330.2 million through June 30, 2013, and have not consistently generated enough funds through our operations to support our business. Although we were profitable in the last three years, we expect to have operating losses over the next few years and we may never achieve sustained profitability." These risks are further detailed in the 10-Q Now the upside: "RBC Capital reiterated an Outperform rating on Astex Pharmaceuticals (NASDAQ: ASTX) with a price target of $9.00. Comments follow topline results from the ongoing phase 2 of SGI-110 in patients with AML and MDS. Analyst Michael Yee continues to believe the drug is undervalued. In his opinion, the SGI-110 looks much more active than older Dacogen (Eisai)." From StreetInsider - Link at the end of this article in our sources section.
Accelerate Diagnostics Inc. - NasdaqCM: AXDXThe insiders have suddenly started huge buys and other acquisitions of shares of AXDX. Directors and board members have acquired 2, 153,650 shares valued at $17,528,114 during August as reported and found on InsiderInsights - see the link the sources section at the end of this article. The best official news on AXDX is found in its 10-Q for the period ending June 30, 2013. With its rights offering I am sure the Company was likely not wanting to complicate a rights offering with great press releases. We have to read into this one from the 10-Q, and from that filing we see they now have an abundance of cash on hand. Even their statements see positive where they are talking about the downside: " .... These forward-looking statements are based on assumptions that the Company will retain key management personnel, the Company will be successful in the development of the BACcel™ system, the Company will obtain sufficient capital to complete the development of the BACcel™ system, the Company will be able to protect its intellectual property, the Company’s ability to respond to technological change, that the Company will accurately anticipate market demand for the Company’s products and that there will be no material adverse change in the Company’s operations or business ... " Now look at this five year chart: I am very comfortable with AXDX despite the fact the company is really right near its FIVE YEAR HIGH. Of course nobody should buy at the five year high.
BioCryst Pharmaceuticals Inc. - NasdaqGS: BCRXLet's start with the chart for BCRX: Normally I look at a chart like that and run. The stock was less than two bucks just six weeks ago and now it is over $6. From it's June low to its August high this stock was up 360%. That's incredible for a NasdaqGS stock. Let's look at why it did that and - more importantly - why we would ever consider it at the current level of $6.38. Let's start with a board member buying five million (and two) dollars worth of BCRX on August 2nd as part of the Company's offering that closed on August 6th. One of hte reasons I like this buy so much is that this insider is paying about three times the price the stock was trading just weeks ago. While he could have certainly bought back then in the market, he was willing to pay the $4.40 price. He dropped a hefty sum of $5,000,002 for this purchase. (Source is at end of the article.) Another reason - Let's quote from the August 8th press release from BCRX: “The fact that we met all of our goals for the BCX4161 Phase 1 trial and secured government funding for the peramivir NDA filing represents a significant step forward for BioCryst,” said Jon P. Stonehouse, President & Chief Executive Officer of BioCryst. “We look forward to initiating the BCX4161 Phase 2a clinical trial and to submitting a peramivir NDA by year end. Our very successful recent financing has allowed us to attract additional high quality investors into the company and has provided us the cash runway to carry us into 2015.” I would likely hold and not add over current levels. Under the $6.38 current share price I would take small steps and average down over six weeks or so. A lot of good news can come here, and if it does this will further move up.
Concord Medical Services NYSE: CCMLet's look at the latest quarterly results. Then let's look at the CEO and COO acquiring shares from other shareholders. Second Quarter 2013 Highlights
- Total net revenue, which consists of net revenues generated from the network business and hospital business, was RMB254.0 million ($41.4 million) in the second quarter of 2013, an 86.1% increase from RMB136.5 million in the second quarter of 2012.
- Gross profit in the second quarter of 2013 was RMB105.2 million ($17.1 million), a 12.1% increase from RMB93.9 million in the second quarter of 2012.
- Net income attributable to ordinary shareholders in the second quarter of 2013 was RMB29.1 million ($4.7 million), a 21.9% decrease from RMB37.2 million in the second quarter of 2012.
- Basic and diluted earnings per American depositary share ("ADS") in the second quarter of 2013 were both RMB0.65 ($0.11).
- Adjusted EBITDA (non-GAAP) in the second quarter of 2013 was RMB104.3 million ($17.0 million), a 11.3% increase from RMB93.7 million in the second quarter of 2012.
Idenix Pharmaceuticals Inc. NasdaqGS: IDIXThis is one high beta stock. The swings are notorious here, and you would likely not buy at current levels if you were ONLY looking at the chart: Quoting Ron Renaud, the President and CEO for Idenix, from the August 7th release: "In the second quarter, we saw significant progress of our lead HCV development program, samatasvir, and continue to be on track to report data from the first patient cohort in the fourth quarter of this year," said Ron Renaud, Idenix's President and Chief Executive Officer. "We remain committed to our HCV nucleotide franchise, and we are actively pursuing additional paths forward with the ultimate goal remaining the evaluation of an all-oral internally developed pan-genotypic combination regimen including samatasvir and a nucleotide inhibitor." In reading bullet points from that same release, we see that there have been no "treatment-related" serious adverse events in the clinical data to date. I hope there none serious at all.
They gave some upcoming info:
- Rates of sustained virologic response measured four weeks after the end of treatment (SVR4) will be available for the first cohort of patients in the fourth quarter of 2013.
- A second trial (HELIX-2) of samatasvir, simeprevir and TMC647055, a once-daily non-nucleoside polymerase inhibitor boosted with low-dose ritonavir being developed by Janssen, is expected to begin enrolling genotype 1 or 4 treatment-naive HCV-infected patients in the third quarter of 2013.
IGI Laboratories Inc. NYSE MKT: IGTheir press release that gives bullet points about the most recent 10-K is a great source of information here. These tell the short story:
Second Quarter and Year to Date 2013 Highlights
- Total revenues of $3.8 million in the second quarter of 2013, an increase of 57% over the same quarter in 2012
- Total revenues of $7.5 million for the six months ended June 30, 2013, an increase of 76% over the same period in 2012
- Total revenues generated from the sale of IGI label generic topical pharmaceutical products for the three and six months ended June 30, 2013 were $1.4 million, and $2.8 million, respectively
- Revenue from our formulation and manufacturing contract services business increased by 10% year to date in 2013 as compared to the same period in 2012
- Gross profit increased to 30.1% for the six months ended June 30, 2013 from 28.6% in the same period of 2012
- Filed one Abbreviated Drug Application, or ANDA, with the U.S. Food and Drug Administration (FDA) in the second quarter of 2013
- Net loss was $0.4 million and $0.6 million in the second quarter of 2013 and 2012, respectively
- Net loss was $0.7 million and $1.3 million for the six months ended June 30, 2013 and 2012, respectively
- Net loss included research and development costs of $0.8 million and $0.6 million in the second quarter of 2013 and 2012, respectively
Novavax Inc. NasdaqGS: NVAXThere have been a ton of insider buys for NVAX over the past six months, with only a single sell. The positive news from the company is very reassuring. So much so for current investors, the stock has been setting new 52 week highs lately. They are getting strong support in the medical community as this release showcases quite nicely: Genocea Biosciences Selected To Present Late-Breaking Oral Presentation At ICAAC 2013 - (August 28th) I am not going to list all that they have in the pipeline - and the status for all of their drugs. The press release of August 8th showcases it all nicely. Also, the have $40.6 million in cash to do what they need to do. Stanley Erck, the President and CEO of the Company, had these comments in the August 8th conference call: "So the second quarter. The second quarter events including up to now, I think, might have been the most productive quarter we've had yet. In April, we announced a new Phase II data for RSV in women. In July, we announced data from an RSV trial in the elderly and exploiting our core technology we began a ground-breaking program for a vaccine candidate against new emerging virus in China, which is H7N9. In parallel, we have responded to and are responding to a new threat coming out of the Middle East and Europe, the coronavirus now called MERS-CoV standing for Middle East Respiratory Syndrome." We're very comfortable with NVAX in our twelve.
Pacific Biosciences of California - NasdaqGS: PACBThe Company is set with the cash it needs for now. They are making progress. The recent conference call had CEO Michael Hunkapiller noting, "We booked new orders for 7 PacBio RS II systems and installed 3 systems, which brings our backlog of systems up to 10 as of the end of June. We booked 23 new orders for RS II upgrades. As a reminder, we booked orders for 31 upgrades in Q1 out of an installed base of 74. We installed 34 upgrades during Q2, leaving 20 upgrades in backlog at the end of June." He further pointed out, "Total revenue grew sequentially to $6 million and with the growing backlog, we are well positioned to drive further revenue growth this year. And finally, we raised an additional $11 million in equity using our aftermarket stock offering through Cantor Fitzgerald. Year-to-date, we have raised $20 million in equity plus $20 million in debt. This cash provides us with greater flexibility and time to further develop our products and grow the business." (Source Seeking Alpha - see sources at end of article for link.) Recent days have seen the company two 52 week highs, the second of which is $4.72 from August 26th. The Company does not put out a lot of press releases. Some of the best information comes in its conference calls. That's where I get my positive outlook on PACB.
PharmAthene Inc. - NYSE MKT: PIPThis is another stock creating a new 52 week high just days ago. At $2.42 last week, you would have to go back to 2011 to see higher levels. Why? I think part of the reason for the recent surge is this article by Jeff Eiseman at Seeking Alpha: "How PharmAthene And Theraclone's Assets Will Enhance Shareholder Value" I am not going to copy over his rationale to this article. I will just say this: I read this when it came out and noticed the stock immediately went on and set these new 52 week highs after that. Read Mr. Eiseman's rationale, and I am sold after reading it. (Link to his article in the sources section at the end of this article.)
Sinovac Biotech Ltd. - NasdaqGS: SVA Another 52 week stock. This one hit it on Friday at $5.20. They reported outstanding results in their press release of August 13th: (unaudited numbers) Second Quarter 2013 Financial Highlights (period-over-period comparisons to second quarter 2012)
- Total sales increased by 86.4% to $17.5 million from $9.4 million.
- Gross profit increased by 70.1% to $13.6 million from $8.0 million.
- Net income attributable to common stockholders was $1.3 million, or $0.02 per basic and diluted share, compared to net loss attributed to common stockholders of $1.6 million, or $0.03 per basic and diluted share.
- Cash and cash equivalents totaled $92.0 million as of June 30, 2013, compared to $91.2 million as of December 31, 2012.
ZELTIQ Aesthetics Inc. - NasdaqGS: ZLTQIf this Company can do what they say they can do, it will be priceless. "Selectively reducing stubborn fat that may not respond to diet or exercise" is roughly what they claim with ZELTIQ(R). Their financial press release of July 31st gave some stats:
- Total revenue of $26.3 million, up 18% year-over year and 32% sequentially
- Consumable revenue of $13.4 million, up 30% year-over-year and 50% sequentially
- Consumable revenue reaches 51% of total revenues
- 136 systems shipped, bringing total system installed base to 1,731
The First Strategy: Short Term In and Out Technical TradingRisk: Aggressive with loss of principle possible versus a potential gain that is unknown. One of the best ways to play biotechs is to understand their schedule. When you have a list like the list above, make a spreadsheet that details the dates when they put out news, release financials, (10-Q's and 10-K's), when they promised updates on drug trials, dates when milestones are promised and more. This spreadsheet is to give you a good idea of when it is safe to trade in and out of this stock. With most pharmaceutical companies that have several phases of drug trials, it is never good to be holding the stock when they put out an update. While they may put out a raving success story, many such releases have so much parsing of words that they have the wrong affect on the investing community. You want to play the anticipation of good news in these stocks. With so many that are at or very, very close to their 52 week highs presently, this list is unique in that the investors are already excited. Some of these will continue to run in anticipation of the next release or other update. It is no coincidence that this list is out after all of these companies have only recently provided key updates in the last 30 days and are not really expected to put out any official news for at least 30 days.
It goes like this:
- With this strategy you would buy no less than four of these.
- You would pick those that you feel most comfortable with.
- You would decide on your total investment and split it up by the number of these you choose.
- You even go into odd lots if necessary to keep the investments about the same.
- Place an order to buy when you feel the stock is at a relatively stable level. Do so for each.
- Once you get orders confirmed, you should already know what profit percent you want for each.
- I would then suggest putting in a GTC sell order for each to close those positions when they hit the percent gain you desired. Remember the transactional cost in and out.
- As one position closes out with a gain, find a replacement using only the principle you used before.
What is the potential to do well?It comes down to did you pick the right stocks? If you did, this is going to work great. If you picked the wrong stocks, you will lose. You need to investigate the stocks you choose. Understand that in a list like this there are a lot of great reasons to think that each and every one of these is going to do great. The flip side of that coin is that any one of these can have a disaster or a set-back and one press release could wipe out gains and even some of your principle. One bad stock that loses 50% can take away the profits on several others. You much watch the news. You should take modest profits. Most importantly - unless you are certain the company you are in in this sector has positive news for sure (in your eyes), bail out a couple of weeks before it is likely to release earnings or other information. Remember this: These stocks have ALREADY had some great reports from management. People are expecting BETTER in almost all of these cases. That's why I have timed this list for the first trading day of September.
The Second Strategy is Not Really a "Strategy" - It's a Buy and Hold while Setting a Windfall Profit GTC Sell OrderRisk less aggressive, but you will see up and downs.
Here is how this works:
- Pick those you like.
- Set an entry price you like.
- Place a buy order in.
- Once confirmed set an extraordinary profit GTC Sell Order that would capture a huge profit should the stock spike. I do these generally at 50%. Anytime I see a 50% profit, I generally take it and reassess.
When do you sell?
- When you see the profit you like.
- When the company puts out a press release you see no recovery from.
- When you about even, but the money is now more critical to you due to other obligations or liquidity issues.