Healthcare Business

Top Biotech Stocks to Buy and Stocks to Short From PropThink

The world of biotech investing is always a difficult one. Often a binary event, such as a Food and Drug Administration (FDA) approval or a life-saving capital raise, is the difference between not only success or failure, but survival. The biotech analysts at PropThink are trying to handicap the best and worst scenarios on the stocks they cover.

Investors need to remember that biotech names can be highly speculative and are not suitable for conservative portfolios. It is also important for us to mention that PropThink often holds a stock or option position in the stocks they offer positive research analysis on. Conversely, they may be short or buy puts on names they are negative on.

TG Therapeutics Inc. (NASDAQ: TGTX) got hammered last week and PropThink says to buy the latest dip. The company is developing two early-stage but very promising oncology drugs. Backed by an extremely strong management team, and with expectations high for a catalyst rich second half of 2013, investors may want to use any pullback in this volatile name to add stock. The Thomson/First Call price target for the stock is $11.50. A move to the price target would be an 80% gain for investors.

Medivation Inc. (NASDAQ: MDVN) was another stock that got clipped last week on news that Johnson & Johnson (NYSE: JNJ) was acquiring its closest development stage competitor, Aragon Pharmaceuticals. The deal unnerved many investors who view Aragon and ARN-509, its Phase II prostate cancer treatment, as a key threat, one enhanced when matched with Johnson & Johnson’s strong balance sheet and pharmaceutical experience. However, the Prop Think team thinks that Medivation’s position is stronger than it appears on a number of fronts, and that the takeover of Aragon is not as material of a threat as the market first perceived. The consensus price target for the Medivation is $68.

Isis Pharmaceuticals Inc. (NASDAQ: ISIS) continues to be a name to buy at PropThink. The company has shown tremendous data points and impressive numbers from their Phase II trial of ISIS-APOCIIIRx in patients with high triglycerides and type 2 diabetes. APOCIIIRx, as a triglyceride-lowering therapy, would compete directly with Amarin Corp. PLC’s (NASDAQ: AMRN) Vascepa, and the mid-stage results suggest that Isis’s candidate is far more effective than Amarin’s ultra-pure fish oil pill. Wall Street is decidedly split pro and con on this volatile stock. The consensus price target is $18, which is $8 less than where the stock closed on Friday.

Biogen Idec Inc. (NASDAQ: BIIB) was another name that got pounded during the recent market sell off, but rallied strong late last week. Wall Street investment bank Cowen raised concerns over the sustainability of their Tecfidera product launch, specifically its growth trajectory and potential for European data protection. The concerns were deemed totally unwarranted by the PropThink analysts and presented a solid buying opportunity. The consensus price target for the biotechnology behemoth is $232.

Durect Corp. (NASDAQ: DRRX) is truly a micro cap stock trading at just over $1. The FDA accepted the company’s new drug application  for Posidur, which is used for the treatment of postoperative pain. The drug is an injectable sustained release formulation of the local anesthetic bupivacaine. It is administered during surgery to the surgical site, where it continuously releases therapeutic levels of bupivacaine using Durect’s SABER controlled release technology. Clinical data on Posidur suggests 72 hours of uninterrupted local analgesia. The consensus target of $2.75 represents a 150% move from the current trading level. It is important to remember illiquid micro cap stocks are only suitable for the most aggressive accounts.

Amedisys Inc. (NASDAQ: AMED) got hammered on Friday and PropThink has been shorting the home health care space since the Centers for Medicare and Medicaid services (CMS) started sniffing around these high-margin, government payer-driven businesses. Friday the CMS publicized a regulatory proposal that Medicare would be cutting reimbursement rates by 3.5% annually over the next four years. This would leave Amedisys very vulnerable to earnings shortfalls. Remember, short selling is also for very aggressive accounts.

With a penchant for large-cap names with huge momentum and small-cap names on the verge of a big success, PropThink offers a good balance of biotech information and data. Again, investors should remember that some of the highly speculative names may be unsuitable for conservative portfolios. With that caveat in place, some of the names also could lead to spectacular gains.

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