Whenever the mojo goes out of momentum stocks, whether it is fair or not, biotech usually comes along for the ride. Recently, the biotechs, whether they be large cap industry giants or smaller cap clinical stage companies, have been getting stung pretty good, and now may be a good time to look at companies with pending catalysts.
A new research note from RBC points out that while biotechs are down over the past few sessions without any change in fundamentals, some companies with big Phase 3 data coming this year have gotten hit hard and should be looked at. While the research covered 12 stocks with pending 2015 data, we focused in on the three with Phase 3 results on the way. They are ArQule Inc. (NASDAQ: ARQL), Inter-Cellular Therapies Inc. (NASDAQ: ITCI) and XOMA Corp. (NASDAQ: XOMA).
This biotechnology company is engaged in the research and development of next-generation, small-molecule cancer therapeutics. Its targeted, broad-spectrum products and research programs are focused on key biological processes that are central to human cancers. ArQule’s lead product, in Phase 2 and Phase 3 clinical development, is tivantinib (ARQ 197), an oral, selective inhibitor of the c-MET receptor tyrosine kinase.
The RBC team thinks that the interim analysis from the ongoing Phase 3 second-line liver cancer study for tivantinib could be out by the end of this year. They do stress the possibility that the data are not released until 2016.
The Thomson/First Call consensus price target for the stock is $4.50. The shares closed most recently at $2.05.
This company is developing novel drugs for the treatment of neuropsychiatric and neurodegenerative disease and other disorders of the central nervous system. It is developing its lead drug candidate, ITI-007, for the treatment of schizophrenia, behavioral disturbances in dementia, bipolar disorder and other neuropsychiatric and neurological disorders. Inter-Cellular is also utilizing its phosphodiesterase platform and other proprietary chemistry platforms to develop drugs for the treatment of cognitive deficits in schizophrenia and other CNS disorders. In addition, it is developing inhibitors against other targets for CNS indications such as Alzheimer’s disease, Parkinson’s disease and depression and non-CNS indications such as cardiovascular disease.
The RBC analysts think that the first Phase 3 data for ITI-007 will be out by the end of the year. We recently highlighted the stock as one having the potential for explosive upside.
The consensus price target is posted at $36.40. Shares closed the trading day Thursday at $20.45.
This company is a leader in the discovery and development of therapeutic antibodies. Its innovative product candidates are the result of its expertise in developing ground-breaking monoclonal antibodies, including allosteric modulating antibodies, which have created new opportunities to potentially treat a wide range of human diseases. XOMA is developing its lead product gevokizumab (IL-1 beta modulating antibody) with Servier through a global Phase 3 program for Behcet’s disease uveitis and non-infectious uveitis. XOMA also has an ongoing Phase 3 study of gevokizumab in pyoderma gangrenosum.
The RBC analysts expect that Phase 3 data from the Behcet’s study for gevokizumab and two Phase 3 studies in NIU will be released this year. Both could hold big potential trial data for the company.
The consensus price target is $8.71, and the stock closed trading Thursday at $3 per share.
Even with impending Phase 3 data on the way, these stocks are only suitable for very aggressive, risk-tolerant accounts. Should any of the data not hit expected levels, the stocks could be severely affected. However, if the data are good, there could be huge upside.