Binary events -- clinical trial results and Food and Drug Administration approvals -- are the lifeblood of the biotech industry. As long as the drugmaker keeps getting positive results, the value of the stock will continue going up.
Here are three biotechs with upcoming events that could drive their value higher.
Exelixis (NAS: EXEL) was expecting data for its lead compound, cabozantinib, in medullary thyroid cancer by now, but last month the company told investors they shouldn't expect them until the end of September.
Either the patients taking cabozantinib are progressing slower than expected (good), the patients taking placebo are progressing slower than expected (bad), or a combination of the two (possibly bad). It's hard to know which option it is, but given the efficacy data we've seen so far testing cabozantinib in thyroid, prostate, and other cancers, I'm inclined to think the data will come out positive enough to get cabozantinib on the market.
Get turned on
BioSante Pharmaceuticals (NAS: BPAX) should report efficacy data for its female sexual dysfunction treatment, LibiGel, before the end of the year. The gel is essentially just testosterone, so the mechanism of action to increase women's libido is fairly straightforward. The biggest worry I see is that a higher-than-expected placebo effect might make it difficult for BioSante to prove that the drug works when compared to placebo.
Beyond the efficacy data, there's still safety data that will need to be reported before the company can apply to the FDA. And then investors will have to worry about whether the agency will view LibiGel as a lifestyle drug, which might raise the bar for the balance of efficacy and safety. Boehringer Ingelheim couldn't get its female sexual dysfunction drug, flibanserin, past the FDA.
Despite the future risks, though, there's no doubt BioSante will rise on positive efficacy data. With a market cap under $300 million, there are very little sales baked into the price.
Third time's the charm?
Amylin Pharmaceuticals (NAS: AMLN) and its partners Eli Lilly (NYS: LLY) and Alkermes (NAS: ALKS) are headed in front of the FDA for a third attempt at gaining approval for their once-weekly diabetes drug, Bydureon. The FDA should decide on or about Jan. 28.
Normally it's a good idea to avoid serial FDA appliers. If a company can't figure out what the FDA wanted after the first complete response letter, there's a good chance it never will. Witness Encysive Pharmaceuticals and Discovery Laboratories.
But in the case of Bydureon, I'm not sure the delay is really the companies' fault. The first complete response letter was so mild that shares of Amylin and Alkermes rose after the announcement. The request to run a new trial to check for heart issues after the second application was a complete shock to the companies and investors alike.
The trial was a success, so assuming the FDA doesn't have any other surprises up its sleeve, investors should finally get a chance to see how well Bydureon can compete against Novo Nordisk's (NYS: NVO) Victoza and oral diabetes drugs such as Merck's (NYS: MRK) Januvia.
Not all binary events are equal
When a company submits a marketing application to the FDA, the agency has about 60 days to accept the application or issue a refuse-to-file letter, requesting additional information before it'll even review the application.
These refuse-to-file applications have become more common recently, leading some to believe there's a new binary event about 60 days after the application is filed. The problem is: The binary event is very lopsided. There's plenty of potential downside if the FDA issues a refuse-to-file letter, but little to no upside if the application is accepted.
Some would say the solution is to avoid holding shares in a company that's waiting to have its application accepted. But I'd argue it would be better to just avoid holding companies that might get a refuse-to-file letter altogether. If you're so worried that the company can't submit a complete enough application to get reviewed, that might be a sign the company isn't worth holding through a decision.
Looking forward to any other binary events? Let us know in the comment box below.
At the time thisarticle was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Exelixis. Motley Fool newsletter services have recommended buying shares of Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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