Gentium: Buying Opportunity At A Lower Level Amid Correction

Gentium (GENT) is an Italian biotech company that provides unique treatment options to patients faced with rare diseases with high unmet medical needs. Gentium is an excellent growth play on its investigational drug Defibrotide. However, the stock appears reasonably valued after rising ~200% from its 52-week low at $6.96. I believe that the stock could correct ~30% from its recent high at $22.40. This would provide investors an excellent buying opportunity with a favorable risk-reward ratio.

Company Overview

Gentium is a multi-product biopharmaceutical company that develops drugs primarily sourced from DNAs. Defibrotide, Gentium's lead product candidate, has been designed for treatment and prevention of veno-occlusive disease ("VOD"). Defibrotide is derived from porcine mucosal DNA. Phase III clinical trial of Defibrotide is complete as a first-line therapy of severe VOD in the US, Canada, and Israel. The company also completed Phase II/III pediatric trial of Defibrotide in Europe for preventing VOD. Apart from Defibrotide, Gentium produces Sulglicotide, Urokinase and Heparin for commercial distribution.

Gentium: An Excellent Growth Play on Defibrotide

VOD is a disorder of the vascular system that can result from commonly used cancer therapies. In most cases, cancer is treated with chemotherapy, radiation therapy or hormone therapy. In some cases, the therapy treats the cancer directly whereas in other cases, it is administered to prepare the patient for a stem cell transplantation ("SCT") or bone marrow transplantation ("BMT"). The frequency of occurrence of VOD is significant, which ranges from 5% to more than 60% in adults as well as in children.

Gentium recently received a positive opinion for Defitelio, a medicine containing the active substance Defibrotide, by the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP"). This process is similar to the FDA's PDUFA meetings that could lead to the drug's final approval and commercialization. If approved, Defitelio would become the first drug for VOD in the current treatment setting.

The EMA's reversal from its earlier negative decision helped Gentium post its best ever quarterly results in June, 2013 for Defibrotide, which is currently available in Europe under the named patient program ("NPP"). I feel that the use of Defibrotide in controlling VOD would be much wider than expected, particularly in severe VOD with high morbidity and mortality rates post stem cell transplantation.

In the US, Defibrotide is available on a pre-approval basis through a cost recovery program and its application is limited to clinical studies and compassionate use. Defibrotide has been granted orphan and fast-track designations by the FDA. In July 2011, a New Drug Application ("NDA") for Defibrotide was filed with the FDA for the treatment of VOD. But after the FDA found many potential "Refuse to File" issues with the candidate, Gentium voluntarily withdrew its NDA in August 2011. Since then, the company has been working hard for resubmitting the NDA and I strongly believe it will be successful in getting the final approval. I will explain in the next section of this article why I believe so. Since there are no approved drugs that can treat or prevent VOD, I expect that the successful commercialization of Defibrotide will unlock significant value for Gentium shareholders.

Defibrotide's Potential

Defibrotide is the sodium salt of a complex mixture of single-stranded oligodeoxyribonucleotides extracted from porcine DNA. It has anti-thrombotic, anti-inflammatory and anti-ischemic properties. In patients suffering from VOD, high levels of various anti-cancer drugs travel to the microvessels of the liver for being filtered out though circulation. This causes extensive damage to the endothelial lining of these vessels. The natural response by the body is to clot the sites of damage, which results in occlusion of these small-diameter vessels and eventually liver failure and multi-organ failure ("MOF"). Defibrotide has protective effects on human microvascular endothelial cells ("HMEC"). It increases the breakdown of blood clots and protects the cells lining the blood vessels. I believe this mechanism of action of Defibrotide will eventually convince the regulatory authorities to approve the drug.

As I explained, severe VOD leads to multi-organ failure, which is characterized by increased oxygen requirement, renal dysfunction and encephalopathy. The prognosis for patients with severe VOD with multi-organ failure is grim, where VOD typically occurs within 30 days of stem cell transplantation, and the survival rate for patients with VOD is 20% or less following 100 days. Several prospective trials were performed to investigate the effectiveness of Prostaglandin E1 ("PGE1"), Antithrombin III ("ATIII") and Ursodeoxycholic Acid as therapeutic measures, which demonstrated no statistically significant results.

Since VOD is difficult to diagnose, prophylactic intervention is always considered. However, a large prospective cohort study to assess the efficacy of a frequently used prophylaxis with low-dose or low-molecular weight heparin demonstrated no significant benefit. The study was conducted by the European Group for Blood and Marrow Transplantation ("EBMT").

The advent of Defibrotide ushered in a new era in controlling VOD, both in terms of therapeutic as well as prophylactic measures. In a retrospective study consisting of 45 pediatric patients, the efficacy of Defibrotide as a therapeutic measure has been tested, which showed that in a subgroup of 22 patients with severe disease, younger age and early start of Defibrotide administration were associated with a significantly superior outcome. In another subgroup of patients who underwent transplantation for malignant infantile osteopetrosis, the incidence rate of VOD was more than 60%. Because of this high incidence, Defibrotide as a prophylactic measure was initiated in 9 patients who underwent transplantation. In this group, only 1 patient (11.1%) was diagnosed with moderate VOD.

Apart from VOD, Defibrotide is also effective in treating Multiple Myeloma, for which Phase I/II dose-escalating, multi center, non comparative and open label trials in combination with melphalan, prednisone, and thalidomide are already completed. The most common side effects of Defibrotide are hemorrhage, hypotension and coagulopathy.

Gentium's Pipeline

Apart from Defibrotide, the company has another compound currently in pre-clinical stages of development. The name of the compound is Oligotide, which is a derivative of Defibrotide. A study by Eissner G et al. showed that Oligotide protects human microvascular endothelial cells against fludarabine-induced activation, damage and allogenicity.

In another study by T. Murohara et al. the efficacy of Oligotide was examined in a feline model of myocardial ischaemia (MI: 90 min) and reperfusion (R: 270 min). Oligotide exerted a significant cardioprotection in MI+R injury.

The studies mentioned above indicate that Gentium will succeed when clinical trials of Oligotide will commence. I believe that Oligotide will have tremendous potential in multiple indications and it will contribute a significant share in Gentium's future revenues.

Gentium: A Stable Value Play Too

While Defibrotide is Gentium's immediate growth driver, it has other products that generate stable revenues for the company. Its Sulglicotide, a sulphated glycopeptide derived from porcine duodenum with ulcer healing and gastrointestinal protective properties, is a popular drug worldwide.

Gentium is a leading producer of Urokinase in Europe. Urokinase is an enzyme derived from human urine. The drug is used in the management of thromboembolic disorders, such as deep venous thrombosis, pulmonary embolism, acute myocardial infarction and peripheral arterial thromboembolism.

The company also produces Heparin Sodium, the sodium salt of sulphated glycosaminoglycan. The source of the substance is swine intestinal mucosa. Heparin has the characteristic property of delaying the clotting of freshly shed blood. Gentium supplies Sulglicotide, Urokinase and Heparin to international pharmaceutical companies that market the drugs in their own countries.

Gentium's Valuation and Projected Stock Price

Gentium is a cash-rich company and I don't think any public offering would be necessary in the near-term. It has cash and equivalents of $21.06 million on its balance sheet as of the quarter ending 30 June, 2013. Given that the company has a steady cash flow, the chance of a cash-crunch is almost zero. Moreover, with a limited chance of share dilution, shareholders' value would be protected.

GENT Cash and Equivalents data by YCharts

Gentium is trading at a Price/Book ratio of 9.4x on a book value per share of $2.11. In terms of Price to Book, Gentium is trading at a significant premium relative to its peers, such as Illumina (ILMN), Auxilium Pharmaceuticals (AUXL), Jazz Pharmaceuticals (JAZZ), and Onyx Pharmaceuticals (ONXX). The peer group average Price/Book ratio is 6.3x. I expect that Gentium's book value per share will be around $2.50 in the next six to nine months, following successful commercialization of Defibrotide in Europe. Assigning the peer group average Price/Book ratio on Gentium's forward book value per share, I arrive at $15.75 as Gentium's near-term target price. I believe that would be a good entry point with a 60-70% upside potential from there, running into the FDA's final approval process of Defibrotide and upcoming clinical trials of Oligotide.

GENT Book Value Per Share data by YCharts

I believe Price/Book is one of the best metrics that offers valuable insight to investors seeking growth at a reasonable price. However, I prefer to compare it with ROE, and if there is a significant divergence between the two, I feel something might be wrong.

GENT Return on Equity data by YCharts

In case of Gentium, while the Price/Book is rising steadily since the last few weeks, its ROE is not showing significant strength as I expect. Although the ROE is not unimpressive, the fact that it is trending downwards is a bit worrisome. This divergence makes me conclude that the stock needs to be corrected in the short-term. Therefore, I sold my long position in GENT. I am waiting to enter the counter again at a lower level. I still believe GENT is an excellent growth story and expect that the next round of catalysts will come in the form of the FDA's final approval proceedings for Defibrotide and the upcoming clinical trials of Oligotide.

Summary: Reasons to Buy

Defibrotide has been granted Orphan Medicinal Product Designation by the European Commission for the treatment and prevention of VOD. Recently the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP") adopted a positive opinion for Defitelio, a medicine containing the active substance Defibrotide.CHMP's positive opinion for Defitelio could lead to the drug's final approval and commercialization in Europe in the near-term. If approved, Defitelio would become the first drug for VOD in the current treatment setting.In the US, Defibrotide has been granted orphan and fast-track designations by the FDA, which has increased the possibility of getting final approval.Gentium's pipeline contains Oligotide, a product with a potential clinical use in pre-SCT conditioning. Oligotide could have significant potential in the treatment of damaged human microvascular endothelial cells ("HMEC").Apart from Defibrotide, Gentium has several other product lines that generate stable revenues for the company, such as Sulglicotide, Urokinase and Heparin.

Potential Downsides

Gentium's stock appears reasonably valued at the current price around $20 after rising ~200% from its 52-week low at $6.96. A short-term correction may be just in the cards.If EMA doesn't approve Defitelio in the near-term, the stock may slide towards $10, where it has significant support.It's not clear when the company will resubmit its NDA for Defibrotide to the FDA. The most recently available update regarding this provided no clue. It only mentioned that the company plans to resubmit it this year. Delay in resubmitting the NDA could negatively impact the stock.

The Bottom Line

Although Gentium currently has an unfavorable risk-reward ratio for short-term investors, I strongly believe that the stock will eventually cross its all-time high of $22.40. Investors with a long-term horizon are advised to accumulate the stock on dips close to $15.75.

Disclosure: I am long AUXL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: I have sold GENT at $21 and will buy again at a lower level.

View the original article here

2 Biopharma Stocks You Should Be Buying This Month

To sustain growth under stiff competition, biotech companies are always under pressure to improve their drug pipeline through continuous drug development initiatives. These initiatives help the companies offset potential revenue loss that occurs with patent expiration. Apart from launching new drugs, biotech companies also look for Merger and acquisition route for top line growth, as this strategy helps them expand their domestic and foreign operations.

Continuing our research on Healthcare Picks, (Read: 2 Pharma Stocks With More Than 25% YTD Returns To Consider AND Don't Miss These 3 Healthcare Sweet Spots) we at Fusion Research scouted out three biotech companies that are taking such initiatives to provide solid returns to their shareholders. Let's discuss these initiatives in detail.

Good revenue growth opportunity from the Multiple Myeloma drug market

Pomalyst is the new drug in Celgene's (CELG) Multiple Myeloma portfolio. This drug is a third line treatment medication for Multiple Myeloma, a type of blood cancer disease. Third line treatment signifies that doctors can only give it to patients after two dosages of other drugs. The FDA approved this drug in February this year, and according to a survey by R.W. Baird, it has attained 27% market share in third line blood cancer drugs in March this year. On August 9, 2013, the drug has received approval for distribution in the European Union.

Pomalyst is currently priced at $10,500 for a 28 day cycle. If we assume Pomalyst will achieve the same 27% market share in Europe's drug market too, then annual revenue of Pomalyst is expected to cross $122 million with 43,000 new Multiple Myeloma patients who are diagnosed each year in the U.S. and Europe combined. This calculation is just a small reflection of potential revenue growth that Pomalyst can generate due to growing multiple myeloma patients and expected market share growth.

The company has a strong presence in the Multiple Myeloma drug market. Its blockbuster drug Revlimid commanded 41% share in second line treatment. Second line drug treatment signifies that this drug can be given only after the first dosage of a different drug hasn't produced the desired improvement. With this strong share in the second line drug market, the company is striving to register this drug as a first line treatment drug, so doctors can give it to newly diagnosed patients. For registration, the company is conducting a MM-020 study, and recently it announced that it has achieved its first target of progression free survival, or PFS, in Phase III MM-020 study. PFS is the length of time during and after the treatment that the patient lives with the disease without it getting worse.

Based on this result, the company has initiated Revlimid's registration process as a first line treatment in the U.S. and Europe. Looking at the growth potential from newly diagnosed patients and an expected 5.2% annual growth in the Multiple Myeloma drug market until 2021, this approval could bring strong revenue growth from Revlimid.

Pomalyst is expected to capitalize on the company's strong presence in Multiple Myeloma, with Revlimid achieving 41% market share. Celgene can expect revenue growth potential from this market and with current MM-020 trials, the company will increase its presence in first line treatment of this disease.

Is $10.4 billion acquisition justifiable?

Amgen (AMGN) is expected to increase its share in the cancer drug market with the recent acquisition of ONYX Pharmaceuticals (ONXX) for $10.4 billion, or $125 per share. Onyx sells liver and kidney cancer treatment drugs under the Nexavar brand name, and it sells a third line Multiple Myeloma treatment drug under the brand name Kyprolis, which it launched last year. Kyprolis is the most preferred third line treatment drug with 52% share in the third line treatment drug market. Therefore, due to its market leadership and growth in multiple myeloma patients, analysts have pegged the drug's annual revenue to reach an expected $1 billion by 2016. This acquisition provides Amgen the opportunity to sustain top line growth in the future. The company is facing increased pressure from the market to increase its drug development program since patents on four of its five best selling drugs are expiring in 2015.

Kyprolis is approved in the U.S. market only, so Onyx is conducting Phase III FOCUS trials in order to register it in the European market for patients suffering from Multiple Myeloma. The company is expected to apply for registration approval after the interim results of these trials, which are due during the fourth quarter of this year. Looking at the company's previous trials results, Onyx should post good results in the current trial, and it expects no hurdle in approval. Europe is among the biggest markets for Multiple Myeloma drugs with registration of 21,240 new cases each year.

Meanwhile, Amgen is developing a heart failure drug called AMG 423. Heart failure accounts for 30% of global deaths in those suffering from heart diseases, and the demand for new effective drugs has been growing accordingly. AMG 423 is currently in phase two testing, and its result is expected to come in the first quarter of next year. It expects to conduct a phase three test after that.

To have a look at the potential of this drug, we can look at figures of Johnson & Johnson's (JNJ) Natrecor, which was approved in 2001 for acute heart failure. The frequency of this drug was around once a week. Its cost was around $500 per dose. If we consider three months of use at the same cost as Natrecor, AMG 423's annual cost comes to around $6,000 per patent.

If we assume that this drug achieves a peak penetration level of 20% of the 1 million patients that are hospitalized with heart failure in U.S., as per healthcare research and quality agency, then this drug's annual revenue is expected to reach $1.2 billion.

Acquisition of Onyx and the AMG 423 drug trial provide Amgen an opportunity to sustain its market leadership in the drug market. As patent expiration dates come near, the company has increased its research and development to enhance its drug pipeline, which can minimize the potential loss expected to come from patent expirations.

Conclusion:

Both companies are expecting good revenue growth from the Multiple Myeloma market.

Celgene's drugs are expected to leverage the Multiple Myeloma drug market growth, thus providing bright future prospects for the company and with MM-020 results on the chart, investors can expect good growth in company's top line, resulting in earnings growth.

Amgen's acquisition of Onyx provides good opportunity for it to benefit from the leadership of Kyprolis in the Multiple Myeloma drug market. Also, with new drug AMG 423 in the pipeline, it is expected that company will sustain growth in the future despite patent expirations in 2015. Investors can expect good top line growth reflecting in the company's EPS, which is expected to increase from $6.51 in 2012 to $8.28 in 2014. Investors have to remain patient for sustained growth from Amgen, as the world's biggest biotech company faces tough conditions ahead with patent expirations.

Both Amgen and Celgene currently trade at a 12 months trailing PE of 18.35 and 39.87 respectively, against the industry average PE of 53. Therefore, their current initiatives in the growing Multiple Myeloma market and low PE ratio, signify that both these stocks have upside potential.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

View the original article here

Gentium: Buying Opportunity At A Lower Level Amid Correction

Gentium (GENT) is an Italian biotech company that provides unique treatment options to patients faced with rare diseases with high unmet medical needs. Gentium is an excellent growth play on its investigational drug Defibrotide. However, the stock appears reasonably valued after rising ~200% from its 52-week low at $6.96. I believe that the stock could correct ~30% from its recent high at $22.40. This would provide investors an excellent buying opportunity with a favorable risk-reward ratio.

Company Overview

Gentium is a multi-product biopharmaceutical company that develops drugs primarily sourced from DNAs. Defibrotide, Gentium's lead product candidate, has been designed for treatment and prevention of veno-occlusive disease ("VOD"). Defibrotide is derived from porcine mucosal DNA. Phase III clinical trial of Defibrotide is complete as a first-line therapy of severe VOD in the US, Canada, and Israel. The company also completed Phase II/III pediatric trial of Defibrotide in Europe for preventing VOD. Apart from Defibrotide, Gentium produces Sulglicotide, Urokinase and Heparin for commercial distribution.

Gentium: An Excellent Growth Play on Defibrotide

VOD is a disorder of the vascular system that can result from commonly used cancer therapies. In most cases, cancer is treated with chemotherapy, radiation therapy or hormone therapy. In some cases, the therapy treats the cancer directly whereas in other cases, it is administered to prepare the patient for a stem cell transplantation ("SCT") or bone marrow transplantation ("BMT"). The frequency of occurrence of VOD is significant, which ranges from 5% to more than 60% in adults as well as in children.

Gentium recently received a positive opinion for Defitelio, a medicine containing the active substance Defibrotide, by the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP"). This process is similar to the FDA's PDUFA meetings that could lead to the drug's final approval and commercialization. If approved, Defitelio would become the first drug for VOD in the current treatment setting.

The EMA's reversal from its earlier negative decision helped Gentium post its best ever quarterly results in June, 2013 for Defibrotide, which is currently available in Europe under the named patient program ("NPP"). I feel that the use of Defibrotide in controlling VOD would be much wider than expected, particularly in severe VOD with high morbidity and mortality rates post stem cell transplantation.

In the US, Defibrotide is available on a pre-approval basis through a cost recovery program and its application is limited to clinical studies and compassionate use. Defibrotide has been granted orphan and fast-track designations by the FDA. In July 2011, a New Drug Application ("NDA") for Defibrotide was filed with the FDA for the treatment of VOD. But after the FDA found many potential "Refuse to File" issues with the candidate, Gentium voluntarily withdrew its NDA in August 2011. Since then, the company has been working hard for resubmitting the NDA and I strongly believe it will be successful in getting the final approval. I will explain in the next section of this article why I believe so. Since there are no approved drugs that can treat or prevent VOD, I expect that the successful commercialization of Defibrotide will unlock significant value for Gentium shareholders.

Defibrotide's Potential

Defibrotide is the sodium salt of a complex mixture of single-stranded oligodeoxyribonucleotides extracted from porcine DNA. It has anti-thrombotic, anti-inflammatory and anti-ischemic properties. In patients suffering from VOD, high levels of various anti-cancer drugs travel to the microvessels of the liver for being filtered out though circulation. This causes extensive damage to the endothelial lining of these vessels. The natural response by the body is to clot the sites of damage, which results in occlusion of these small-diameter vessels and eventually liver failure and multi-organ failure ("MOF"). Defibrotide has protective effects on human microvascular endothelial cells ("HMEC"). It increases the breakdown of blood clots and protects the cells lining the blood vessels. I believe this mechanism of action of Defibrotide will eventually convince the regulatory authorities to approve the drug.

As I explained, severe VOD leads to multi-organ failure, which is characterized by increased oxygen requirement, renal dysfunction and encephalopathy. The prognosis for patients with severe VOD with multi-organ failure is grim, where VOD typically occurs within 30 days of stem cell transplantation, and the survival rate for patients with VOD is 20% or less following 100 days. Several prospective trials were performed to investigate the effectiveness of Prostaglandin E1 ("PGE1"), Antithrombin III ("ATIII") and Ursodeoxycholic Acid as therapeutic measures, which demonstrated no statistically significant results.

Since VOD is difficult to diagnose, prophylactic intervention is always considered. However, a large prospective cohort study to assess the efficacy of a frequently used prophylaxis with low-dose or low-molecular weight heparin demonstrated no significant benefit. The study was conducted by the European Group for Blood and Marrow Transplantation ("EBMT").

The advent of Defibrotide ushered in a new era in controlling VOD, both in terms of therapeutic as well as prophylactic measures. In a retrospective study consisting of 45 pediatric patients, the efficacy of Defibrotide as a therapeutic measure has been tested, which showed that in a subgroup of 22 patients with severe disease, younger age and early start of Defibrotide administration were associated with a significantly superior outcome. In another subgroup of patients who underwent transplantation for malignant infantile osteopetrosis, the incidence rate of VOD was more than 60%. Because of this high incidence, Defibrotide as a prophylactic measure was initiated in 9 patients who underwent transplantation. In this group, only 1 patient (11.1%) was diagnosed with moderate VOD.

Apart from VOD, Defibrotide is also effective in treating Multiple Myeloma, for which Phase I/II dose-escalating, multi center, non comparative and open label trials in combination with melphalan, prednisone, and thalidomide are already completed. The most common side effects of Defibrotide are hemorrhage, hypotension and coagulopathy.

Gentium's Pipeline

Apart from Defibrotide, the company has another compound currently in pre-clinical stages of development. The name of the compound is Oligotide, which is a derivative of Defibrotide. A study by Eissner G et al. showed that Oligotide protects human microvascular endothelial cells against fludarabine-induced activation, damage and allogenicity.

In another study by T. Murohara et al. the efficacy of Oligotide was examined in a feline model of myocardial ischaemia (MI: 90 min) and reperfusion (R: 270 min). Oligotide exerted a significant cardioprotection in MI+R injury.

The studies mentioned above indicate that Gentium will succeed when clinical trials of Oligotide will commence. I believe that Oligotide will have tremendous potential in multiple indications and it will contribute a significant share in Gentium's future revenues.

Gentium: A Stable Value Play Too

While Defibrotide is Gentium's immediate growth driver, it has other products that generate stable revenues for the company. Its Sulglicotide, a sulphated glycopeptide derived from porcine duodenum with ulcer healing and gastrointestinal protective properties, is a popular drug worldwide.

Gentium is a leading producer of Urokinase in Europe. Urokinase is an enzyme derived from human urine. The drug is used in the management of thromboembolic disorders, such as deep venous thrombosis, pulmonary embolism, acute myocardial infarction and peripheral arterial thromboembolism.

The company also produces Heparin Sodium, the sodium salt of sulphated glycosaminoglycan. The source of the substance is swine intestinal mucosa. Heparin has the characteristic property of delaying the clotting of freshly shed blood. Gentium supplies Sulglicotide, Urokinase and Heparin to international pharmaceutical companies that market the drugs in their own countries.

Gentium's Valuation and Projected Stock Price

Gentium is a cash-rich company and I don't think any public offering would be necessary in the near-term. It has cash and equivalents of $21.06 million on its balance sheet as of the quarter ending 30 June, 2013. Given that the company has a steady cash flow, the chance of a cash-crunch is almost zero. Moreover, with a limited chance of share dilution, shareholders' value would be protected.

GENT Cash and Equivalents data by YCharts

Gentium is trading at a Price/Book ratio of 9.4x on a book value per share of $2.11. In terms of Price to Book, Gentium is trading at a significant premium relative to its peers, such as Illumina (ILMN), Auxilium Pharmaceuticals (AUXL), Jazz Pharmaceuticals (JAZZ), and Onyx Pharmaceuticals (ONXX). The peer group average Price/Book ratio is 6.3x. I expect that Gentium's book value per share will be around $2.50 in the next six to nine months, following successful commercialization of Defibrotide in Europe. Assigning the peer group average Price/Book ratio on Gentium's forward book value per share, I arrive at $15.75 as Gentium's near-term target price. I believe that would be a good entry point with a 60-70% upside potential from there, running into the FDA's final approval process of Defibrotide and upcoming clinical trials of Oligotide.

GENT Book Value Per Share data by YCharts

I believe Price/Book is one of the best metrics that offers valuable insight to investors seeking growth at a reasonable price. However, I prefer to compare it with ROE, and if there is a significant divergence between the two, I feel something might be wrong.

GENT Return on Equity data by YCharts

In case of Gentium, while the Price/Book is rising steadily since the last few weeks, its ROE is not showing significant strength as I expect. Although the ROE is not unimpressive, the fact that it is trending downwards is a bit worrisome. This divergence makes me conclude that the stock needs to be corrected in the short-term. Therefore, I sold my long position in GENT. I am waiting to enter the counter again at a lower level. I still believe GENT is an excellent growth story and expect that the next round of catalysts will come in the form of the FDA's final approval proceedings for Defibrotide and the upcoming clinical trials of Oligotide.

Summary: Reasons to Buy

Defibrotide has been granted Orphan Medicinal Product Designation by the European Commission for the treatment and prevention of VOD. Recently the European Medicines Agency's ("EMA") Committee for Medicinal Products for Human Use ("CHMP") adopted a positive opinion for Defitelio, a medicine containing the active substance Defibrotide.CHMP's positive opinion for Defitelio could lead to the drug's final approval and commercialization in Europe in the near-term. If approved, Defitelio would become the first drug for VOD in the current treatment setting.In the US, Defibrotide has been granted orphan and fast-track designations by the FDA, which has increased the possibility of getting final approval.Gentium's pipeline contains Oligotide, a product with a potential clinical use in pre-SCT conditioning. Oligotide could have significant potential in the treatment of damaged human microvascular endothelial cells ("HMEC").Apart from Defibrotide, Gentium has several other product lines that generate stable revenues for the company, such as Sulglicotide, Urokinase and Heparin.

Potential Downsides

Gentium's stock appears reasonably valued at the current price around $20 after rising ~200% from its 52-week low at $6.96. A short-term correction may be just in the cards.If EMA doesn't approve Defitelio in the near-term, the stock may slide towards $10, where it has significant support.It's not clear when the company will resubmit its NDA for Defibrotide to the FDA. The most recently available update regarding this provided no clue. It only mentioned that the company plans to resubmit it this year. Delay in resubmitting the NDA could negatively impact the stock.

The Bottom Line

Although Gentium currently has an unfavorable risk-reward ratio for short-term investors, I strongly believe that the stock will eventually cross its all-time high of $22.40. Investors with a long-term horizon are advised to accumulate the stock on dips close to $15.75.

Disclosure: I am long AUXL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: I have sold GENT at $21 and will buy again at a lower level.

View the original article here

Insiders Are Buying Sarepta Therapeutics

When insiders accumulate a stock intensively, the stock can be expected to outperform the market during the next six months. Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases.

In this article, I will feature one biotech company that has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

The stock is purchased by three or more insiders within one month.

The stock is sold by no insiders in the month of intensive purchasing.

At least two purchasers increase their holdings by more than 10%.

Sarepta Therapeutics (SRPT) is focused on developing RNA-based therapeutics to improve and save the lives of people affected by serious and life-threatening rare and infectious diseases. The company's diverse pipeline includes its lead program eteplirsen, for Duchenne muscular dystrophy [DMD], as well as potential treatments for some of the world's most lethal infectious diseases.

(click to enlarge)

Insider buying by insider (last 30 days)

Anthony Chase purchased 3,500 shares on August 22 and currently holds 31,744 shares or 0.1% of the company. Anthony Chase serves as a director of the company.Gil Price purchased 500 shares on August 19 and currently holds 35,330 shares or 0.1% of the company. Gil Price serves as a director of the company.Sandesh Mahatme purchased 5,000 shares on August 20 and currently holds 5,000 shares or less than 0.1% of the company. Sandesh Mahatme joined Sarepta as Senior Vice President and Chief Financial Officer in November 2012.

Insider buying by calendar month

Here is a table of Sarepta's insider-trading activity by calendar month.

There have been 19,000 shares purchased and there have been zero shares sold by the insiders since June 2013.

Financials

The company reported the second-quarter financial results on August 8 with the following highlights:

Subsequent to second quarter end and up to August 7, Sarepta raised $37.9 million in proceeds and issued approximately 1.0 million shares of common stock under the At-The-Market equity financing that was put in place in July 2013.

Upcoming milestones

Sarepta plans to submit a New Drug Application [NDA] for the approval of eteplirsen for the treatment of Duchenne muscular dystrophy patients with genotypes amenable to skipping of exon 51. The decision to submit an NDA for eteplirsen was based on productive interactions with the FDA including a meeting with the agency in July. In pre-meeting comments, the FDA stated it was open to considering an NDA based on results from the Phase IIb clinical study of eteplirsen. Sarepta expects to submit the NDA to the FDA in the first half of 2014.

(click to enlarge)

Competition

DMD program competition

Currently, no product has been approved for the treatment of DMD. Companies including, but not limited to, Prosensa (RNA) in collaboration with GlaxoSmithKline (GSK), have product candidates in development for the treatment of DMD.

The Prosensa/GSK program commenced treatment in January 2011 in a Phase III clinical study in ambulant individuals with DMD who have a dystrophin gene mutation amenable to treatment by skipping exon 51. Prosensa's candidate for skipping exon 51, GSK2402968, utilizes a different chemistry, 2'O-methyl-phosphorothioate, which has the potential for different performance, safety and tolerability characteristics than eteplirsen. This randomized, placebo controlled study is fully enrolled, with approximately 180 participants who are being dosed for 48 weeks. The primary efficacy endpoint is a measure of muscle function using the 6MWT. Results for this Phase III study are anticipated by the end of 2013.

In September 2010, the Prosensa/GSK program commenced a Phase II double-blind, placebo-controlled study. This study is designed to assess the efficacy of two different dosing regimens of GSK2402968 administered over 24 weeks in DMD patients, and then to continue observing the patients over a second 24 week interval for a total study time frame of 48 weeks. This study completed enrollment with 54 DMD patients in October 2011 and has since concluded with results expected after the Phase III clinical study is complete.

Hemorrhagic fever virus programs

No specific treatment has been proven effective, and no approved vaccine currently exists for either Ebola or Marburg. Investigational compounds cannot be tested for efficacy on humans except in outbreak environments so these agents must be tested extensively in animals and meet strict government regulations.

Vaccine development is in the early stages in both the biotech industry and by U.S. government agencies (e.g., the National Institute of Allergy and Infectious Diseases and the Centers for Disease Control and Prevention). The government is also supporting early stage research on broad-spectrum therapeutics effective against hemorrhagic fever viruses.

With respect to therapeutics in advanced development, in February 2012 Tekmira Pharmaceuticals (TKMR) initiated a Phase I trial for TKM-Ebola, a systemically delivered RNAi therapeutic for the treatment of Ebola virus infection. Sarepta commenced initial human safety studies of its therapeutic candidates against Marburg and Ebola viruses in May 2011.

Influenza program

Currently, there are two therapeutic products for influenza that have received market approval from the FDA and are recommended for use in the United States. These are:

Oseltamivir (Tamiflu), a Roche (RHHBY.OB) and Gilead (GILD) product.Zanamivir (Relenza), a GSK product.

In addition to these products, Daiichi Sankyo's (DSKYF.PK) laninamivir (Inavir) and BioCryst's (BCRX) peramivir were launched in 2010 in Japan. Currently, DHHS funding is helping support clinical trials of Biota's (BOTA) laninamivir. In addition, other companies including, Toyama Chemical (a subsidiary of Fujifilm (FUJIF.PK)), have influenza therapeutic compounds in development. Toyama Chemical's favipiravir is in a Phase II clinical trial in the United States and has completed a Phase III trial in Japan. DHHS is currently seeking additional antiviral therapeutics for the treatment and/or prophylaxis of influenza A and B infections.

In addition to therapeutic products, other companies are focusing development efforts on universal influenza vaccines, including BiondVax Pharmaceuticals Ltd., which initiated a Phase IIa trial of its universal influenza vaccine candidate in October 2010. Successful development of a universal influenza vaccine could lead to a reduction in the number of influenza cases and, therefore, the market size.

Conclusion

There have been three different insiders buying Sarepta and there have not been any insiders selling Sarepta during the last 30 days. Two out of these three insiders increased their holdings by more than 10%. Sarepta has an insider ownership of 0.40%. There are nine analyst buy ratings, three neutral ratings and one sell rating with an average target price of $47.17. The next major catalyst for the stock will be the NDA submission to the FDA in the first half of 2014. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SRPT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Why shopaholics overspend? Poor credit management, buying to boost mood, study says

Main Category: Psychology / Psychiatry
Article Date: 05 Aug 2013 - 0:00 PDT Current ratings for:
Why shopaholics overspend? Poor credit management, buying to boost mood, study says

Why do shopping addicts keep spending even in the face of harmful financial, emotional and social consequences? A new study suggests poor credit management and a belief that new purchases will create a happier life fuel compulsive buying.

Approximately 10 percent of adults in Western countries are believed to have a compulsive spending disorder that leads them to lose control over their buying behavior, and the trend is on the rise. These shopaholics are addicted to buying things, regardless of whether they want or need them.

In a new study due to be published in the Journal of Economic Psychology, San Francisco State University researchers have identified specific behaviors that lead to such compulsive buying.

"Compulsive shoppers tend to be people who bury their head in the sand and ignore the credit card bill," said Ryan Howell, associate professor of psychology at SF State. "We also found that these individuals keep on buying because they are looking for that 'buy high,' hoping their purchases will lift their mood and transform them as a person."

"A lot of research has shown that shopaholics tend to have materialistic values," Howell said. "Our results explain why materialistic people shop compulsively."

Howell and colleagues surveyed more than 1,600 participants who answered questions about their money management, shopping habits and how much they value material possessions.

The researchers' analysis found that lack of money management predicted individuals' compulsive spending, regardless of their personality, gender, age and income. In particular, out-of-control-shopping was primarily driven by poor credit management, such as not paying attention to credit card statements, not paying credit card bills on time and exceeding credit limits.

The authors suggest that one possible reason why credit cards may facilitate compulsive shopping is because they allow consumers to separate the pleasure of buying from the pain of paying.

In the study, compulsive shoppers reported that they bought items to get a buzz or put themselves in a better mood. They also believed the purchases could change their life, for example by transforming their appearance, self-confidence, reputation and relationships.

"We know that a person's values impact their shopping habits, but values aren't the easiest thing to change" Howell said. "Even if you are still materialistic and you have the desire to acquire more possessions, it's how you manage your behavior that counts. Our findings suggest that you can keep your shopping under control by paying attention to your credit card and checking in with yourself about whether you are shopping for emotional reasons."

Howell and his graduate students continue to study compulsive buying and other consumer habits through their Beyond the Purchase website at http://www.beyondthepurchase.org. On the site, members of the public can take free surveys to find out what kind of consumer they are and how their spending choices affect them.

Article adapted by Medical News Today from original press release. Click 'references' tab above for source.
Visit our psychology / psychiatry section for the latest news on this subject.

"Sadness, Identity, and Plastic in Over-shopping: The Interplay of Materialism, Poor Credit Management, and Emotional Buying Motives in Predicting Compulsive Buying," has been accepted for publication in the Journal of Economic Psychology. Howell co-authored the paper with former SF State graduate student Grant Donnelly and undergraduate student Masha Ksendzova.

San Francisco State University

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