Mike Havrilla     www.BioRunUp.com       

As a follow-up to my most recent article on the buyout binge among bio-pharma and diagnostic companies, below is a basket of 20 stocks (listed randomly) to consider from the ETF Innovators Indexes of 250 companies which represent a mix of pending catalysts in the form of clinical trials or FDA decisions, innovative patent portfolios or drug discovery technology platforms, promising compounds in clinical development, and marketed therapeutic or diagnostic products. Click on any of the company names for links to all of my previous articles for those I have mentioned previously.

Emerging Diagnostic Index : Average loss of 63.2%, including 39 companies with average market cap of $50M

Emerging Bio-Pharma Index: Top 40 Rated Companies

Emerging Bio-Pharma Index: 36 Additional Companies

Micro-Cap Bio-Pharma Index : 130 companies with an average loss of 43.6% in past year and average market cap of $58M

AspenBio Pharma (APPY) – APPY has pending results for the world's first blood-based appendicitis screening test, AppyScore, which will support a 510(k) filing with the FDA for marketing clearance if positive.

BioDelivery Sciences (BDSI) – Onsolis approval is possible by mid-2009 and the Company recently raised $6M in cash from partner Meda AB, representing a $3M expanded licensing agreement + a $3M advance of the $30M milestone payment upon FDA approval.

Momenta Pharma (MNTA) – MNTA represents a pure-play on the future of bio-generics and is developing a mix of proprietary compounds, follow-on-biologics, and has pending ANDAs for blockbuster, complex products including Lovenox and Copaxone in partnership with Sandoz division of Novartis (NVS).

Electro-Optical Sciences (MELA) – MELA has pending clinical trial results for MelaFind diagnostic screening test for melanoma, which will support a FDA application if positive.

OraSure Technologies (OSUR) – OSUR is a leader in oral fluid diagnostic testing, with a pending FDA application for its hepatitis C (HCV) test with Schering-Plough (SGP) and is also developing an over-the-counter oral fluid test for HIV.

Discovery Labs (DSCO) – DSCO has a mid-April PDUFA decision date for Surfaxin after several previous delays due to manufacturing issues raised by the FDA.

Cytori Therapeutics (CYTX) – An innovator in the field of regenerative medicine which is already marketing its products in Asia and Europe based on the Celution System for breast reconstruction procedures and stem cell banking applications from a patient's own fat tissue.

Caraco Pharma (CPD) – CPD has more than doubled from its low around 3 bucks, but is still cheap at current levels and is poised to return into double digits once resolving the manufacturing issues outlined in a FDA warning letter last year.

Dendreon (DNDN) – DNDN represents the ultimate biotech binary trade for 2009 with Provenge clinical trial results expected around mid-year which will either send the stock soaring or tumbling.

Javelin Pharma (JAV) – JAV has surged nearly four-fold from a low of 40 cents late last year as the victim of forced liquidation and panic selling since reporting positive Phase 3 results for Dyloject, which will support an application for FDA approval in 2H09. Dyloject is already on the market in Europe and the Company is engaged in partnership discussions for the product, along with another late-stage pipeline candidate Ereska.

SuperGen (SUPG) – SUPG has more than doubled from its low of $1.11, driven down by disappointing data for cancer drug Dacogen compared to Celgene's rival drug Vidaza. However, SUPG boasts a robust, early-stage cancer drug pipeline + discovery platform and the current price around $2.50 includes zero debt and about $1.50 per share in cash.

Clarient (CLRT) – CLRT is a play on personalized medicine through its diagnostic and clinical lab services, which are focused on improving the treatment outcomes for cancer therapeutics.

Nanosphere (NSPH) – NSPH recently filed 510(k) applications with the FDA for two new diagnostic products, including a cystic fibrosis assay and an infectious disease panel for respiratory viruses (influenza + respiratory syncytial virus or RSV).

Home Diagnostics (HDIX) – HDIX manufactures value-priced blood glucose monitors and testing supplies, which are sold through a variety of channels, including mail order, retail pharmacies, and medical wholesalers.

Osiris Therapeutics (OSIR) – OSIR is a leader in regenerative medicine, which signed a major deal with Genzyme (GENZ) last year and has pending clinical trial results later this year for Prochymal.
Cypress Bioscience (CYPB) – CYPB has attracted the attention of stock and option investors lately in anticipation of a FDA decision for milnacipran in the treatment of fibromyalgia – with no clear indication of a decision date, but 1/18/09 represents a three-month delay from the original PDUFA date.

Vivus (VVUS) – VVUS has nearly 3 bucks per share in cash, negligible debt, and is trading around 5 bucks with pending data from two Phase 3 clinical trials of weight loss drug Qnexa expected in mid-2009.

Isis Pharma (ISIS) – ISIS is expected to report Phase 3 data around mid-year for mipomersen in the treatment of patients with a genetic disorder that leads to very high levels of LDL (bad) cholesterol.

AMAG Pharma (AMAG) – AMAG received a second complete response late last year for Feraheme, but it appears that no new issues were raised by the FDA and the Company may not be required to issue another response to the agency as it may only required more time for the FDA to review AMAG's original response last October.

Acorda Therapeutics (ACOR) – ACOR is expected to submit a NDA to the FDA during 1Q09 for fampridine SR in the treatment of walking disabilities due to multiple sclerosis.

Since I profiled EXACT Sciences (EXAS) in late December as part of the ETF Innovators Emerging Diagnostics Index , EXAS announced that its stool-based DNA [sDNA] screening test was added to the colorectal cancer screening options in 12 more states + Washington DC and the Company received an unsolicited, all-stock buyout offer from Sequenom (SQNM) after the market close on Friday, which is valued at $41M or $1.50 per share.

It has not been an easy ride for EXAS since I first wrote about the Company in October 2007, but the unsolicited bid by SQNM highlights the underlying value drivers at EXAS, which are not adequately reflected in the all-stock, $41M offer and I plan to continue holding my shares despite the short-term stock surge from the all-time lows set late last year:

1.) a portfolio of intellectual property in non-invasive prenatal diagnostics, non-invasive colorectal, and aero-digestive cancer screening

2.) the American Cancer Society [ACS] endorsement of sDNA testing, leading to wider acceptance of sDNA testing as an option for colorectal cancer screening by states and major insurers such as Cigna (CI)

3.) the commercial launch of ColoSure by LabCorp (LH)

4.) EXAS has long-standing relationships with scientific pioneers at Johns Hopkins University, Case Western Reserve University, and other leading medical institutions – with the latter launching a pilot program for sDNA screening at two sites which will feature the test as the preferred option for those who are unwilling or unable to obtain a colonoscopy.

Investors should also note that SQNM traded as a penny stock not so long ago, including most of the time period between August 2004-October 2006 before enacting a 1:3 reverse split in June 2006 to maintain its Nasdaq listing. The reverse split proved effective for SQNM and the stock price began an exponential ascent later that year and now trades in the low twenties for a market cap of $1.3B, compared to EXAS which is now trading above the $1.50 offer at a market cap of just $42M during intraday trading today.

The hostile bid by SQNM represents a new support level for shares of EXAS around $1.50, well above the penny stock levels of late last year when things appeared bleak for the Company's future and the overall stock market. While SQNM states the bid for EXAS is focused on expanding into cancer diagnostics; EXAS also holds patents in the area of prenatal diagnostics, which are not fairly valued in the $41M offer by SQNM for the entire company.

I think the unsolicited bid by SQNM represents the beginning of offers for EXAS, which could involve licensing deals for the prenatal diagnostics IP and bring in a cash windfall of $20M-$30M + milestone and royalty payments. Such a deal would be similar to the $30M previously received from LabCorp (LH) to develop the sDNA colorectal cancer test as a "homebrew" version without going through the FDA approval process.

EXAS is clearly in need of a major cash infusion and management overhaul to revitalize the Company, which has struggled despite the ACS endorsement of sDNA for colorectal cancer screening. The bid by SQNM brings attention to EXACT's prenatal diagnostic IP and hastens the process of licensing deals for this valuable patent estate. Prenatal diagnostics are key to the future of SQNM, which will announce clinical trial results at the end of the month for SeQureDx, a non-invasive screening test for Down syndrome that the Company hopes to launch later this year.

Update – After the market close, EXAS unanimously rejected the SQNM acquisition proposal at $1.50 per share or $41M in stock as the Board stated that EXAS is actively pursuing a strategic alternative that can provide greater value. Stay tuned for more details. . .

The accompanying table [click to enlarge] includes 19 companies in the ETF Innovators [ETFI] Global Carbon Trading Index along with the prices of seven benchmark commodities and funds. The Carbon Trading Index rallied over the past month along with the overall market, although the gains were less than the overall market and the index has declined by more than 50% in the past six months.

With the launch of AirShares Carbon Fund (ASO) in mid-December, investors have another option to trade the price of carbon with the iPath Global Carbon ETN (GRN) already on the market since early July. As a proxy for the global price of carbon, GRN declined by 3% in the past month and 46% in the past six months compared to a gain of 7% in the past month and a loss of 53% over the past six months for the Carbon Trading Index.

Major energy commodities declined by even more than carbon during the past one and six months, with the U.S. Oil (USO) and Natural Gas (UNG) Funds, which have both declined by more than 15% in the past month and more than 63% in the past six months. Central Appalachian Coal Futures (NYMEX: QL) declined by about 8% in the past month and 56% over the past six months.

The Market Vectors Global Alternative Energy (GEX) and Environmental Services (EVX) ETFs both posted impressive gains over the past month of 25.5% and 18.1%, respectively, with EVX benefiting from a large stake of about 10% in Waste Management (WMI) which rose by 13.5% in the past month. Clean Energy Fuels (CLNE) rose by 24.5% in the past month, although the stock is still down by 47.4% in the past six months.

CNX Gas (CXG) posted the biggest loss over the past month of the major companies in the index, declining by about 12% compared to the 9.9% gain for the S&P 500 SPDR (SPY). An analyst from UBS recently downgraded CXG from buy to neutral on valuation concerns and recommended investors look for a lower entry point to buy the stock. However, the analyst was positive on the Company’s fundamentals and boosted his earnings estimate for the year by a penny to $1.55 per share while noting positives such as production growth, a clean balance sheet, consistently favorable operating results, and strong management.

The accompanying table [click to enlarge] includes 19 companies in the ETF Innovators [ETFI] Global Carbon Trading Index along with the prices of seven benchmark commodities and funds. The Carbon Trading Index rallied over the past month along with the overall market, although the gains were less than the overall market and the index has declined by more than 50% in the past six months.

With the launch of AirShares Carbon Fund (ASO) in mid-December, investors have another option to trade the price of carbon with the iPath Global Carbon ETN (GRN) already on the market since early July. As a proxy for the global price of carbon, GRN declined by 3% in the past month and 46% in the past six months compared to a gain of 7% in the past month and a loss of 53% over the past six months for the Carbon Trading Index.

Major energy commodities declined by even more than carbon during the past one and six months, with the U.S. Oil (USO) and Natural Gas (UNG) Funds, which have both declined by more than 15% in the past month and more than 63% in the past six months. Central Appalachian Coal Futures (NYMEX: QL) declined by about 8% in the past month and 56% over the past six months.

The Market Vectors Global Alternative Energy (GEX) and Environmental Services (EVX) ETFs both posted impressive gains over the past month of 25.5% and 18.1%, respectively, with EVX benefiting from a large stake of about 10% in Waste Management (WMI) which rose by 13.5% in the past month. Clean Energy Fuels (CLNE) rose by 24.5% in the past month, although the stock is still down by 47.4% in the past six months.

CNX Gas (CXG) posted the biggest loss over the past month of the major companies in the index, declining by about 12% compared to the 9.9% gain for the S&P 500 SPDR (SPY). An analyst from UBS recently downgraded CXG from buy to neutral on valuation concerns and recommended investors look for a lower entry point to buy the stock. However, the analyst was positive on the Company’s fundamentals and boosted his earnings estimate for the year by a penny to $1.55 per share while noting positives such as production growth, a clean balance sheet, consistently favorable operating results, and strong management.

The accompanying table [click to enlarge] includes 19 companies in the ETF Innovators [ETFI] Global Carbon Trading Index along with the prices of seven benchmark commodities and funds. The Carbon Trading Index rallied over the past month along with the overall market, although the gains were less than the overall market and the index has declined by more than 50% in the past six months.

With the launch of AirShares Carbon Fund (ASO) in mid-December, investors have another option to trade the price of carbon with the iPath Global Carbon ETN (GRN) already on the market since early July. As a proxy for the global price of carbon, GRN declined by 3% in the past month and 46% in the past six months compared to a gain of 7% in the past month and a loss of 53% over the past six months for the Carbon Trading Index.

Major energy commodities declined by even more than carbon during the past one and six months, with the U.S. Oil (USO) and Natural Gas (UNG) Funds, which have both declined by more than 15% in the past month and more than 63% in the past six months. Central Appalachian Coal Futures (NYMEX: QL) declined by about 8% in the past month and 56% over the past six months.

The Market Vectors Global Alternative Energy (GEX) and Environmental Services (EVX) ETFs both posted impressive gains over the past month of 25.5% and 18.1%, respectively, with EVX benefiting from a large stake of about 10% in Waste Management (WMI) which rose by 13.5% in the past month. Clean Energy Fuels (CLNE) rose by 24.5% in the past month, although the stock is still down by 47.4% in the past six months.

CNX Gas (CXG) posted the biggest loss over the past month of the major companies in the index, declining by about 12% compared to the 9.9% gain for the S&P 500 SPDR (SPY). An analyst from UBS recently downgraded CXG from buy to neutral on valuation concerns and recommended investors look for a lower entry point to buy the stock. However, the analyst was positive on the Company’s fundamentals and boosted his earnings estimate for the year by a penny to $1.55 per share while noting positives such as production growth, a clean balance sheet, consistently favorable operating results, and strong management.

The accompanying table [click to enlarge] includes 19 companies in the ETF Innovators [ETFI] Global Carbon Trading Index along with the prices of seven benchmark commodities and funds. The Carbon Trading Index rallied over the past month along with the overall market, although the gains were less than the overall market and the index has declined by more than 50% in the past six months.

With the launch of AirShares Carbon Fund (ASO) in mid-December, investors have another option to trade the price of carbon with the iPath Global Carbon ETN (GRN) already on the market since early July. As a proxy for the global price of carbon, GRN declined by 3% in the past month and 46% in the past six months compared to a gain of 7% in the past month and a loss of 53% over the past six months for the Carbon Trading Index.

Major energy commodities declined by even more than carbon during the past one and six months, with the U.S. Oil (USO) and Natural Gas (UNG) Funds, which have both declined by more than 15% in the past month and more than 63% in the past six months. Central Appalachian Coal Futures (NYMEX: QL) declined by about 8% in the past month and 56% over the past six months.

The Market Vectors Global Alternative Energy (GEX) and Environmental Services (EVX) ETFs both posted impressive gains over the past month of 25.5% and 18.1%, respectively, with EVX benefiting from a large stake of about 10% in Waste Management (WMI) which rose by 13.5% in the past month. Clean Energy Fuels (CLNE) rose by 24.5% in the past month, although the stock is still down by 47.4% in the past six months.

CNX Gas (CXG) posted the biggest loss over the past month of the major companies in the index, declining by about 12% compared to the 9.9% gain for the S&P 500 SPDR (SPY). An analyst from UBS recently downgraded CXG from buy to neutral on valuation concerns and recommended investors look for a lower entry point to buy the stock. However, the analyst was positive on the Company’s fundamentals and boosted his earnings estimate for the year by a penny to $1.55 per share while noting positives such as production growth, a clean balance sheet, consistently favorable operating results, and strong management.

While we are not even halfway through January, the healthcare sector is already active with deal-making, ranging from the rumored $95 buyout of biotech giant Genetech (DNA) by Roche (RHHBY) to Endo's (ENDP) purchase of small-cap, specialty pharma Indevus (IDEV) to Sequenom's (SQNM) $41M offer for emerging diagnostic company EXACT Sciences (EXAS) – which was promptly rebuffed by EXACT's board after the market close on Monday on the promise of a better deal in the works for shareholders.

Larger bio-pharma and diagnostic companies are opportunistically looking to expand their product offerings, pipeline prospects, patent portfolios, and drug discovery technology platforms given the huge declines in the stock prices of small/micro-cap stocks in the healthcare sector. With that in mind, I sorted through the ETF Innovators indexes for a list of a dozen stocks with market caps below $300M which lost at least 60% of their market value in the past year as a starting point for more research on potential buyout plays that would likely come in at a big premium to current valuations based on recent deals for companies of this size.

The stocks are listed below with their market cap and 52-week stock price changes and the list excludes all stocks trading below $1 per share – click on the company names for links to all of my previous articles for those I have mentioned previously:

1.) OraSure Technologies (OSUR): $145M, -64% OSUR is a leading developer of oral fluid-based diagnostic screening tests with a FDA application filed for approval of a test for hepatitis C and a HIV test designed for over-the-counter sale in development.

2.) Caraco Pharma (CPD): $206M, -65% CPD is a value-priced generic drug company with a major shareholder and business partner that is India's largest generic drug maker by market cap, Sun Pharma.

3.) Javelin Pharma (JAV): $85M, -61% JAV reported positive Phase 3 results late last year for Dyloject to support an application for FDA approval in 2H09. Dyloject is already on the market in Europe and the Company is engaged in partnership discussions for the product, along with another late-stage pipeline candidate Ereska.

4.) Nanosphere (NSPH): $109M, -64% NSPH is an Emerging Diagnostic company that recently filed 510(k) applications with the FDA for two new products, including a cystic fibrosis assay and an infectious disease panel for respiratory viruses (influenza + respiratory syncytial virus or RSV).

5.) Akorn (AKRX): $197M, -70% AKRX offers a mix of proprietary drugs such as Akten eye gel as well as generic injectable drugs in partnership with Strides Arcolab of India.

6.) Human Genome Sciences (HGSI): $256M, -83% HGSI is a biotech developer of protein and antibody-based therapeutics with a robust pipeline that includes a pair of late stage, Phase 3 compounds, Albuferon and LympoStat-B.

7.) Obagi Medical Products (OMPI): $163M, -60% OMPI is a specialty pharma which is focused on skin care products.

8.) Cynosure (CYNO): $104M, -67% CYNO is a provider of cosmetic medicine laser systems, which trades very close to its cash hoard with negligible debt.

9.) TranS1 (TSON): $125M, -61% TSON is a spinal implant maker focused on the treatment of degenerative disc disease which trades at less than 2X cash with zero debt.

10.) RTI Biologics (RTIX): $158M, -63% RTIX is a regenerative medicine company for surgical products and tissue processing.

11.) Achillion Pharma (ACHN): $32M, -71% ACHN is an early stage developer of drugs for hepatitis C.

12.) BioSante Pharma (BPAX): $41M, -63% BPAX is developing LibiGel as the female Viagra and the compound is being evaluated in three separate Phase 3 studies.

The accompanying table [click to enlarge] presents the top five rated companies with market caps of at least $100M from each of the eight new ETF Innovators healthcare indexes, including a database exceeding 500 companies worldwide. The Healthcare Composite Index is a dynamic, semi-active index with quarterly rebalancing which consists of the 40 top-rated companies on an equal weight basis from each of the eight global healthcare indexes listed below and represents an alternative strategy to existing health composite ETFs -- which tend to have highly correlated returns and over-weight exposure to the same widely held companies.

1.) Hospitals & Outpatient Care – Almost Family (AFAM)
2.) Pet Care & Animal 'Farma' – PetMed Express (PETS)
3.) Cosmetic & Reconstructive Medicine – Osiris Therapeutics (OSIR)
4.) Healthcare Cost Containment – Teva Pharma (TEVA)
5.) Health Information Technology – Allscripts-Misys (MDRX)
6.) Preventive Medicine – Landauer (LDR)
7.) Health Innovators – Thoratec (THOR)
8.) Emerging Bio-Pharma – ViroPharma (VPHM)

Click on any of the links above to view the most recent article and top rated companies from each of the underlying healthcare indexes, which results in an alternative indexing strategy for the global healthcare sector by giving each company an equal weight status and choosing the top five rated companies from eight new global health indexes.

The index of 40 companies posted a gain of 36% over the past year, compared to losses of about 27% for each of the three most popular healthcare composite ETFs by net assets, including the Healthcare Sector SPDR (XLV), iShares S&P Global Healthcare (IXJ), and Vanguard Healthcare (VHT).

The accompanying table [click to enlarge or download] includes an updated calendar of 75 expected FDA decision dates, which includes a full slate of expected action before year-end outline in my previous article. The last few days have been busy for antibiotics at the agency, resulting in sharply lower stock prices for Targanta Therapeutics (TARG) and Theravance (THRX).

An FDA panel voted against Targanta's oritavancin, which has an upcoming decision in early December and sent shares crashing from 8 bucks before the decision to around $1.30 in trading today. Despite the panel endorsement for telavancin, shares of Theravance are losing about 25% today and the Company is still waiting for the FDA to issue a formal PDUFA date.

Vanda Pharma (VNDA) received word yesterday from the FDA that its resubmission for iloperidone was accepted with a decision date expected by 5/6/09. Some other recent filings include Ista Pharma's (ISTA) NDA for eye drop Bepreve and two new filings by Johnson & Johnson (JNJ) for Comfyde and trabectedin.