Three Biotech Opportunities

Investors continue to have to adjust to increasing volatility in the markets. Equities opened the trading week seeing the Dow gaining nearly 400 points. Yesterday, the index immediately gave back 300 points of Monday's gains. I continue to use these frequent hiccups to add to some core positions primarily through using a simple Buy-Write strategy to take advantage of larger option premiums created by the increasing gyrations of the market over the past month. Today, we will talk about a few holdings in the healthcare space I think are good candidates for this approach. Investors will get a chance today to possibly get Celgene at below $90 a share. The biotech stalwart was served with a Refusal to File letter the FDA which was disclosed after the bell yesterday. This knocked the stock down some eight percent in afterhours trading. The letter was around its New Drug Application or NDA for ozanimod in development for the treatment of patients with relapsing forms of multiple sclerosis. Celgene bought Receptos for over $7 billion in mid-2015 to acquire this asset. This appears to be a bureaucratic snafu that certainly does not put Celgene's management in a good light. However, this will probably delay the NDA submission not kill it. Celgene was already down some 30% from recent highs and $90 seems a good support level. ANI Pharmaceuticals is another name I like on dips. This company is not seeing the same challenges as Celgene and has been mentioned as a possible buyout more than once. The company reported that fourth-quarter revenues grew almost 25% year-over-year yesterday and offered solid forward guidance. Management has done a commendable job making small strategic acquisitions over the years while keeping a clean balance sheet. Something that has eluded many others in this space. With the shares priced just over 10 times forward earnings, I have no problem adding some exposure to this concern whenever investors go into 'risk off' mode on stocks. Finally, we have T2 Biosystems whose shares also bucked yesterday's downturn. This 'off the radar' name is a razor and razor blade story. The company manufactures a device call the T2Dx (the razor) which can diagnose infections in the bloodstream much faster than the current process involving labs as it can be used on site at hospitals. It then supplies the panels (the razorblades) used for these tests. One panel is already approved and generating revenue. The big potential catalyst on the horizon is approval for a new panel that will detect sepsis. In trials it proved to be 95% accurate in identify the pathogens that cause this infection. As importantly, it can turn around this test in under six hours. The standard process currently in use takes an average of three days. Sepsis accounts for approximately six percent of overall hospital costs as well as one in three deaths that occur in these facilities. The panel is already approved in Europe and should garner the green light here in the United States in the next few months. Approval should trigger a substantial acceleration of the installed base and a big boost to revenues. If things fall into place for T2 Biosytems, I believe this stock could be a multi-bagger over the next few years. As such, I am more than happy to add to my core stake whenever the market puts the shares 'on sale'.

Three Biotech Opportunities

Celgene, ANI and T2 are seeing attractive entry points.

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