Bret Jensen is a regular contributor to Real Money Pro. Click here to learn about this dynamic market information service for active traders.
The biotech sector has had a nice few days this holiday-shortened trading week, beating the S&P 500 every day. And I believe sentiment should start to improve on both the pharma and biotech groups after the upcoming election likely results in a continued divided government.
Amid this backdrop, there are several smaller names in the lucrative, but volatile small biotech/biopharma to consider. Each have approaching catalysts.
Let's start with Novavax (NVAX) , which is starting to make a nice little move. This vaccine play has a large-scale Phase III trial around a promising respiratory syncytial virus (RSV) vaccine whose results should be out by the end of the month. It may not have the current notoriety of the Zika virus, but RSV hospitalizes more than 200,000 elderly individuals in the U.S. every year.
Next up, there is Dynavax Technologies (DVAX) , which sold off last week as the Ad Comm panel around its hepatitis B vaccine "Heplisav-B" was unexpectedly cancelled. The stock has recovered somewhat this week after the company issued a statement clarifying that event and the mid-December PDUFA date with the FDA seems fully in place.
It is hard to see how this vaccine does not get approved given the far-superior results it delivered compared to the current standard on the market, in a more-than-10,000-person Phase 3 trial. Several analyst firms have chimed in this week to support that view.
Given Dynavax has a market capitalization of less than $500 million and almost $150 million in cash on its balance sheet, the stock should go much higher on approval.
I recently took a small position in ocular concern Aerie Pharmaceuticals (AERI) . The company just filed its first new drug application (NDA) for its first product to treat glaucoma, which looks headed to commercialization. If all goes well, that compound could be on the market in the first half of 2017.
Aerie also has a second drug in the pipeline that is about a year behind its first. As for the stock, a beneficial owner recently made a purchase of more than $4 million, and the shares seem undervalued, with the company's market capitalization at less than $600 million.
Finally, I picked up a few shares in a thinly traded Israeli based biopharma, Kamada (KMDA) , this week. The company just filed a Biologic License Application (BLA) for its post-exposure rabies treatment, a human anti-rabies immune globulin. If approved, it will be marketed with partner Kendrion into a market that is believed to be $100 million annually in the U.S.
The company also has a few products on the market it distributes via other partners, such as Baxalta, which was recently purchased by Shire (SHPG) . It has a good pipeline and sales are increasing some 20% annually.Kamada should do $75 million to $80 million in revenue this year and $100 million in fiscal year 2017 when it should turn profitable. It has a solid balance sheet and an undervalued $175 million market capitalization.