Horizon Pharma (NASDAQ:HZNP) is working on treatments for arthritis pain, and like Oncogenex has a big pharma partner to help it along. In June, Covidien (NYSE:COV) entered into a deal with Horizon to promote its DUEXIS cure for rheumatoid arthritis and osteoarthritis through the end of 2014. Of course, shares have run up dramatically since then — with HZNP up more than 80% year-to-date – but shares are still 30% off their 52-week high from recently.
Another plus is that Horizon has seen big institutional interest lately, including health care VC fund Essex Woodlands and mutual fund group Fidelity both doubling their stakes. Also, a number of new institutional money has entered the fray, as Ayer Capital Management, the Vanguard Group and the Cowen Group all opened up positions in Horizon last quarter. These big positions also have increased the daily volume in this pick, which has helped liquidity.
Medgenics (AMEX:MDGN) is a fascinating biotech opportunity because it has received “orphan drug” designation from the FDA for its hepatitis treatment, the Infradure Biopump. As the name implies, orphan drugs have no other treatments in their family — so the U.S. government can fast-track certain medications for approval to serve a health need. The various forms of hepatitis and the lack of competition means promise for MDGN … if its drugs win approval, of course.
The company is tiny at less than $150 million, and it’s still bleeding cash, but the prospect of an accelerated pipeline and bolstered buyout talk has caused shares to surge as much as 500% in 2012. Clearly there’s the risk of buying a top after this run, but a buyout with a premium on shares could make it worth your while.
The “smart money” just can’t seem to agree on genetics research company Affymetrix (NASDAQ:AFFX). A few days ago, JPMorgan (NYSE:JPM) cut the stock to underweight with a $5 price target. But not long before that, Steifel Nicolaus put a “buy” rating on the stock with a target of $19. That’s par of the course with unproven biotechs like this.
But if you’re looking for reasons to err on the side of bullishness, consider that the stock is up almost 11% year-to-date, and though the run has been volatile, huge hockey sticks that indicate a large move either way haven’t stuck. Furthermore, the 1.3 million shares traded daily provides a little more stability in this stock when you’re placing orders. The kicker? Piper Jaffray recently placed Affymetrix on a list of possible biotech buyout targets.
Remember, if you’re going to play “biotech home run derby,” please make sure you are not risking your entire retirement nest egg. It’s fine to swing for the fences once in a while, but make sure you are not putting too much of your portfolio into these risky ventures.
Also, please consider this article as just a jumping-off point. Any of these picks could collapse tomorrow based on regulatory approval or other important news, so please do your own research — or post links and commentary in the forum section below to help your fellow biotech investors.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.