It's been a common occurrence lately for biopharmaceutical stocks to generate huge weekly gains. Only a few weeks ago, three biotech stocks jumped close to 40% in the same five-day period. The past week has been tame by comparison.
Still, though, several drugmakers enjoyed impressive gains over the past week. Catalyst Pharmaceuticals (NASDAQ: CPRX), Sucampo Pharmaceuticals (NASDAQ: SCMP), and Peregrine Pharmaceuticals (NASDAQ: PPHM) were at the top of the list. Here's what drove these drug stocks higher -- and whether or not they're smart picks for investors after their big runs.
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Catalyst Pharmaceuticals stock soared around 25% this week on top of impressive gains earlier in the year. So far in 2017, Catalyst's market cap has more than quadrupled.
The major recent catalyst (pardon the pun) for the company stemmed from the announcement of results from a late-stage study of Firdapse for the symptomatic treatment of Lambert-Eaton myasthenic syndrome (LEMS). LEMS is a rare autoimmune disorder where patients frequently experience muscle weakness of the limbs. In the study, Firdapse met the primary endpoints of improvement in quantitative myasthenia gravis scores and subject global impression, as well as the secondary endpoint of physicians' clinical global impression of improvement.
Firdapse is already approved for treating LEMS in Europe. Based on the latest clinical results, Catalyst plans to file for U.S. regulatory approval in the first quarter of 2018.
Sucampo Pharmaceuticals hasn't had as great of a year as Catalyst has, but the last few days have been much better, with Sucampo stock jumping more than 20%.
There really wasn't any obvious development that drove Sucampo's share price higher. However, the company has reported some good news over the last couple of months. On Sept. 28, Sucampo announced that the U.S. Food and Drug Administration (FDA) had accepted its supplemental New Drug Application (sNDA) for Amitiza in treating children aged six to 17 years with pediatric functional constipation, with an approval decision expected by Jan. 28, 2018. Also, Sucampo upped its full-year 2017 revenue and earnings guidance on Nov. 1 after posting solid third-quarter results.
Amitiza is already approved in multiple countries, including the U.S., for several gastrointestinal indications. Sucampo also has one other product on the market in Japan, eye-disease drug Rescula.
Peregrine Pharmaceuticals stock enjoyed a 13% boost this week. Although the drugmaker's market cap has more than doubled so far in 2017, it's been a volatile year for Peregrine with its share price swinging up and down by 50% or more multiple times.
The latest bump stems from a settlement with Ronin Trading and SW Investment Management (SWIM), collectively Peregrine's largest shareholder. Under the terms of the agreement, three members of Peregrine's board of directors submitted their resignations. The vacancies were immediately filled by individuals nominated by Ronin/SWIM.
This settlement ended a saga that has gone on for several months. Ronin/SWIM had expressed concerns about Peregrine's strategy, continued stock dilution, and weak corporate governance. A letter was sent to shareholders in July detailing those concerns. This letter also referenced the group's lack of confidence in Peregrine CEO Steven King and CFO Paul Lytle. Both King and Lytle remain in their roles with the company for now.
Are they buys?
All of these drug stocks could go higher. In fact, the consensus one-year price targets among Wall Street analysts for Catalyst, Sucampo, and Peregrine reflect significant premiums to the current share prices for each company. Earlier this year, my colleague Sean Williams referred to Sucampo as a potential "hidden gem."
Of the three, Sucampo is the only one that is profitable. Winning another indication for Amitiza should help the company perform even better. Catalyst stands a good chance to win U.S. approval for Firdapse, in my view. And Peregrine could see better days ahead with a board more aligned to shareholder interests.
Still, I think there are better stocks on the market. These three soared this week, but my take is that there are bigger winners to be found for the long run.
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