Is Heron Therapeutics Still a Good Buy After Skyrocketing Higher in 2015?

By George

What: According to S&P Capital IQ, Heron Therapeutics' stock finished 2015 up nearly 170%, making it one of the best performing biotech stocks last year. The company's banner year was the result of its emerging clinical pipeline producingpositive results for both the experimental chemotherapy-induced nausea drug, Sustol, as well as the post-op pain medicineHTX-011.

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So what: Sustol is currently barreling toward its regulatory review date of Jan. 17 with the U.S. Food and Drug Administration. The good news is that most analysts covering this stock think Sustol will finally be approved on its third time in front of the regulatory agency. While HTX-011 is a few years away from a formal regulatory review, the drug is targeting a huge market worth over $11 billion annually.

Now what: If Sustol is approved, Heron is expected to bring in anywhere between $55 million to $100 million in revenue in 2016, helping to shrink the company's net loss per share. At peak, industry experts think this drug could eventually generate around $400 million in annual sales, implying that it could be a huge value driver for a company with a market cap of less than $1 billion at current levels.

Looking a bit further out, investors are right to be excited about the potential blockbuster opportunity the mid-stage post-op pain medicine HTX-011 presents down the road. However, it'll probably end up facing stiff competition fromPacira Pharmaceuticals' Exparel, as well asTrevena's promising experimental-stage pain medicine TRV130. After all, Pacira already has a head start on commercializing its product, and Trevena's developmental therapy has been extremely impressive from an efficacy and safety standpoint in two midstage trials.

All told, Heron is an intriguing small-cap biopharma worth a deeper dive by risk-tolerant investors because of the potential approval for Sustol and its emerging clinical pipeline. That's why I may decide to add this stock to my portfolio this year, especially if the FDA does give Sustol the green light.

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George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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