Biotech Trades for the 2010 ASCO Conference
How to Trade this Year's ASCO Conference
Nothing has the power to send a biotech stock to the moon like the FDA...
Unless, of course, that biotech is presenting at the annual — and super influential — American Society of Clinical Oncology conference.
You see, any time a company is expected to present healthy data at ASCO, the speculation over FDA approval, buyout, and game-changing findings can jet stock prices going into the conference.
I expect this year's conference (taking place June 4-8 in Chicago) to be no different...
Even though the ASCO conference doesn't kick off for another month, now is the perfect time to back up the truck.
Just as we saw heading into the 2009 ASCO conference:
Seattle Genetics (SGEN) soared from $8.25 to more than $10.50
Pfizer (PFE) jumped from $13.25 to more than $15.50
Exelixis (EXEL) jumped from $4.25 to more than $6
And ArQule (ARQL) jumped from $3.95 to more than $5.
And just as we saw in 2008:
Immunogen (IMGN) flew from $3 to more than $4.75
Rigel (RIGL) climbed from a low of $20 to more than $24.50
Novartis (NVS) jumped from $50 to $54
And Infinity Pharmaceuticals (INFI) ran from $6.50 to $9.50
(Note: With $1 to $2 gains, you're not likely to see explosive returns — with stocks, at least. It's why we use options to milk underlying stock gains for white hot, and sizable profits every time.)
While ASCO is among a big draw factor for investor interest, know this: the unpredictability of presentations for those outside the biotech world won't always lead to a sure-fire winner.
What does matter is being in the right place at the right time — and that time is now.
Ask anyone who trades ASCO, FDA calendars, and Phase III trials, and they'll tell you the same thing: The price of a biotech stock will go up as the date draws closer.
And if you want to maximize your potential return from ASCO, you must be in place at least three to four weeks in advance. In regards to this year's conference in June, that's now.
But it doesn't mean that you should risk the house...
Not all trades will work out like Dendreon.
In the case of our Dendreon (DNDN)/ASCO trade (which produced 65% and 71% gains), we were able to profit within a day or two of a presentation at the ASCO Genitourinary Cancers Symposium.
Buying ahead of this conference — where speculators anticipated an explosive upside move — resulted in quick gains.
You see, as a conference nears and people expect to hear good news, crowds of speculators and traders start coming in to buy the stock, sending the stock up.
This happens over and over again, with many biotechs and pharmaceuticals. The only key is having the information in as far in advance as you can... and when it comes to conferences, at least a month.
Here's How to Trade ASCO Now
Between now and June 8, 2010, here are six trading ideas that we believe could pay off well.
One of our favorites is Delcath (DCTH), which Adam Sharp has spoken about in depth:
Investors will get a first look at Phase III results at the ASCO meeting. This could be a very big catalyst for DCTH shares...
The company recently announced positive clinical data for their proprietary liver cancer treatment system, The Delcath Percutaneous Hepatic Perfusion (PHP) device, which works by first isolating the patient's liver from the rest of the circulatory system...
The system, which is unique as far as I know, allows doctors to target the liver with 10x higher doses of chemotherapy than are normally feasible...
It could prove to be an important life-extending development for patients who currently have few treatment options...
Patients who received treatment from the Delcath system had more than a 50% reduction in a primary study goal, "time to tumor reduction or death." The results exceeded primary endpoint expectations and were statistically significant. In FDA-speak, that's good news for patients — and investors.
Reuters reports that the market for Delcath's system to treat the spread of melanoma to the liver could be $745 million in the U.S. alone. Delcath is also proceeding with phase II clinical trials on primary liver cancers at the National Cancer Institute.
The company's current market cap was around $395m.
By June 5, we'll learn about overall survival of patients, along with other important study details. So even though Delcath's system met the primary endpoint, as they announced tonight, we don't know exactly how long (or if) it increased overall survival among patients. The data looks good so far, but I prefer to stay wary and be ready for a surprise.
That's just one of the companies presenting ASCO data. To be well-diversified (usually a prudent measure), we'd recommend including some of these in your basket...
Provectus (in the same industry as Dendreon) is focused on the development of cancer and psoriasis treatment based on the Rose Bengal compound. It's looking strong ahead of key clinical trials and ahead of the ASCO conference.
Here's what's really exciting...
According to the company:
Rose Bengal is a red dye that was previously used to test for corneal scratches because it is preferentially absorbed by damaged cells. Provectus found that a highly specialized version of this dye is also absorbed in irregular or damaged cancerous cells... As the cancerous cells continue to take in more and more PV-10, they begin to rupture and eventually go into cell necrosis (death). The entire process also occurs without any radiation, which gives the treatment a substantial edge over existing treatments with side-effects.
Celldex Therapeutics (CLDX)
Partnered with Pfizer, Celldex's CDX-110 was developed for glioblastoma, a common and aggressive form of brain cancer. Shares of this stock are already running nicely ahead of the ASCO meeting.
Pharmacyclics (PCYC) — Also a possible takeover target, we believe
We're looking for the company to present data at ASCO to build support for its Btk inhibitor PCI-32765 monotherapy. Roth Capital recently raised its price target on the stock from $8 to $11.
Nektar Therapeutics (NKTR)
We're waiting for the company to update its Phase II study of NKTR-102 in women with platinum-resistant/refractory ovarian cancer. The company reportedly had good results from this study in March.
Keryx Biopharmaceuticals (KERX)
We're looking for the company to present results of a Phase II study of perifosine in combination with capecitabine as compared to a placebo plus capecitabine in patients with metastatic colorectal cancer. Plus, as of this posting, the price target on KERX was raised to to $8 from $5 at Rodman & Renshaw.
Time It Right
These six companies are just a sampling of some hot biostocks that stand to heat up even more with the ASCO conference just around the corner. Also, keep an eye out for stocks with prostate cancer studies. We've had great success trading these in the past.
But keep in mind, timing is everything. We're less than a month away from this year's event... waiting to buy could mean the word gets out, investors expect to hear good news, they buy up shares and prices go up.
And remember, even while buying a basket of these stocks... never, never risk the house. This market is still wildly volatile.
I'll be covering the ASCO trade profits in more detail in Options Trading Pit. Stay tuned.
Stay Ahead of the Curve,
Ian L. Cooper
The Best Free Investment You'll Ever Make
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