It’s difficult to find explosive opportunities in a market that is testing all time highs, but one of the places to look is the turnaround companies in hot sectors. Biotech has been one of the top performing industry sectors over the past year with the iShares biotech Index fund (IBB) up 43.5%, dramatically outperforming the S&P by more than 2:1.
That said, the concerns about the introduction of Obamacare and negative headlines from several large drug manufacturers have caused extreme volatility over the last two months. When this happens, the smaller companies usually take the brunt of the selling offering opportunities for investors that have a close eye for value. Prospectors found gold nuggets among the rocks on the ground in California, and with a close eye, you can too.
In searching for these sparkling companies we came across the FedEx of Biotech…
When a medication is injected into a patient, antibodies attack the foreign substance and try to kill it off before the drug can work its magic. In order for the drug to be effective, it needs to be wrapped in a protective coating and delivered to the organ or system that will react. Without this protection, the response rate would be substantially lower than it could otherwise be. This is the area of development where Tekmira’s (TKMR) profits are derived, not creating the drug but providing the delivery mechanism. When a drug absolutely, positively, has to be delivered, companies like Boehringer Iingelheim call Tekmira.
Tekmira has long been a partner for the biotech companies receiving royalties for products relying on its delivery technology as well as funding for development programs. However, that could be changing as the company takes steps to expand its own product line. A new Oncology product has showed early success in preventing tumor growth and an anti-Ebola therapy are seeing early signs of success.
PLK1 is a protein inside tumors that causes cell division and consequently tumor growth. At this time, there are 36 patients enrolled in a phase 1 trial that showed 75% achieving stability including 1 patient that had almost a 20% reduction in tumor size. In the first half of 2014, a Phase 2 trial will begin with a more extensive evaluation. Yes, this is early on for the company, but the initial signs of success are present.
Another exciting test beginning shortly is a phase 1 trial for an anti-Ebola therapy. This trial will also begin in the first half of 2014 but Tekmira is not operating on this alone. The product is being created under a contract with the US Department of Defense! If the trials go well, rather than having to market this product, Tekmira will be compensated for manufacturing the therapy. Wouldn’t it be great to have a company that didn’t need to ring up its own sales? What’s even better is that the contract value is north of $100 million.
Tekmira has a solid business as a partner to drug manufacturers but is moving from being just a platform company to also being a product company. As it co-develops products and develops its own portfolio, each of these is an opportunity to layer growth onto a stable business.
Tracking the Jackpot,
Tom Anderson.
