These Three Biotechs Could See a Boost Soon
Despite some challenges — including FDA struggles — these biopharma names could see their conditions improve in the near-term.
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I've spotted three biotech stocks I hold within my portfolio via covered-call positions that have potentially positive catalysts on the near-term horizon.
We will start with Corcept Therapeutics CORT, a mid-cap commercial stage biopharma whose focus is around cortisol levels in the body and the diseases this can impact. Its current flagship produce is called Korlym. This once-daily tablet treats certain subsets of endogenous cushing's syndrome, a rare disorder caused by having too much cortisol in the blood for an extended period of time. Corcept is already a profitable company based on the success of Korlym. Management has provided guidance between $900 million to $950 million in sales this fiscal year. At the midpoint that would represent just over 35% growth over fiscal 2024. The stock has a market cap of just over $7.7 billion and net cash of just over $550 million.
The story could get considerably more exciting in the coming quarters. Management has just submitted a marketing application for a different cortisol modulator named Relacorilant to treat early-stage ovarian cancer that does not respond to platinum-based treatments. The application is supported by trial data and approval would open up a whole new revenue stream for Corcept. Relacorilant already has one marketing application accepted to treat hypercortisolism, with a decision calendared for the very end of this year.
Up next is Aldeyra Therapeutics, Inc. ALDX, a much smaller biopharma company that has had a long saga with the Food and Drug Administration in getting its lead candidate approved to treat ophthalmic disorder dry eye disease. The FDA rejected the company’s marketing application for the second time in early April of this year. This time the government agency requested a clinical trial assessing the clinical efficacy of reproxalap in addressing the ocular symptoms in this indication. Management met with the FDA soon after the rejection and then provided the requested trial data with its resubmitted marketing application around reproxalap. That application was accepted for review yesterday. My small bet on ALDX is that the third time is the charm for this $300 million market cap company.
Finally, we have another small cap gene therapy company having its own challenges with the FDA named Rocket Pharmaceuticals RCKT. Its marketing application for Kresladi, a gene therapy targeting severe leukocyte adhesion deficiency-I was rejected due to the need for more data around manufacturing and controls. Leukocyte adhesion deficiency is an immunodeficiency condition that can lead to soft-tissue infections, gum inflammation, and even tooth loss. There is still an outside chance the FDA could approve this candidate before the end of this year.
A bigger near-term challenge is the FDA put a clinical hold on a Phase 2 trial for the company’s experimental gene therapy candidate targeting a rare disorder called Danon disease in May. This followed the death of one of the dozen people in the study. It should be noted that the trial patient did not die directly as a result of the therapy but of the infection that followed. I do expect more clarity on how this study can move forward in the coming months.
Of note, the FDA did convey yesterday its regenerative medicine advanced therapy designation to another gene therapy Rocket has in development which triggered a nice rise in the shares on Thursday. The market cap of the shares is not much more than the cash on the company’s balance sheet. This helps make the stock worthy of a small bet in anticipation of further positive developments.
At the time of publication, Jensen was long ALDX, CORT and RCKT.
