I Am Long EPRS and PFNX Stocks For New Theme “Biosimilar Drugs” – Decision on Novartis Drug Could Create New Industry of ‘Generic’ Biologic Drugs

Last night it was reported that  a U.S. FDA advisory panel on Wednesday unanimously recommended the agency approve the first “biosimilar” drug in the U.S., a version of the anti-infective cancer drug Neupogen.

The Obama administration, through provisions of the 2010 Affordable Care Act, created a simplified pathway for biosimilars, a path the FDA is following.

Biosimilars, unlike traditional generics, aren’t precisely identical to the brand drug. Under the new law, brand-name companies get 12 years to market their drugs exclusively. The FDA requires that the new versions be “highly similar” to the original drug, and it is this concept that the agency and advisory panel evaluated during a daylong Wednesday hearing.

Express Scripts Inc., the big prescription-benefit manager, has estimated that the first two biosimilars likely to get FDA approval, versions of Neupogen and Remicade, could save $22.7 billion in costs to patients and insurers over their first 10 years.

I wanted to quickly find stocks that are involved in this emerging area.  There are three stocks that I have found in the “biosimilar” drug business:

1) Coherus Biosciences, Inc. (CHRS) – A late-stage clinical biologics platform company, focuses on developing and commercializing biosimilar products worldwide. Its clinical stage pipeline consists of CHS-0214, an etanercept biosimilar candidate, which is in two Phase III clinical trials for the treatment of rheumatoid arthritis and psoriasis; CHS-1420, an adalimumab biosimilar candidate that has completed a Phase I study to treat psoriasis or rheumatoid arthritis; and CHS-1701, a pegfilgrastim biosimilar candidate, which has completed a Phase I study for the treatment of breast cancer patients exhibiting chemotherapy-induced neutropenia. The company was formerly known as BioGenerics, Inc. and changed its name to Coherus Biosciences, Inc. in April 2012. Coherus Biosciences, Inc. was founded in 2010 and is headquartered in Redwood City, California.

CHRS recently went public and three analysts have put targets of $20 , $22, and $45 respectively.  CHRS has approximately 32 million shares outstanding and a trading float of approximately 13 million shares.

2)  EPIRUS Biopharmaceuticals, Inc. (EPRS) – A commercial-stage biotechnology company, focuses on developing, manufacturing, and commercializing biosimilar therapeutics worldwide. Its lead product candidate is BOW015, a monoclonal antibody against tumor necrosis factor alpha for the treatment of autoimmune diseases. The company has obtained manufacturing and marketing approval in India for BOW015 as a treatment for rheumatoid arthritis. Its pipeline of biosimilar product candidates also includes BOW050, a biosimilar version of Humira (adalimumab) for the treatment of inflammatory diseases; and BOW030, a biosimilar version of Avastin (bevacizumab) to treat various cancers.

EPRS has one analysts I found that covers  it with a price target of $12.  EPRS  has approximately 13 million shares outstanding and a trading float of approximately 6 million shares.

3) Pfenex Inc. (PFNX) – A clinical-stage biotechnology company, is engaged in the development of biosimilar therapeutics. Its lead product candidate includes PF582, a biosimilar candidate to Lucentis that is in Phase Ib/IIa trials in patients with wet age-related macular degeneration. The company also develops PF530, an interferon beta-1b biosimilar candidate to the Betaseron to reduce the relapses in patients with relapsing forms of multiple sclerosis; PF694, an interferon alpha-2a biosimilar candidate to the reference product Pegasys; and other biosimilar candidates. In addition, it develops PF708, a teriparatide generic peptide product candidate to the reference listed drug Forteo; Px563L, an anthrax vaccine candidate based on a recombinant modified form of the protective antigen; and Px533, a prophylactic vaccine candidate to protect against malaria infection.

PFNX went public in 2014  and two analysts have put targets of $12, and $15 respectively. PFNX has approximately 20 million shares outstanding and a trading float of approximately 10 million shares.

As with any biotech there is always execution risk as trial drugs may not work. Also, EPRS and PFNX has small trading floats that could be subject to extreme and rapid moves.

Disclaimer: I am long EPRS and PFNX. This is not investment advice. The valuation section does not represent price target predictions whatsoever. The stock in this article may never appreciate in price and may depreciate in price. Do not make investment decisions based on this article. This article is for information only. I am not an investment advisor. I am not responsible for your investment decisions. I may sell my position in EPRS and PFNX at any time. Low float stocks can be risky and you could lose all of your investment.