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Biotechs to Follow in 2015 off Fresh Insider Moves

Insider moves are always interesting to equity traders no matter where they occur, but more than any other sector, insider buys tend to inspire the most chatter around biotech. This is mostly due to the esoteric science and trial statistics that often determine the fate of a firm, which company and other biotech insiders tend to know more about than even premium hedge fund operators.

Over December, several significant moves have been made at different biotech firms that warrant at least a raised eyebrow. In some cases, the moves themselves have caused significant increases in either share prices or trading volume, and in other cases not. Whatever the situation, these stocks should be watched carefully for developments in 2015 in light of these transactions.

Cocrystal Pharma (OTCBB:COCP)

In chronological order, we begin with Cocrystal Pharma, an early-stage biotech specializing in antivirals with sporadic press but an all-star board and staff. On December 5, a Form 13D was filed indicating a 14.3% holding by Dr. Phillip Frost, a Cocrystal board member, as well as Chairman of both Opko Health (NYSE:OPK) and Israeli generics giant Teva (NYSE:TEVA). Opko has been on a 1500% tear since market bottom in March 2009, going up from 61 cents to now just under $10 a share. Opko was at $2 when Frost was first named Chairman. Teva has had a good year as well, up 43% in 2014, outpacing the larger Nasdaq biotechnology index ETF (NASDAQ:IBB).

Opko itself has a 7.8% holding in Cocrystal, which brings Frost’s total interest in the company to over 22%.

If that weren’t enough, the November 25th merger between Cocrystal and private firm RFS Pharma saw RFS owner Dr. Raymond Schinazi take a 38.9% stake in the company. Schinazi has his own impressive record in biotech, founding Pharmasset, which was acquired by Gilead (NASDAQ:GILD) for $11.4B in 2012; Idenix, acquired by Merck (NASDAQ:MRK); and Triangle Pharmaceuticals, also acquired by Giliad in 2003. The scientific wing of the company is headed by Dr. Roger Kornberg, the 2006 Nobel Prize winner in chemistry, also a Cocrystal cofounder with a 2.2% stake. In total, insiders account for just under 72% of total shares outstanding.

Cocrystal’s share price was not directly effected by the December 5th filing, but trading volume was over twice the average that day.

Seattle Genetics (NASDAQ:SGEN)

Four days later on December 9th, Felix Baker, a director at Seattle Genetics brought his ownership of the company up to 20.3%. This move came after a flurry of data were released by the company on its ongoing clinical trials for various drugs. First, phase 1 results were announced for an antibody-drug conjugate for acute myeloid leukemia, a type of blood cancer. Those results showed 44% of 52 patients showing either complete response to the drug or otherwise being disease free. Phase 1 results do not usually inspire intensive buying since it is only the beginning of the clinical trial process, so this type of insider move at this stage is significant.

Included in that flurry were the 4-year survival data for Seattle Genetics’ ADCETRIS, an antibody-drug conjugate for a form of lymphoma, came in at 64%, while the median overall survival for the disease is only 5.5 months. While ADCETRIS is already approved, these results could get it into first-line therapy, significantly increasing the drug’s market. It is currently approved only as a second- and third-line therapy. Baker has since bought even more shares, upping his ownership to 22.7% of the company.

Agios Pharmaceuticals (NASDAQ:AGIO)

One week later Agios Pharmaceuticals saw a major insider move. Agios is a development stage biotech valued at close to $4B, with major investment by Celgene (NASDAQ:CELG). Agios targets the way cancer cells metabolize sugars, attempting to starve them from within. On December 16th, Celgene bought over 5.24M shares, bringing its total ownership to a 27.2% stake. Celgene is investing heavily here in part because it has commercial rights to Agios’ lead candidate.

Agios showed positive preliminary results in its phase 1 trial for both efficacy and safety, with 6 complete remissions out of 14 patients, though this was in November. The catalyst for Celgene’s most recent stock purchase is unclear, but may be connected to Agios’ recent public offering. Agios stock has been on a steep uptrend all year at over 34% gains for 2014. Given Celgene’s experience with clinical trials, its commitment to Agios and latest investment could point to a good year ahead for the company.

Advaxis (NASDAQ:ADXS)

Three days later on December 19th, another biotech saw a pretty large insider move which also had the effect of putting shares to the races. Advaxis, a firm principally focused on cervical cancer treatment, is generally overlooked because there is already an effective cervical cancer vaccine available that prevents the HPV virus that causes the disease. Nevertheless, for those that already have cervical cancer, primarily patients in Asia, few treatments are available.

ADXS-HPV, Advaxis’ lead candidate, was featured on Fox News on December 10th, which began the recent uptrend. FDA acceptance of an investigational new drug (IND) application for ADXS-HPV on December 15th further propelled the stock, followed by a 4.54M share stake by Adage Capital, totaling almost 19% of the company in one trade, the same day its latest public offering closed. All those events in succession had the effect of pushing the stock up 200% since December 10.

Despite the recent gains, Advaxis is still below $200M market cap. Recent mainstream media interest and institutional investment could mean that Advaxis has entered a new stage as a publicly traded company, no longer relegated to obscurity.

All in all, a very busy month for biotech insiders. It will be interesting to see how these stocks perform in 2015 and beyond.

  Market Exclusive Is a financial portal geared to engaging discussion on current financial topics. Market Exclusive is not an investment advisor. Please read our full disclaimer at http://marketexclusive.com/about-us/disclaimer/

Teva (NYSE:TEVA) has a new chairman. As of February 5 and after four and a half years at the helm of the largest generics manufacturer in the world, Dr. Phillip Frost has resigned his position. This was announced back in June and is no surprise, and wouldn’t be all that noteworthy if not for the fact that other companies that Dr. Frost is heavily involved and invested in are suddenly making rather large upside moves.

Two of Frost’s companies in particular have been on a tear. One, Opko Health (NYSE:OPK), has increased 73% since the middle of December. Frost is both Chairman and CEO of Opko. Another, Cocrystal Pharma, (OTCBB:COCP) has increased 54% over the last 5 trading days.

Opko’s Recent Run, Patience has Paid Off

While Opko’s appreciation is at least explainable in terms of fundamentals, there is no obvious reason why Cocrystal would rise so fast and to such an extent. The fact that its rise has been almost exactly correlated with Frost’s official resignation from Teva may be coincidence, or there may be something more to it.

Frost has been Chairman and CEO of Opko since March 2007. He took over the company right on the cusp of the financial crisis, and weathered the startup through an 80% decline over a two year period. Opko’s stock didn’t get back to even under Frost’s tenure until February 2011, just under 4 years since assuming leadership of the company. From that point, it took yet another two years for the stock to finally move to a new trading range. Now, six long years later, OPK is up over 570%.

Opko is a bit of an enigma if you just look at its earnings statement. Annual losses have skyrocketed from $31M in 2012 to $114M in 2013, and look set to surpass $160M for 2014. However, the end of 2014 marked several critical milestones for the company that look to make 2015 a breakout year, with investors taking notice.

First of all, its lead product Rayaldee met endpoints in both of its Phase 3 trials reported late last year. Rayaldee is designed to treat vitamin D insufficiency in late stage chronic kidney disease (CKD) patients. These patients constitute a $12B market, and could transform Opko into a blockbuster company.

Ironically, this very success is what is causing Opko, at this point at least, to bleed cash even faster. In March 2013, Opko acquired Cytochroma, and with it the rights to Rayaldee. With primary endpoints being met in both Phase 3 trials, the milestone payments to Cytochroma have gone up, significantly increasing Opko’s operating expenses. In other words, Opko is a victim of its own success, that is, until the point in time where Rayaldee begins break into its $12B addressable market.

As for the results themselves, Rayaldee corrected vitamin D insufficiency in 97% of treated patients versus 6% with placebo. Safety and tolerability data were comparable in both treatment groups. The reason Opko has risen so sharply of late could be a combination of these results in addition to the fact that Opko’s management, including Frost, is intimately familiar with pharmaceutical marketing channels and how to get a new product to patients by targeting physicians.

Though Opko is a startup biotech, it is not headed by a rookie executive staff by any means. It took 6 years and almost $622M in capital to get where it is, but chances look good that patience will pay off in this case.

Cocrystal Jumps 54% in a Week

Cocrystal Pharma, also one of Frost’s pet projects, is 22% owned by Frost which includes a 7.8% stake by Opko and a 14.3% holding by Frost Investments. Though Frost does not chair Cocrystal, he is a director, and is part of a team of insiders that hold approximately 72% of shares outstanding. Cocrystal is currently focusing on Hepatitis C antivirals among others, and is headed by a team that includes the founder of Pharmasset, which was acquired by Gilead (NASDAQ:GILD) for $11B in a deal that was catalyzed by – you guessed it – a hepatitis C antiviral.

Cocrystal is still in the early stages of development, but has for some reason jumped from $0.50 to $0.70 in two days. While there is a chance the move could be temporary, patience and a 6-year wait did turne out well for Opko shareholders. Not to mention the precedent of an $11B acquisition of Pharmasset for a hepatitis C treatment. Having the founder of Pharmasset on your board certainly can’t hurt either.

Pershing Gold

There is yet another company that Frost is heavily invested in, but is getting much less attention, possibly because it is not in the pharmaceutical industry where Frost’s name has more influence. It is in fact a gold miner called Pershing Gold (OTCMKTS:PGLC). When people mention the name Dr. Phillip Frost, gold mining is not usually the first thing that comes to mind, and therefore his 15% ownership of the company tends to go relatively unnoticed. Neither does Frost’s name appear on the Pershing board of directors.

But unlike Cocrystal which just jumped seemingly for no reason other than possibly Frost’s resignation from Teva to concentrate on Cocrystal and Opko, Pershing does have some recent developments that could cause its stock, bouncing between $0.20 and $0.40 a share for three and a half years now, to break out of this range.

According to a February 4th press release, Pershing announced the discovery of a 2.24 ounces per ton intercept at its Relief Canyon mine in Nevada, considered extremely high grade. High grade is anything above one tenth of an ounce per ton. Nevertheless, the stock has yet to respond to the news.

Up until now, Pershing has burned through $111M in capital as a development stage gold miner. While comparing a gold miner to a startup biotech may be apples to oranges, $111M is less than 20% of what Opko spent to get to its current point. Could patience finally pay off for Pershing shareholders as well after over three years of the stock going nowhere?

 Market Exclusive Is a financial portal geared to engaging discussion on current financial topics. Market Exclusive is not an investment advisor. Please read our full disclaimer at http://marketexclusive.com/about-us/disclaimer/

On September 11 last year, a little-known Israeli financial magazine called Globes came out with a report that Dr. Phillip Frost, Chairman and CEO of Opko Health (NYSE:OPK), and then Chairman of Teva Pharmaceuticals (NYSE:TEVA), was interested in moving a private Israeli biotech called SciVac, 45% owned by Opko, into a corporate shell and making it public.

Today, Frost accomplished his goal, as SciVac has been officially acquired by Levon Resources (OTCMKTS:LVNVF), with 68.4% of the new company going to the former private SciVac shareholders and 31.6% going to former Levon shareholders. Since Opko already has a 45% stake in SciVac, that brings its total take in SciVac to 30.8%.

The deal still has to be voted on by current Levon shareholders in April, but is expected to pass.

Opko has had some success taking stakes in biotech companies so far this year. Its recent 8% stake in Cocrystal Pharma (OTCBB:COCP) has jumped 100% since February. Cocrystal is its second largest investment behind private Russian biotech Pharmsynthez.

SciVac’s Hepatitis B Vaccine

SciVac is the developer of a third generation hepatitis B vaccine (HBV) called Sci-B-Vac . It is approved in several countries including SciVac’s home country of Israel, where it is administered to hundreds of thousands of newborns each year. While first generation HBV vaccines are mostly effective, their effectiveness is still only 90%. In a clinical trial of over 5,000 people, Sci-B-Vac was shown to have an effectiveness of greater than 98% with higher immunogenicity, or immune response in terms of antibodies produced.

The difference between Sci-B-Vac and the current standard-of-care HBV vaccine is that Sci-B-Vac is derived from mammalian cells instead of yeast cells, and carries on it the three main HBV surface antigens instead of just one. It is believed that the 10% of people who do not respond to first generation HBV vaccines are infected with mutant versions of HBV that escape the single antigen vaccine. It is much harder for HBV to mutate all three surface antigens simultaneously to escape Sci-B-Vac.

Despite vaccines available, HBV is still a huge pandemic. According to the World Health Organization, one third of the world’s population is infected with HBV, with up to 400M people suffering chronic infections leading to chronic liver disease. 250M of those people are in the Asia-Pacific region alone.

SciVac’s next regulatory goal is approval in the United States, where 12M people are infected every year despite the current first generation vaccine available. What regulatory hurdles have to be overcome remains to be seen, given that Sci-B-Vac is already clinically tested and approved in several countries. SciVac will be aiming at the immunocompromised as well as end stage renal disease and HIV patients, as these are patient populations who have special difficulties responding to current HBV vaccines.

Context of Frost’s Latest Move Hints at Possible Future Moves

Dr. Frost’s latest move comes in the context of several other interesting stock movements that may tip off future deals in the making. In October last year, only one month after Globes reported Frost’s interest in taking SciVac public, Levon acquired 35M shares, or 10% of Pershing Gold Corporation (OTCMKTS:PGLC) another one of Frost’s pet projects of which he has a 15% stake translating to 53.7M shares. Those 35M shares of PGLC will be moving to new entity Spinco, so speculators looking out for the next Frost-related deal should keep an eye on a possible merger between Spinco and Pershing. A similar deal was inked bewteen Pershing and Continental Resources Group in February 2013 where the latter was acquired by Pershing. Continental had a substantial stake in Pershing at the time.

Cocrystal, which is fairly similar to SciVac in that it is focusing on molecularly tailored vaccines, primarily hepatitis C. Cocrystal is also 22% owned by Frost through his investment trust as well as an 8% stake through Opko. Cocrystal has skyrocketed over 100% since February but lacking any obvious catalyst for doing so. Another possible move to watch then is for a deal between Levon, now SciVac, and Cocrystal, which itself was once BioZone, also an Opko investment that was merged into Cocrystal.

With Frost’s myriad of moves and deals over the last few years things can get admittedly confusing and make your head spin. The structure of these mergers, however, repeatedly seems to start with Opko at the base and then moves out from there. Opko itself has been on a nearly 100% tear since December. As for Cocrystal’s recent 100% move, it may have investors scratching their heads but connecting the dots here could point to the beginning stages of a Frost deal at some point between Cocrystal and SciVac as both specialize in hepatitis vaccines, as well as one between Spinco and Pershing.

Call it equity consolidation with synergies in mind, it certainly is a fascinating chess game.

 Market Exclusive Is a financial portal geared to engaging discussion on current financial topics. Market Exclusive is not an investment advisor. Please read our full disclaimer at http://marketexclusive.com/about-us/disclaimer/