BCRX; possible avian flu opportunity
NEW YORK - John McCamant, editor of Medical Technology Stock Letter, recommends buying shares of BioCryst Pharmaceuticals, the Birmingham, Ala.-based developer of small-molecule drugs.
BioCryst (nasdaq: BCRX - news - people ) shares have surged 50% from their low on Friday to their close on Tuesday, at a 52-week closing high of $15.04. The reason for the enthusiasm: BioCryst's influenza neuraminidase inhibitor drug candidate, peramivir, received prominent and positive mention in a New York Times article about how some discarded drug candidates may have new possibilities in treating the H5N1 avian influenza that has broken out in Southeast Asia, which many public health officials fear could develop into a global pandemic. Peramivir was mentioned as one of the most promising drugs.
Three years ago, peramivir failed a Phase III drug trial due to poor bioavailability (the ability of the drug to be absorbed into the bloodstream) in its pill form. BioCryst is now developing an injectable version of the drug, and peramivir has shown some success in fighting avian flu in pre-clinical testing involving cell cultures and in animals.
In 2001, Johnson and Johnson (nyse: JNJ - news - people ), which had been BioCryst's partner in peramivir's early development, pulled out of the program, leaving BioCryst with exclusive rights to the drug's future profits, which could be substantial. Tamiflu, a flu drug from Gilead Sciences (nasdaq: GILD - news - people ) and Roche, had sales of $450 million in the first half of 2005. BioCryst's total sales for the past 12 months totaled $393,000.
In a July 1, 2005 filing with the Security and Exchange Commission, BioCryst said it is "considering various options for the development of peramivir, including whether to file an investigational new drug (IND) application with the U.S. Food and Drug Administration to conduct clinical trials in humans for avian and other viral strains of influenza." It now appears that BioCryst will file the IND by early November.
In the September issue of Medical technology Stock Letter, McCamant says "recent testing has shown that a single intramuscular injection of peramivir is comparable to, or better than, five days of oral treatment with other neuraminidase inhibitors in preventing death from the avian flu virus."
McCamant also notes that the normal procedure for getting FDA approval requires a series of Phase I, II, and III trials, but BioCryst's initial strategy will be focused on obtaining approval to stockpile peramivir under Project Bioshield guidelines, which are much less rigorous.
The government standard for stockpiled drugs is to prove to the National Institutes of Health the safety and efficacy of a drug through two efficacy studies in animals and one safety study in humans. Peramivir has already been tested in nearly 1,000 people, and additional human testing will begin in January.
Reuters reports that BioCryst Chief Executive Officer Charles Bugg said the company had enough peramivir on hand to treat 15,000 to 20,000 people and has already ordered enough raw materials to make enough of the drug to treat up to another million.
"BCRX has a readily scalable manufacturing process in place that could rapidly ramp up to produce 120 million doses per year," says McCamant. "In addition, it appears that peramivir could be up to ten times cheaper than Tamiflu--BCRX estimates a cost in the $1 range per dose versus Tamiflu's expected bulk-discounted cost of $12 per course."
BioCryst has nearly tripled in value since late May, but McCamant says the sharp rise "may only just be the start," and cites the company's small-market capitalization of $304 million. His 18 to 24 month price target is $25, although his buy limit is $12, which is lower than the stock's price (as of Tuesday's close). Buy on pullbacks.
BioCryst lost $22 million in the past 12 months on revenue of $393,000. On the balance sheet, BioCryst has no debt and $1.26 per share in cash, and last month filed an $85 million shelf offering, which will allow it to sell additional shares.
The investment above was recommended in Forbes Newsletters' free Stock of the Week e-mail when BioCryst was trading below McCamant's $12 buy limit.
