Three Biotech Investment Ideas from Cormorant Asset Management

At the beginning of June, Nektar Therapeutics (NASDAQ:NKTR) disclosed preliminary data from its Phase 1/2 study that assessed the combination of its NKTR-124 and Bristol-Myers Squibb Co (NYSE:BMY)’s Opdivo in a range of cancers, including first-line melanoma, first-line renal cell carcinoma and first-line urothelial cancer. Investors were disappointed to see that the response rate in melanoma and kidney cancer patients declined since the Stage 1 of the trial in November. If in November, the overall response rate was 11 out of 13 patients, in May it declined to 14, and a similar trend was noticed among kidney cancer patients. Nektar Therapeutics (NASDAQ:NKTR) plans to launch a Phase 3 study in first-line-melanoma this quarter and is working on designing pivotal trials in first-line renal cell carcinoma and first-line urothelial cancer.

Following the news, two analysts, William Blair and JPMorgan Chase & Co., reiterated their ‘Buy’ and ‘Overweight’ ratings, respectively, although JPMorgan cut its price target to $78 from $80. HC Wainwright downgraded the stock to “Neutral’ but kept the price target intact at $54.

Aside from NKTR-124, Nektar Therapeutics has a couple of other products in its pipeline, including the NKTR-181, which is an opioid analgesic with a slow effect that doesn’t give patients the same sensation of euphoria as traditional opioids, thus minimizing the risk of abuse and addiction. At the end of May, Nektar filed the New Drug Application with the US FDA for NKTR-181. The company also seems to be financially healthy. The company earned just $38 million, but spent nearly $125 million in the first three months of 2018 and, even though, it recorded a loss of $96 million at the end of March, it still managed to finish the quarter with $334 million in cash, which excludes $1.85 billion it received from Bristol-Myers Squibb Co (NYSE:BMY) in April.

Let’s now take a look at two companies that Cormorant Asset Management added to its equity portfolio during the first three months of 2018. In SAGE Therapeutics Inc (NASDAQ:SAGE), Bihua Chen’s fund acquired a $38.60-million position that contains 239,600 shares. After jumping in December, SAGE Therapeutics Inc (NASDAQ:SAGE)’s stock has been trading mostly sideways since the beginning of the year. However, the company has recently seen a number of developments that might propel it higher. At the end of May, the US FDA accepted under Priority Review the marketing application for IV brexanolone for the treatment of postpartum depression, which is a Breakthrough Therapy indication. The FDA’s action date is December 19. In June, SAGE Therapeutics (NASDAQ:SAGE) also signed a strategic collaboration deal with Shionogi & Co., Ltd. to develop and sell SAGE-217 in Japan, Taiwan and South Korea. Shionogi will be responsible for development, regulatory filings and commercial activities related to the drug, while Sage will receive up to $575 million, including $90 million upfront and the rest in milestones and tiered royalties on net sales.

In addition, Cormorant is also betting on gene therapy, which is considered one of the biggest challenges of modern medicine, but also something that could revolutionize the entire industry. During the first quarter, the fund added 1.52 million shares of Rocket Pharmaceuticals Inc (NASDAQ:RCKT), a small-cap clinical-stage company that is developing gene therapy treatment options for rare diseases. The company currently has several ongoing studies that involve Fanconi Anemia, Leukocyte Adhesion Deficiency-I, Pyruvate Kinase Deficiency, Infantile Malignant Osteopetrosis. Over the course of this year, Rocket Pharmaceuticals Inc (NASDAQ:RCKT) expects to present updates on its studies and to file for multiple regulatory approvals across its pipeline. In addition, the company is certain that it has enough cash to support its operations and R&D activities through 2020.

Disclosure: none