Fear These Three Biotech Stocks: AVEO Pharmaceuticals, Inc …

Fear These Three Biotech Stocks: AVEO Pharmaceuticals, Inc …

They say good things come in threes. If so, biotech companies could be in for not just another year of outperformance, but another decade. The first era of biotech was a building phase, when companies created their first blockbuster drugs. The second, current one, has resulted in a four-year rally that reflects the sector’s transition from a cluster of one-hit wonders to mature companies with multiple blockbuster products. And now the third is just starting to emerge – Credit Suisse calls it Biotech 3.0 – that looks likely to continue to 2020 and beyond.

For the past four years, biotech stocks have been the top-performing industry in the S&P 500, and the recent outperformance has been notable: a 74 percent gain in 2013 (versus 30 percent for the S&P 500) and a 42 percent gain in 2014 (versus 11 percent). And Credit Suisse Head of Global Biotechnology Research Ravi Mehrotra expects the stocks to beat the market once again this year. “This multi-year outperformance has not been a simple sentiment-driven bull run, but rather a fundamental rerating of the biotech sector,” he writes in a recent report published this year.

On the trading floor, shares of AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) dropped 3.75% to close at $1.54. The $89.14M company on August 17, 2015 announced an exclusive, worldwide license agreement with Novartis for the development and commercialization of AVEO’s first-in-class, potent, humanized inhibitory antibody targeting growth differentiation factor 15 (GDF15), AV-380, and related antibodies, including modified or derivative forms of any such antibody (the “Product”).

Under the terms of the agreement, AVEO will receive an upfront payment of $15 million and will be eligible to receive reimbursement, clinical, sales and regulatory-based milestone payments totaling $311 million assuming successful advancement of the Product. AVEO will also be eligible to receive tiered royalties on product sales ranging from high single digits to a low double-digit. Novartis will be responsible for all clinical development, manufacturing and commercialization activities and costs associated with the Product.

Celldex Therapeutics, Inc. (NASDAQ:CLDX) closed at $15.10 with a decrease of 3.88%. The $1.55B company on August 10, 2015 reported business and financial highlights for the second quarter ended June 30, 2015.

Cash position: Cash, cash equivalents and marketable securities as of June 30, 2015 were $334.0 million compared to $359.8 million as of March 31, 2015. The decrease was primarily driven by our second quarter net cash burn of $25.8 million. As of June 30, 2015 Celldex had 98.5 million shares outstanding.

Revenues: Total revenue was $2.2 million in the second quarter of 2015 and $2.7 million for the six months ended June 30, 2015, compared to $0.6 million and $1.0 million for the comparable periods in 2014. The increase in the second quarter of 2015 and the six months ended June 30, 2015 was primarily due to our clinical trial collaboration with Bristol-Myers Squibb and our research and development agreement with Rockefeller University.

R&D Expenses: Research and development (R&D) expenses were $26.5 million in the second quarter of 2015 and $51.6 million for the six months ended June 30, 2015, compared to $24.1 million and $51.2 million for the comparable periods in 2014.

Net loss: Net loss was $32.4 million, or ($0.33) per share, for the second quarter of 2015 and $62.5 million, or ($0.65) per share, for the six months ended June 30, 2015, compared to a net loss of $28.3 million, or ($0.32) per share and $58.2 million, or ($0.65) per share for the comparable periods in 2014.

XOMA Corp (NASDAQ:XOMA) ended at $0.829 by losing 3.60%. The $101.98M company on August 6, 2015 reported its financial results for the quarter ended June 30, 2015.

XOMA reported total revenues of $2.5 million in the second quarter ended June 30, 2015, compared with $6.0 million in the corresponding period of 2014. The reduction in 2015 revenues reflects lower activity under the Company’s existing contracts with National Institute of Allergy and Infectious Diseases (NIAID) for the development of anti-botulism agents.

Research and development (R&D) expenses for the second quarter of 2015 were $19.7 million, compared with $19.6 million in the corresponding period of 2014.

Selling, general and administrative (SG&A) expenses were $5.1 million in the second quarter of 2015, as compared to $5.2 million in the corresponding quarter of 2014.

For the second quarter of 2015, XOMA had a net loss of $23.8 million, compared with a net loss of $11.9 million for the second quarter of 2014. Excluding non-cash charges related to the revaluation of warrant liabilities, net loss in the quarters ended June 30, 2015 and 2014, was $23.6 million and $19.9 million, respectively.

On June 30, 2015, XOMA had cash, cash equivalents, and short-term investments of $51.0 million. The Company ended December 31, 2014, with cash, cash equivalents, and short-term investments of $78.4 million.

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Fear These Three Biotech Stocks: AVEO Pharmaceuticals, Inc …

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