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PropThink

About the Author PropThink

PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically complicated companies and equities that are grossly over- or under-valued. We offer regular market coverage and actionable research to PropThink Premium and Premium Plus subscribers.

These Biotech IPO’s Just Don’t Stop


The latest in the onslaught of biotech initial public offerings, Spark Therapeutics (ONCE) priced at $23 on Thursday evening. Twelve hours later, the stock opened at $43 and ripped all afternoon to close the Friday session at $50.00. For those keeping score at home, that’s a one-day double (+117% actually) for anyone who was able to get placed in Spark’s IPO. $50 per share values Spark at $1.2 billion.

What makes the company so intriguing? Spark is the most recent gene therapy company to hit the public realm, joining companies like uniQure (QURE), bluebird bio (BLUE)AGTC (AGTC) and Avalanche Biotechnologies (AAVLamong others, developing potential one-time cures for some disorders. On Friday we published a 30-second primer on Spark just before the stock began trading on the open market.  As with many of its competitors, Spark’s gene therapy candidates use a modified adeno-associated virus (AAV, get used to seeing this term), and lead candidate SPK-RPE65 will produce phase III results in the second half of the year in a group of rare blinding conditions known as inherited retinal dystrophies (IRD). In the first half, Spark will begin dosing Hemophilia B patients with its SPK-FIX candidate, which is partnered with Pfizer (PFE). The company could gross $185 million from this week’s IPO.

PropThink contributor Zack Fink tracks the gene therapy and RNAi fields religiously. He’s already written at length about bluebird bio [which is up 160% since he suggested it to PropThink Premium subscribers], and he spent much of this week looking into the increasingly crowded race for a Hemophilia B gene therapy. Hemophilia B is an ideal target for gene therapy because it’s well understood molecularly and is the result of a single gene defect. Spark is the latest entrant, joining Biogen Idec (BIIB), uniQure, and Baxter International (BAX) to developer a potential “cure” for the disorder. This weekend, PropThink Premium members will be privy to Mr. Fink’s latest report on gene therapies in Hemophilia B, explaining why we lean towards one developer in particular.

Earlier this month Conatus Pharmaceuticals (CNAT) was crushed with the release of top-line results from three phase I/II studies of its lead drug candidate, emricasan. Thankfully, we suggested to PropThink Premium members taking profits in front of the data, at a 60% gain. The results were awfully confusing, and management did a poor job of setting expectations in advance. One trial only enrolled a third of the planned patients, and the outcomes were difficult to interpret. This week we published a deeper dive on the recent data and explained why the stock was crushed – we also offered our outlook on CNAT from here.

Intercept Pharma (ICPT) on Thursday night announced that the FDA granted its lead drug, obeticholic acid, Breathrough Therapy Designation for the treatment of NASH. The stock rallied 30%, adding $1 billion to Intercept’s market valueThe designation carries weight for ICPT moreso than it would for ot… as obeticholic acid was steeped in controversy for much of 2014. The designation offers validation from the FDA that NASH is truly an unmet need, and more importantly, there’s a regulatory path forward. The designation essentially reduces a major overhang in the eyes of investors. Add to that a 15% short interest in ICPT, and Thursday’s after hours price action starts to make sense.