Top picks 2013: Coronado, Pacira Pharma
These two favorites are each focused on new biotech drug development projects.
Coronado BioSciences (CNDO) is our top speculative pick for 2013. The company's lead drug development candidate is CNDO-201, a pharmaceutical formulation of orally delivered, beneficial porcine parasites (a.k.a., whipworms) for the treatment of human autoimmune disease.
Pacira Pharmaceuticals (PCRX) is our top conservative stock recommendation for 2013. The specialty pharmaceutical company develops, commercializes, and manufactures pharmaceutical products for use in hospitals and ambulatory surgery centers.
Coronado's unconventional therapy aims to re-create the historical natural relationship that humans have had with intestinal parasites.
Known as the "Hygiene Hypothesis," this is a relationship that was essential before the significant improvement in public health in the last century.
CNDO-201 has already showed encouraging efficacy in Crohn's disease and ulcerative colitis, and there has also been some exciting early data in multiple sclerosis.
We believe that Wall Street is currently overlooking Coronado due to the unfamiliarity of using beneficial parasites in traditional medicine. As a result, there is very little research on CNDO and it is under-owned by institutional investors.
Over the next 12 months, we believe CNDO shares will double in price, we set our 18-month target at $20 per share based on our expectation of Phase II clinical success for CNDO-201 in Crohn's disease alone. Additional trial success in other autoimmune diseases would significantly increase this target price.
An extremely safe, oral drug that targets markets that are in excess of $10 billion is one of the Holy Grail's of medicine. We recommend CNDO as a buy under $8.
Pacira Pharmaceuticals is our top conservative stock recommendation for 2013. It drugs are based on its proprietary DepoFoam drug delivery technology. Its lead drug, Exparel, is a long-acting non-opioid postsurgical analgesic for postsurgical pain management.
The drug fills an enormous void in post-surgical pain management, a multibillion-dollar commercial market currently dominated by narcotic painkillers.
Led by a management team experienced in marketing innovative hospital-based pharmaceuticals, PCRX is well-positioned to deliver strong sales and earnings growth. PCRX's CEO, Dave Stack, has more than 25 years of successful industry experience.
Narcotic analgesics present significant challenges for patients and physicians. Among the major side effects are severe constipation and dependence/addiction, the latter has resulted in a health care crisis in both the post-surgery and hospital discharge settings.
Exparel offers surgeons a needed alternative -- long-acting pain management without the major adverse events associated with opiods.
With a targeted audience of more than 24 million surgical procedures, the potential market for Exparel (avg. cost of $285) exceeds $5 billion.
While forecasts will vary widely due to the early and somewhat unpredictable nature of any new drug launch, Exparel's big picture continues to expand and all of the metrics point in the right direction.
We are highly comfortable with the following Exparel sales forecasts for 2012 to 2015: $14 million, $65 million, $140 million, and $280 million. This could lead to earnings per share in 2014 and 2015 of $1 and $3, respectively. Hence, we believe our target price of $30 could prove conservative. Buy under $20.
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