Dundee biotech outlook sees ‘ample room for upside’

While we were at the J.P. Morgan Healthcare Conference in San Francisco last week, Dundee Securities issued its latest biotech sector update.

On the bright side, analyst David Martin writes that there are signs Biovail, Angiotech and QLT stocks are bouncing back – supported by new strategies and new products in development for each company.  “And specialist funds in the U.S. remained focused on biotech through the downturn, and are likely to be buyers of the best stories our country has to offer,” he contends.

Many Canadian biotech stocks have stabilized or bounced over the last 12 months, but few are anywhere near all time highs, suggesting there is “ample room for upside, if risk appetite remains high, or positive events occur.”

In the near-term, his key events include Phase 2b results for Protox’s (TSX:PRX) benign prostatic hyperplasia drug PRX302 (which the company said last week had positive top-line results), and two FDA decisions for Labopharm’s (TSX:DDS) trazodone on February 11 and Theratechnologies’ (TSX:TH) tesamorelin on March 29.

Mr. Martin figures Cardiome (TSX:COM) remains “undervalued,” and stands to receive milestone payments from partner Merck, totalling a possible $50-million in 2010, if initiation of a Phase 3 trial for oral vernakalant, expected in the first half, and European approval of intravenous vernakalant, expected in the second half, go ahead as planned.

MethylGene (TSX:MYG) is trading below cash, he points out, and may be poised for a turnaround, if results expected later this year for MGCD265 and MGCD0103 are positive.

Mr. Martin is also keeping an eye on YM Biosciences (TSX:YM) as the company expects to report results for four nimotuzumab trials this year, he says, adding that he is re-evaluating YM in light of the U.S. Treasury Department’s clearance for expanded nimotuzumab testing in the U.S., and YM’s recent acquisition of Cytopia.

Outside Dundee’s formal coverage universe, Mr. Martin is looking for:

• Growing sales momentum for DiagnoCure’s (TSX:CUR) PCA3 and Previstage cancer diagnostics; and

• Spectral Diagnostics (TSX:SDI) to initiate a trial for sepsis treatment, Toraymyxin, now that funding is in place; and

• Neptune Technologies (TSXV:NTB) partner, Bayer, to launch its krill oil dietary supplement/neutraceutical product, and for Neptune to initiate clinical testing of CaPre; and

• Stem Cell (TSXV:SSS) to report Phase 2b stroke data for regenerative therapy NTx-265 in mid-2010;  and

• GeneNews (TSX:GEN) partner Enzo Labs to validate and launch the ColonSentry colorectal cancer screening diagnostic, expected in the second half; and

• Immunovaccine (TSXV:IMV) to initiate its Phase 1 trial for DPX-0907 in patients with breast, ovarian and prostate cancers.  DPX-0907 is potentially a universal cancer vaccine, which incorporates seven cancer-expressed antigens formulated in a T-cell stimulating delivery depot.