One key metric that allows us to see under the surface of the market is “relative strength”, or how well a stock is faring against other stocks in the same market space. (1) This method helped William O’Neil become an investing legend (2), and the CANSLIM approach he founded that is now popularized by Investor’s Business Daily is still driven in large part by analysis built on identifying relative strength. (3)
Relative Strength analysis is particularly useful when analyzing a stock in a group that has been suffering declines over a period of weeks or months. But it’s also useful when trying to identify which groups of the market appear to be rotating into a leadership role.
With the broad bear market seemingly still in full bloom, this is a good time to take note of areas of the market showing upward momentum over the past 1-2 months.
One area that fits this description is biotechnology (4), with small-cap oncology players showing particular relative strength. With that in mind, we take a look below at some of the most interesting stories in the space.
Fate Therapeutics Inc. (Nasdaq:FATE) engages in the development of programmed cellular immunotherapies for cancer and immune disorder. Its pipeline of products includes immuno-ocology candidates and immuno-regulation candidates.
The company’s proprietary induced pluripotent stem cell (iPSC) product platform enables mass production of off-the-shelf, engineered, homogeneous cell products that are designed to be administered with multiple doses to deliver more effective pharmacologic activity, including in combination with other cancer treatments.
Fate Therapeutics Inc. (Nasdaq:FATE) recently announced that it has expanded its off-the-shelf, iPSC-derived, cell-based cancer immunotherapy collaboration with ONO Pharmaceutical Co., Ltd. (ONO) to include the development of chimeric antigen receptor (CAR) NK cell collaboration candidates. In addition, as part of the collaboration’s expansion, ONO will contribute novel binding domains targeting a second solid tumor antigen. Under the original Collaboration and Option Agreement entered into between Fate and ONO in September 2018, ONO has contributed novel binding domains targeting an initial solid tumor antigen, and Fate is currently conducting preclinical development of a multiplexed-engineered, iPSC-derived CAR T-cell product candidate for solid tumors. (5)
“Our collaboration with ONO has focused on driving innovation in the field of cell therapy for solid tumors, and we are excited by the preclinical data we have observed with our first iPSC-derived CAR T-cell product candidate,” said Scott Wolchko, President and Chief Executive Officer of Fate Therapeutics. “We are impressed with the differentiated antigen binders that ONO has contributed to the partnership, and we are pleased to expand our collaboration to initiate preclinical development of collaboration products targeting a second solid tumor antigen.”
If you’re long this stock, then you’re liking how the stock has responded to the announcement. FATE shares have been moving higher over the past week overall, pushing about 6% to the upside on above average trading volume. Shares of the stock have powered higher over the past month, rallying roughly 41% in that time on strong overall action. (6)
Fate Therapeutics Inc. (Nasdaq:FATE) managed to rope in revenues totaling $18.4M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 65.3%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($573.8M against $77.9M). (7)
Adhera Therapeutics, Inc. (OTC US:ATRX) is particularly interesting right now because the stock hasn’t seen much interest lately. However, we would point out a potentially powerful catalyst earlier this week – especially given the powerful outperformance of other stocks in the oncology space – ATRX just executed an LOI to acquire a novel protein complex for targeted treatment of advanced cancers.
This is key because ATRX previously has only had exposure to the $6 billion Parkinson’s market (8), the $48 billion diabetes market (9), and the $25-plus billion NASH market (10). A move into the cancer space when cancer small caps are starting to lead the market bounce could be an explosive catalyst once the crowd takes note.
Adhera Therapeutics, Inc. (OTC US:ATRX), as noted above, most recently announced that it has entered into an LOI with Bio Innovation Group to acquire Paclitaxel Gallium Transferrin (“PGT”), a novel protein complex for targeted treatment of advanced cancers.
The details here are important.
According to the company’s release, PGT is designed to deliver paclitaxel to cancer cells over-expressing Transferrin Receptor 1, also known as CD71 or TFR1. Paclitaxel is a commercially successful drug approved by the U.S. Food and Drug Administration (“FDA”) in two variations, solvent-based paclitaxel (sb-paclitaxel, brand name Taxol®) and protein-based paclitaxel (nab-paclitaxel, brand name ABRAXANE®). Sb-paclitaxel is approved for breast, ovarian, and lung cancer and Kaposi’s Sarcoma, while nab-paclitaxel is approved for breast, pancreatic, and non-small cell lung cancer. Each are often used off-label for a variety of hard-to-treat solid and liquid tumors.
Gallium nitrate (brand name GANITE®) is FDA-approved for hypercalcemia of malignancy, a common finding in patients with advanced stage cancer. With characteristics similar to iron, gallium has anti-cancer activity and has been shown to have synergistic activity in combination with other anti-cancer drugs. Transferrin is a human blood protein that functions as an iron transport and natural ligand that binds to CD71-positive cells. Nab-paclitaxel uses albumin as its protein component. Pre-clinical research on PGT suggests that switching the protein component to transferrin could have potential advantages over albumin for developing a new targeted therapy, one that delivers a second, non-cross resistant agent, gallium.
Adhera Therapeutics, Inc. (OTC US:ATRX) CEO Andrew Kucharchuk stated, “CD71 is regarded as an optimal target in oncology, yet it has proven elusive to new therapeutics because of its ubiquitous expression on the surface of generic cells, a challenge that we believe PGT could potentially overcome while hitting tumor cells with both paclitaxel and gallium. Owing to the fact that CD71 is overly expressed on many different refractory tumors, we see an opportunity to develop a strategy that is focused on a specific cancer while simultaneously working to evolve a new drug for a tumor-agnostic secondary indication. PGT is a tremendous value add to our pipeline and we look forward to advancing the research on this promising new therapy.” (11)
Global Blood Therapeutics Inc. (Nasdaq:GBT) isn’t, strictly speaking, in the oncology space. But it is a leader in the fight against blood-based disorders, and treatments and research in the space are generally held as systematically similar to treatments and research around leukemias and lymphomas, so the math is relatively similar when thinking about runway, capital, and returns.
Founded in 2011, GBT is delivering on its goal to transform the treatment and care of SCD, a lifelong, devastating inherited blood disorder. The company has introduced Oxbryta (voxelotor), the first FDA-approved medicine that directly inhibits sickle hemoglobin (HbS) polymerization, the root cause of red blood cell sickling in SCD.
Global Blood Therapeutics Inc. (Nasdaq:GBT) recently announced the initiation of an expanded access program (EAP) for voxelotor in Brazil for the treatment of sickle cell disease (SCD) in adult and pediatric patients 12 years of age and older who cannot satisfactorily be treated with a medicine authorized for use in Brazil. ANVISA, the Brazilian Health Regulatory Agency, has authorized the voxelotor EAP, which is actively enrolling at clinical sites around the country.
“There are up to 100,000 people estimated to have sickle cell disease in Brazil, yet there are no currently approved treatments that directly address the underlying cause of the disease,” said Kim Smith-Whitley, M.D., executive vice president and head of research and development at GBT. “As part of our deep, ongoing commitment to patient access worldwide, we are pleased to initiate this expanded access program for eligible patients in Brazil who may benefit from voxelotor, which we believe can potentially modify the course of this debilitating disease.” (12)
Traders will note 21% piled on for shareholders of the stock during the trailing month. Market participants may want to pay attention to this stock. GBT has a history of dramatic rallies. In addition, the listing has seen a growing influx of trading interest, with the stock’s recent average trading volume running 7% above the average volume levels in play in this stock over the longer term. (13)
Global Blood Therapeutics Inc. (Nasdaq:GBT) has a significant war chest ($553.4M) of cash on the books, which is balanced by about $79.3M in total current liabilities. GBT is pulling in trailing 12-month revenues of $210.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 41.3%. (14)
Other key players in the Cancer space include Dynavax Technologies Corp. (Nasdaq:DVAX), Bristol Myers Squibb Co. (NYSE:BMY), Pfizer Inc. (NYSE:PFE), Guardant Health Inc. (Nasdaq:GH), and Illumina Inc. (Nasdaq:ILMN).
References:
- https://en.wikipedia.org/wiki/Relative_strength
- https://www.stockopedia.com/content/how-does-can-slim-investing-work-55881/
- https://www.investopedia.com/terms/w/william-j-oneil.asp
- https://www.barrons.com/articles/biotech-stocks-poised-to-outperform-51657226664
- https://finance.yahoo.com/news/fate-therapeutics-announces-expansion-solid-110000140.html
- https://www.tradingview.com/chart/?symbol=NASDAQ%3AFATE
- https://www.marketwatch.com/investing/stock/fate?mod=search_symbol
- https://www.marketsandmarkets.com/Market-Reports/parkinson-disease-treatment-market-47265247.html
- https://www.biospace.com/article/diabetes-devices-market-size-to-hit-around-us-48-8-bn-by-2030/
- https://www.globenewswire.com/en/news-release/2022/05/04/2435709/0/en/Non-Alcoholic-Steatohepatitis-NASH-Market-Worth-24-26Bn-Globally-by-2028-at-47-1-CAGR-Exclusive-Report-by-The-Insight-Partners.html
- https://finance.yahoo.com/news/adhera-therapeutics-signs-letter-intent-131500161.html
- https://finance.yahoo.com/news/gbt-initiates-expanded-access-program-120000595.html
- https://www.tradingview.com/chart/?symbol=NASDAQ%3AGBT
- https://www.marketwatch.com/investing/stock/gbt?mod=search_symbol
