Today’s Daily Alert brings a new low-priced pharmaceutical stock idea from The CHEAP Investor.
“ArQule, Inc. (ARQL) engages in the research and development of cancer therapeutics directed toward molecular targets and biological processes. Its lead product candidate tivantinib (ARQ 197) is an inhibitor of the c-Met receptor tyrosine kinase, which is in Phase 3 clinical trial for the treatment of non-small cell lung cancer, liver cancer and colorectal cancer. The company also develops ARQ 621, an inhibitor of the Eg5 kinesin motor protein that has completed Phase I trial; ARQ 736, an inhibitor of the RAF kinases, which is in Phase I clinical trial; ARQ 761, an activator of the E2F-1 damage response/checkpoint pathway; and ARQ 087, an inhibitor of fibroblast growth factor receptor that is in pre-clinical stage. ...
“The stock was a Wall Street favorite, trading at $8.32 in April 2012. Now that the price has fallen about 70%, we think it’s time to start accumulating ArQule. Insiders own about 6% of the 62.3 million total shares outstanding, and 134 institutions own 74% of the float. ArQule is a volatile, but great trading stock, averaging about 640,000 shares a day. In the quarter ended September 30, 2012, institutions sold about 900,000 more shares than they bought. The stock has always had a lot of insider buying. The company has an outstanding balance sheet with $140.2 million ($2.25 per share) in cash, a book value of $1.37 per share and a small debt of $1.7 million.
“On the negative side, the price has fallen from a high of $6.80 in August to its current low level in response to disappointing studies on tivantinib (ARQ 197). In October 2012, ArQule announced that the independent Data Monitoring Committee recommended that the phase III MARQUEE study of ARQ 197 for non-squamous non-small cell lung cancer should be discontinued, as it was not likely to meet its primary endpoint of improved overall survival. On January 14 disappointing phase II results were released on another study of tivantinib in combination with Pfizer’s Camptosar and Bristol-Myers Squibbs/Eli Lilly’s Erbiutx in patients with refractory or relapsed colorectal cancer.
“‘Recent developments in the tivantinib non-small cell lung cancer clinical development program have re-focused our near-term efforts on the commencement of a Phase III trial with tivantinib as single agent therapy in second-line HCC,’ said Paolo Pucci, chief executive officer of ArQule. ... ‘Our financial position continues to be strong,’ concluded Mr. Pucci, ‘and we expect to conclude this year with between $127 million and $130 million in cash, equivalents and marketable securities.’
“While ArQule certainly has hit a setback with its tivantinib drug trials, it has other products in the pipeline; and that’s what we’re counting on. The company has a huge amount of cash ($140 million) and a small burn rate — approximately $5 million for nine months. The stock has a loyal following, with many of Wall Street’s major institutions owning shares. The stock is in a downward trend and investors who can stand the risk should consider accumulating shares at this level. Any positive test results for its drug candidates could move the stock 50% to 100%. Significant news could cause the price to move considerably higher. Buy Recommendation.”
- Bill Mathews, The CHEAP Investor, February 2013