This biotech has pulled back a little, offering a lower entry point. New drugs and takeover possibilities create an opportunity to participate in a growing, albeit, volatile opportunity.
Clovis Oncology (CLVS)
from Cabot Top Ten Trader
Wall Street has been eagerly anticipating Clovis Oncology’s (CLVS) latest clinical trial results, and this weekend at the American Society of Clinical Oncology annual meeting in Chicago we saw why.
Clovis’ stock shot up 17% and volume spiked to nearly five times its normal levels in mid-May upon news that Clovis would be presenting data from its ovarian and lung cancer drugs at the conference. The data didn’t disappoint. Clovis’ ovarian cancer drug Rucaparib shrunk tumors in 82% of women in a mid-stage clinical study of 204 patients. Four women in the study had their tumors completely disappear; overall, the drug stopped patients’ cancer from progressing for a median of 9.4 months for those women with BRCA mutations, which are present in about 60% of women with ovarian cancer. Rucaparib targets those mutations by blocking a protein that cancer cells use to protect themselves.
The Rucaparib results are encouraging enough that Clovis CEO Patrick Mahaffy said he plans to file the drug for market approval next year. The company will also seek approval of its lung cancer drug Rociletinib, perhaps as early as later this year, after the drug shrank tumors in 60% of patients who were EFGR-positive.
The promising results for both Rucaparib and Rociletinib increase the likelihood that Clovis could be bought out. Even absent a takeover, the drugs have the potential to make Clovis a lucrative company on its own for the first time.
As is the case with most clinical stage biotechs, CLVS has been very volatile. But the overall trend has been upward—especially in the last two months. A fall from 83 to 68 in late March and early April was immediately followed by a sharp rise all the way up to 92. CLVS sank back to 78 in early May, then rocketed all the way to 100 a week later. Having now settled back in the upper 80s (it held the 50-day line this morning), this looks like a nice time to pick up shares. Set your loss limit in the upper 70s.
Suggested Buy Range: 84.5-87.5
Suggested Loss Limit: 77-78
Michael Cintolo, Cabot Top Ten Trader, www.cabot.net, 978-745-5532, June 1, 2015