Shares of biopharmaceutical company Affymax's (Nasdaq: AFFY) are witnessing strong performance. Last week, the stock had recorded 20 percent upside, whereas the the S&P 500 shed 0.5 percent, while the Nasdaq advanced 0.4 percent to end the week.
The sudden spurt in trading activities is due to two primary reasons. The first is that Food and Drug Administration March 27th meeting to make a decision about Affymax's anemia drug candidate Peginesatide, which was earlier called as Hematide.
The second reason is Rodman & Renshaw has reportedly initiated AFFY with an Outperform. The rating boosted investors' sentiments for the stocks with a hope for a favorable decision from the FDA. The analyst optimism that is Affymax's Peginesatide would be preferred by some dialysis providers over Amgen's (Nasdaq: AMGN) Epogen. This is because Peginesatide could be administered only once a month, whereas Amgen's Epogen needs to be given 13 times in a month on an average.
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Amgen is enjoyed a virtual monopoly in the anemia drug market for more than 20 years with 90 percent share. The company is also working hard to reach long-term understanding for supply of anemia drug to big dialysis provider such as Fresenius Medical and DaVita. Interestingly, Amgen's fourth quarter earnings failed to meet analysts' expectations due to falling sales in the U.S. for its anemia drugs The company's Epogen generated sales of $2.04 billion in 2011, 19 percent lower than 2010.
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Amgen's Epogen was the first to get FDA approval for the treatment of anemia. A few years back, Roche was planning to enter the anemia drug market, but was thwarted by Amgen by defending its patents.
Affymax's Peginesatide is being co-developed by Takeda in the U.S. Both companies will promote the drug for commercial purpose. Upon getting FDA approval for Peginesatide, Takeda will be required to pay an additional $50 million milestone payment to Affymax. Takeda will have an exclusive right to develop and commercialize the drug candidate outside the U.S.
On Friday, Affymax's stock closed 5.9 percent higher than its previous close with trading volume of 2.49 million shares. Except March 22, trading in the company's shares were more than 1.65 million. This is compared to 3-month average volume of 1.15 million shares.
Interestingly, no analyst is recommending this stock for either Sell or Hold. An equal split of eight analysts recommended the stock with Strong Buy and Buy. For the 8 brokerages, the mean and median price target is $16.00 and $18.00 respectively. Similarly, highest and lowest price target is $20.00 and $7.00 respectively.
For the 52-week period, the stock traded between $3.93 and $13.49. Compared to three-month average volume, today's volume has already crossed 1.26 million.
The FDA decision will hold the key to further upside in the stock prices. The expectation is that since the advisory panel had already voted 15 to one in favor of Peginesatide, there should not be any major hurdle to get FDA approval. However, the FDA is not bound by its advisory panel to make a decision. If the FDA fails to approve, then the stock could nose dive strongly. However, this seems unlikely given the analysts' predictions.