Needham & Company Highlights Three Under-the-Radar Biotech Stocks (ARGS) (TLOG) (CYTK)

Needham & Company analyst Chad Messer highlighted three under-the-radar ideas from Needham Healthcare Conference:

Messer commented, "As biotech stocks continue their multi-year run, many investors are getting concerned about potential froth in the market. We, however, believe this has been a biotech market of haves and have-nots. Going into the recent 14th Annual Needham Healthcare Conference we highlighted two high conviction names that have performed well and that we expect to continue to do so: ISIS and ESPR. Now that the conference is over, we highlight 3 names that have not participated in the ongoing biotech rally but that have upcoming major 2015 catalysts which we walked away incrementally more positive on."

Argos Therapeutics (NASDAQ: ARGS): Argos has been running the pivotal Phase III ADAPT study of AGS-003 in metastatic renal cell carcinoma (RCC) for two years now and will finally complete enrollment in the 450 patient trial soon. While the final OS readout is not expected until 1H16, the first interim data look at ~25% events will come at ASCO in June. Another data release at ~50% expected in late 2015. The efficacy stopping hurdle is extremely high for the 25% look, but we believe it could more realistically be achieved by the 50% interim or at the 75% interim in early 2016. We have high conviction for the ADAPT readout based on the Phase IIb results showing a doubling of survival time compared to historical single agent Sutent.

Tetralogic (NASDAQ: TLOG): Tetralogic will read out data from 3 key programs later this year. First off is interim data from a randomized Phase II study of birinapant + 5-AZA in frontline MDS in early 2H. We are optimistic for a successful trial based on earlier Phase Ib data with the combo. TetraLogic is also running a Phase Ib study of birinapant 48 HBV patients that will readout towards the end of the year. While this is the first study testing birinapant in human HBV subjects, birinapant not only cleared virus from circulation but resulted in reduction in surface antigen in rodent models. If this finding translates to humans, it would represent a significant advancement over current antivirals. Given the value assigned to other early stage programs in HBV, we believe this data could also significantly drive shares. Also due this year is Phase II data from SHAPE, a topical HDAC inhibitor for early Cutaneous T-Cell Lymphoma (CTCL). Given the established efficacy of HDAC inhibitors in CTCL, we view this program as highly derisked.

Cytokinetics (NASDAQ: CYTK): At long last, the Phase II expansion arm of COSMIC, studying oral omecamtiv in heart failure, has completed enrollment and we look for data in 4Q. While the echocardiographic and safety data from this study is of interest, the real driver for CYTK shares should be Amgen's subsequent decision on advancing omecamtiv into Phase III which we expect before year end. Cytokinetics stands to receive a significant milestone payment around the initiation of the Phase III study, and we believe Amgen's commitment to the program should help alleviate investor skepticism and cause shares to rally.

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