Omeros Corp (OMER) -> a de-risked revenue producing small biotech

Below is my OMER valuation model with assumptions –> showing over 200% upside potential

Disclosure - OMER is a holding of my Marketocracy Fund. I do not short stocks.

Here are more Healthcare investment ideas from my Fund holdings

Note -most of these stocks are very risky.
My Fund is down 30% ytd with a 10.3% annualized 10 year return

Here are some investment ideas from my July 2016 Healthcare Watchlist

Marketocracy's Fund Managers Report Card for 1H16 -> C+

2016 is shaping-up as a good year for Marketocracy's Fund Managers. According to data just released, a majority 58% of managers (15 of 26) are beating the S&P500 benchmark .

The second quarter was particularly strong for managers as they averaged returns of 4.51% verses 1.90% for the S&P500 index.

However on average managers lagged the performance of the S&P500 over the first half of 2016. Managers returned 0.92% vs 2.69%.


The best performing 2016 Marketocracy managers:
#1 Bruce Pile with 27.77%    (@ a 15yr annual return of 7.5%)
#2 Chris Rees with 19.11%   (@ a 15yr annual return of 8.2%)
#3 Rex Jacobsen with 13.94%   (@ a 14yr annual return of 11.2%) 



The best long-term Marketocracy performers (since their fund inception):
#1 Todd Hagopian (28.0% annual return over 5 years)
#2 Justin Uyehara  (25.6% annual return over 13 years)
#3 Sam Miklosko  (20.8% annual return over 7 years)



Below is a detailed look at all the managers' 2016 performances:

My Fund:
My small-cap focused Healthcare Fund is performing poorly year to date. I am at the bottom of the rankings list, highlighted in yellow.

My fund is down a large 34.45% ytd. It lags the returns of equivalent benchmarks such as the IBB down 20% and the XBI down 18%. My fund's longer-term performance remains strong having returned 10% annualized over the past 10 years.

The recent biotech sector sell-off had a very adverse affect on my fund. I primarily hold small-cap stocks which unfortunately were among the worst affected in the sell-off. Heavy losses from my larger core-holdings also significantly contributed to my under-performance. My positions in Northwest Biotherapeutics (NWBO) and TG Therapeutics (TGTX) fell 94% and 61% respectively over the past 12 months.

I continue to hold both these stocks because I believe their recent sell-off was over-done and the stocks are now under-valued. Both stocks have late-stage cancer treatment candidates that offer tremendous promise with block-buster market potential. Important catalysts, later this year, have the potential to sharply shift investor sentiment in both of these stocks.  

The biotech sector is showing signs of a recovery which is encouraging. I remain optimistic about being invested in this space despite the rocky past 12 months. Over the longer-term I believe this sector will continue to be prosperous.



Disclosure - Marketocracy Funds are available for investment through SMAs.
I do not short stocks.

Novavax (NVAX) is nearing a pivotal PH3 data read-out -> updated - P3 failed to meet its endpoints

Novavax's lead vaccine candidate is for the indication of RSV Flu in older adults. This program is at a Phase 3 stage in clinical development. A data read-out is anticipated in 3Q16. I am expecting a positive result here which will be transformational for this small biotech company. A positive Phase 3 result here will help validate NVAX's vaccine platform technology from which its other vaccine candidates are also built, de-risking the stock..
 
My price target for NVAX is $13 - $16 which presents around 150% upside.

Below is my valuation model with assumptions. It only considers NVAX's lead vaccine candidate, RSV F for older adults.

For my model, I have chosen a conservative vaccine sales price of $80 which less than similar vaccines like Pneumovax and Prevnar which sell for around $100 and $200. Using a market penetration rate of 40% and an 80% likelihood of clinical success and then discounting 50% I calculate peak sales at over $600M. Applying an x8 Price to Sales ratio gives NVAX a Market Cap of $5.0B which is well above its current $1.8B valuation. Note my model only considers NVAX's lead indication. 

I see NVAX as a very attractive investment idea.
The company has a promising vaccine platform that has been used to produce several different vaccine candidates. These candidates have produced positive clinical data and have received FDA Fast Track designations .
NVAX's vaccine candidates are for the following indications; RSV Flu (elderly, maternal, & pediatric), seasonal influenza, RSF/seasonal Flu combo, Ebola, Avian flu (H7N9), and MERS.

NVAX’s most lucrative vaccine candidate is for the RSV indication. Currently there are no FDA approved vaccine's for this indication making this space an area of unmet need. RSV Flu is a common respiratory disease, according to the company, severe cases put a large burden on the healthcare system with over 200k hospital admissions and causing 16k deaths. The total cost burden on major markets NVAX estimates at approximately $88B.

NVAX is leading the race to provide a treatment for this RSV Flu indication. Other companies addressing this indication are GSK and Medimmune with candidates at the Phase2 clinical stage. NVAX's vaccine is the first to demonstrate efficacy in this indication. In  Phase2 testing, their vaccine's immunization efficacy was measured at 41% with p=0.041. These results compare very favorably to approved vaccine Prevnar which showed a lower immunization efficacy of 31% with p=0.008.

NVAX has benefited from funding support from organizations like BARDA and the Gates Foundation. They are now in a strong financial position with over $430M in cash. These reserves will be adequate to advance their various vaccine candidates well into the future.

I estimate NVAX's vast pipeline of vaccines may eventually yield well over $1B in peak sales. Its current low Market Cap of $1.8B lies well below its true potential and now offers investors a very attractive entry point.

Disclosure - NVAX is a core holding of my Marketocracy fund. I do not short stocks 

ResApp Health (RAP.AX) - Not at its peak after a 1500% rise over the past 9 months

ResApp is a small Australian company developing an exciting iPhone App to detect respiratory disease.
This App aims to compete against today's respiratory disease diagnostic tools such as the stethoscope, imaging (x-ray/CT scan), blood and or sputum test.

I ran a Times Revenue Multiple valuation model for this stock using their research data and got a share price target of  $0.85 - $0.66. This presents an attractive over 150% upside from today's price.

Clinical results to date suggest this App has a very high chance of winning FDA approval. This App was able to correctly detect lower respiratory tract involvement in 97% of cases initially missed by experienced clinicians using a stethoscope. The App was also able to differentiate between viral and bacterial pneumonia with around 90% accuracy.

MD take-up of this new diagnostic tool will likely be modest since doctors have used the stethoscope for a very long time. However the uptake in the telehealth market will likely be very high. For my modeling I have given 10% market penetration by MDs and 80% by telehealth markets. 
Coming catalysts include an imminent telehealth partnership announcement, an initiation this quarter of a pivotal clinical study, and a FDA decision in Q4'16.
The risks with this investment include the potential for a similar App competitor to emerge.

Below are information slides from ResApp's last investor presentation:

This is ResApp's 12-month share price chart -

This investment should only be considered by risk adverse investors. Considering the already staggering share price increase large price retractions are possible.
My pricing model says there is still significant upside potential here.


Disclosure - I have no position in this stock but may initiate a long position in the coming weeks

Dipexium Pharmaceuticals (DPRX) - High likelihood of clinical success with big upside

Disclosure - I have no position but may initiate one before PH3 results