In Schizophrenic Markets, Stick To Healthy Stocks

I don't know about you, but I'm a little tired of this hour-to-hour, news driven reactive market. It's making me dizzy.

One day the markets freak after worse-than-expected news on unemployment and home sales hit the Street.

Then, today, Ford (NYSE: F) releases narrower-than-expected losses (big deal, huh?) and Morgan Stanley grants Microsoft an upgrade, and the collective financial world practically jumps for joy.

With such a schizophrenic personality in the markets, I'd hate to be an investor trying to figure out what stocks to invest in long or short term.

Quite frankly, I'd just stick to a sector that we know President Obama is committed to spending money on-healthcare-and invest in small-cap companies with clear visions for future growth.

Here are a few ideas: On Thursday, when most small-cap healthcare stocks slipped, NuVasive (NASDAQ: NUVA) rose 17% after reporting that its first-quarter net loss narrowed on a 56% jump in sales. As of this writing, it's up another 8% in today's trading. The San Diego medical-device company also said it will speed its entry into the cervical disc-replacement market with the planned acquisition of Cervitech.

Under the Orphan Drug Act, companies that develop new treatments for rare diseases are protected from competition for seven years. That has motivated firms like Alexion (NASDAQ: ALXN) to invest in developing novel new drugs for diseases otherwise ignored.

But with no rivals for these drugs, firms like Alexion can pretty much charge what they want. In Alexion's case, that's nearly $400,000 for a year of treatment with Soliris.

In March 2007, Soliris was approved by the FDA for the treatment of the blood disease paroxysmal nocturnal hemoglobinuria, or PNH. In June 2007, the European Commission approved the drug for PNH patients in 29 countries.

PNH is very rare. In all, there are probably 12,000 to 13,000 PNH patients in the U.S. and Europe. PNH is a debilitating disorder defined by the destruction of red blood cells. Severe anemia, pain, fatigue, kidney failure and the risk of blood clots are associated with the disease.

So, Soliris is competition free for seven years. After that, it has patent protection from generics. With a captive market of desperate patients and the need to recover development costs, Alexion in 2008 was able to charge $389,000 in the U.S. for a year of treatment with Soliris. Major health insurers in the U.S. and Europe typically foot the bill for treatment.

All this has contributed to strong growth and financial performance. In its fourth quarter, reported last month, Alexion had revenue of just over $77 million. That's up from just under $24 million in the fourth quarter of 2007.

For all of 2008, sales came in at $259.1 million. And this year Alexion is expected to take in $360 million to $375 million

Analysts see vast potential for Soliris. In 2009, the drug should produce $380 million in revenue. That should swell to nearly $500 million next year. At its peak, treating PNH should represent "a $750-million-a-year worldwide opportunity."

GTx Inc. (NASDAQ: GTXI) is awaiting a FDA decision for its toremifene 80 mg NDA (standard 10-month review) for bone loss due to prostate cancer. Toremifene 80 mg is an oral selective estrogen receptor modulator which GTx seeks to market for the prevention of bone fractures in men with prostate cancer on androgen deprivation therapy (ADT). ADT is primary treatment for advanced prostate cancer. In the United States, approximately 700,000 men with prostate cancer are being treated with ADT and an estimated 100,000 initiate ADT each year.

Less than one month after the Food and Drug Administration said there was a problem with its application, Acorda Therapeutics (NASDAQ: ACOR) delivered a new drug application for fampridine-sr, its treatment for multiple sclerosis. The Hawthorne, N.Y., company closed up 19%.

Acorda Therapeutics is a biotechnology company developing therapies for spinal cord injury, multiple sclerosis and related nervous system disorders. The Company's marketed products include Zanaflex Capsules® (tizanidine hydrochloride), a short-acting drug for the management of spasticity. The Company's pipeline includes a number of products in development for the treatment, regeneration and repair of the spinal cord and brain.

It released financial results for the 4th quarter 2009 back in February, and revenues came in at $12.5 million and were comprised of $14 million in Zanaflex product sales, $1.5 million in discounts and product return allowances.

Management reported that Zanaflex was cash-flow positive in 2008, and will remain cash-flow positive again in 2009. For the full year 2008, Acorda reported total revenues of approximately $47.8 million and a net loss of $74.3 million. Acorda exited the quarter with $246 million in cash and investments -- enough cash in management's view to fund operations through year-end 2010.

On January 30, 2009, Acorda Therapeutics filed the new drug application (NDA) for Fampridine-SR. In total, the NDA filing included more that 50 clinical studies and over 1,200 patient years. Additionally, more than 450 people are currently enrolled in Fampridine-SR extension trials, with treatment duration ranging from seven months to almost 5 years.

The FDA should accept the re-filing in June and  Acorda will be in position to launch Fampridine-SR in early 2010.