It's been a sideways trading week for the markets thus far, although the modest dip by the DOW on Wednesday could be an indication that many are consolidating positions in anticipation of a possible broad market downturn. Some stocks have taken a harder hit than others so far this week and here's just a few of them to keep an eye on as the dips experienced by these companies may be more the result of trading patterns and only be temporary...
Amarin Corporation (AMRN): Amarin shares dropped at the week's open on Monday and have continued with their downward trend ever since, closing Wednesday at just under the twelve dollar mark. Shares were flying earlier this summer, however, just before the company's flagship product, Vascepa, received an FDA approval for the treatment of very high triglycerides. Concerns over whether or not the FDA will eventually grant a new chemical entity (NCE) status to Vascepa has weighed heavily on the share price, especially after the second delay was announced earlier this month. Although Amarin is building a solid foundation of patents to protect its technology, NCE status would provide more rock-solid protection for the period covered by NCE and this fact is being played up heavily by numerous investors and financial media outlets.
Amarin's drop may spell opportunity, according to the bullish argument for the stock. While concerns also exist that the company decide to 'go it alone' with relation to the pending Vascepa launch, which is planned for early-2013, speculation has it that ultimately Amarin will be bought-out by a larger company in the pharmaceutical/healthcare sector. Such speculation propelled shares to nearly twenty dollars once before and also factored into the AMRN price rise of this summer. The drop in share price, too, may fuel the buyout argument because any potential suitors could receive a significant discount from where shares were trading just months ago. Human Genome Sciences suffered a similar share price drop earlier this year when a much-anticipated buyout never materialized, but when GlaxoSmithKline (GSK) finally jumped in and pulled the trigger, Human Genome shares doubled overnight. The same could occur for Amarin, should an offer materialize, as most estimates price a potential buyout somewhere between $22-$26/per AMRN share.
On the other side of the argument, should the company move forward and market Vascepa on its own, and should the NCE designation not come to fruition, then AMRN may have a tougher time recovering from its current levels.
Eventually, however, most consider a rebound as all but inevitable as Vascepa is predicted to become a probable blockbuster over time, especially as/if supplemental FDA approvals roll in for the treatment of high triglycerides. Therefore, many see a rebound in the works, it's mostly just an argument over "when," not "if."
That said, nothing is a done deal in this game until it's a done deal, so invest accordingly.
AEterna Zentaris (AEZS): AEterna shares had been on the move all month long and especially caught fire when Roth Capital initiated coverage on the company with a rating of 'Buy' and a price target of $1.75, but a decision by the FDA announced on Wednesday to not grant fast track status for AEZS-130 as a diagnostic test for adult growth hormone deficiency sent shares spiraling by over twenty percent. Before the drop, AEZS had already doubled since the opening days of September and the return to roughly sixty cents marks a level in between where shares opened the month and the highs reached during the heights of the run.
While a twenty percent drop cannot be discounted, the ruling does not effect the timing for AEterna's planned AEZS-130 filing, which is still slated for early 2013. It also should not effect the company's chances of receiving a priority review for the product, according to statement made by President and CEO, Dr. Juergen Engel. The new did, however, provide the day, swing and momentum traders - who were sitting on bank after the quick double - the opportunity to take profits and move on looking for the next big winner. Wise retail traders who also recognize the benefits of at least taking some profit off the table into quick runs such as that experienced by AEZS this month also likely took some profits and booked that Cabo vacation.
Notable enough, too, is that the FDA ruling and the subsequent price drop (which likely had little to do with the ruling and more to do with traders trading) have little to no effect on the pipeline potential and the reasoning behind Roth Captial's enthusiastic price target of $1.75. In fact, no one really expects AEZS-130 to become a huge money-maker, so the lost battle of a Fast Track designation is hardly relevant to the overall move to market and envisioned success of AEterna Zentaris. If the pipeline continues to develop in a positive manner, then this trading-inflicted volatility may end up becoming a moot point.
Oncothyreon Inc. (ONTY): Oncothyreon shares were moving with reinvigorated life during the month of September as new analyst coverage tagged ONTY with a price target of $10 at a time while it was trading for under five. Shares quickly burst through the six dollar mark on high volume, but the spike didn't last long and after a ten percent Wednesday drop ONTY was right back at the five dollar mark on its highest-volumed day since early summer.
Reason to be enthusiastic about Oncothyreon revolves around an ongoing Phase III trial for the company's immunotherapeutic treatment for non-small cell lung cancer, Stimuvax, that is partnered with Merck KGaA (MRK.F). Results from this trial are slated to start rolling out in early 2013 and - as evidenced by Dendreon (DNDN) in its hey-day, shares of companies in the cancer immunotherapy sector reporting positive Phase III results could spike by monumental margins. Those bullish on the prospects of Stimuvax will keep that in mind.
Oncothyreon had spiked to ten dollars about a year ago on the Stimuvax hype - that coincided with a Jim Cramer pump on his CNBC 'Mad Money' program - but came crashing down to earth this spring when investors took the fact that a data monitoring committee recommended continuing the trial - vice stopping it for positive results - as a bad sign. It was also at that time the company stated the early-2013 target for results-release - previous expectations were more in-line with late-2012. Shares had been slow to recover until this latest run, but ONTY's drop of this week has all but erased the previous gains.
Like AEterna's drop, however, the spiral south may have had more to do with traders responding to quick profits than to anything going on with the company. There has been no public leak of information regarding the trial and Stimuvax results are still expected early next year. As noted above, positive results could have very significant implications on the ONTY share price, so it is likely that investors and traders alike will take up their respective positions accordingly, which could add to the volatility over the coming months. With many predicting an overall market dip either before or just after the November elections, chances are investors are pulling profits from the market in order to leave some cash on the sidelines. The ONTY dip could have resulted from that phenomena, and not anything related to Stimuvax.
Also this month, the company announced the expansion of a trial for its Phase II PX-866 in patients with recurrent or metastatic castration-resistant prostate cancer, so the ONTY pipeline does not stop with Stimuvax.
Neostem, Inc. (NBS): Neostem had been flying high for weeks and hit as high as the mid-seventies during that time, but a Wednesday dip to below that mark again may be an indication that some investors have taken profit. Regardless of any dip in the Neostem share price - whether protracted or not - this company is finely positioned in the regenerative stem cell space and advancing a treatment through trials that could potentially be worth billions on the open market. AMR-001 is designed to repair damaged heart tissue following a heart attack and - as a result of the regenerative aspects of the treatment - to also prevent major cardiac events from reoccurring. AMR-001 has already successfully made it through Phase I trials, as outlined in a recent company presentation, and the first patient has already enrolled in the ongoing PreSERVE Phase II trial. Results from the PreSERVE trial are expected to start rolling in during the latter half of 2013, at which time the NBS share price could appreciate quite significantly, if results are positive.
Additionally, NeoStem has a large-scale contract manufacturing facility under its belt to provide the growing company with a revenue stream as it develops its pipeline. In a deal completed in early 2011, Neostem landed Progenitor Cell Therapy and revenue from this division has already led to a growth rate of 95% during the past two reporting quarters, according to numbers presented the latest quarterly report. The fact that Neostem has PCT in its arsenal gives it an additional leg up on other companies in the sector and adds the prospect that the company's share price could also move based on revenue growth related to that division.
While dips in the share prices of developmental companies is common following quick moves higher, Neostem, like those companies mentioned above, has enough going for it that investors have reason to believe that any current dip could ultimately result in rebound - if the pipeline progresses accordingly.
Sunshine Heart (SSH): The volatile Sunshine Heart spiked hard following the initiation of positive analyst coverage a couple of weeks ago, but a couple of down days this week - including a five percent Wednesday drop - has returned prices to near the value of a recent public offering. Value was not notable during the decline in price, but as noted in relation to the companies listed above, the drop may be more attributed to the overall trend of seeing traders bail out with profits following quick spikes in price.
Also like the above-mentioned companies, however, Sunshine may have enough going for it over the short to mid term that investors may consider the current dip as a temporary one. The company has devised the C-Pulse Heart Assist system, a medical device that has thus far proven to halt - and possibly reverse - the effects and progression of heart failure in patients with Class III and ambulatory Class IV heart failure. It's also considered less-intrusive than other heart-implantable devices since it is implanted outside of the blood stream, was approved in Europe just months ago, and has also demonstrated positive results in an already-completed North American feasibility study. As a result of these results, Sunshine plans to launch a US trial within months - a milestone that could coincide with the first commercial sales of C-Pulse in Europe.
The above-mentioned stock offering positions Sunshine to last comfortably through the mid-way point of the US trial, a key milestone where mid-term results could provide a solid catalyst. Should C-Pulse look to be returning the positive results of earlier trials, that's a point where potential partners and additional investors could look to make a move. Given the wording contained within an amended S1 following the aforementioned stock offering, it could be speculated that such an event is possible. According to the S1, a major "strategic investor" was looking to come on board during the offering and it was also noted that the investor would also send an "observer" to the Sunshine board. Such actions are indicative of a firm or potential acquiring company looking to take a 'wait and see' approach regarding the upcoming trial before jumping all-in. Again, the mid-way point of the trial would be an ideal place for such an investor to reevaluate the way-ahead.
Sunshine has proven highly volatile over the summer months, initially spiking to over seventeen dollars from three, and then playing the peaks and valleys game a couple of more times leading into this latest dip. Still considered highly speculative, Sunshine shares are susceptible to trading swings such as those already seen, at least until the company can generate meaningful revenue. It's also been demonstrated, however, that SSH is often a good bet to rebound off current lows, making any protracted dip here a possible buying scenario in preparation for either another trade or simply a hold for the long haul as C-Pulse is commercialized in Europe and the US trial gains steam.
Roundup: Many believe the broad markets are positioning for a downturn, judging by the tone of recent financial outlet headlines. Given that mood, traders sitting on hefty profits following the runs of the summer months that led to the markets sitting at multi-year highs may be convinced that the time is now to bank some profits and boost the cash reserves on the sidelines. Such actions will inherently lead to the volatility we're seeing in many stocks, but it could also lead to some buying opportunities as many times the stories and pipelines behind the dropping share prices haven't changed. It's highly unlikely that we'll see a market dip as exasperated as we've seen at points over the past five years, but any time the market dips - it's always a good idea to have some cash reserves on the sidelines to jump into any good buys that may materialize. The five above-mentioned companies are just a fraction of what's out there - but they may end up performing a lot better than replacement NFL refs over time.
Disclosure: Long AMRN.
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