At the conclusion of each week,VFC's Stock House examines some news items, stocks and stories that made headlines during the previous trading week, but may also make headlines or influence trends during the upcoming week as well.
The US markets ended the week on a high note with the DOW having closed the week above the 13,200 mark after trading lower for most of the day on Friday. The international markets also received a nice boost this week as signs that the European economy would respond well to stimulus packages were noted while US productivity numbers were up more than expected for the most recently-completed quarter. Some sub-par Chinese export numbers threatened to kill the feel-good mood late in the trading week, but the bulls again took charge and US stocks posted their sixth day in a row of gains on Friday.
The summer swoon that many had predicted has yet to materialize and although a few high-profile earnings misses brought out the bears early in the reporting season, there looks to be little reason to believe the markets will falter - at least for now.
That said, it's the headlines that generally set the market mood. Just as quickly as they tell us how rosy everything is, the next day major concerns will be trumpeted over the airwaves and the markets will be driven lower. Although the US markets responded nicely last week, the European markets did end lower following the China export data that heightened concerns about the prospects of near term global growth.
Politics will also likely take full swing this week, with the Romney camp finally announcing its Vice-Presidential pick. That could significantly deter news coverage away from the markets, but the two sides are likely to start playing yo-yo with the strength of the economy in an effort to each portray the image that would help their respective candidacies win the race to the White House.
As always, amid the furor and fuss, there's some good (or not so good) individual stocks and stories to keep an eye on. Here's just a few of them...
Healthcare, Biotech, Pharmaceutical:
Amarin Corporation (AMRN): Amarin shares finally started to rebound late last week after having dropped big following the announcement of an FDA approval for Vascepa in the treatment of very high triglycerides during the closing days of July. The move downward surprised some, but it was also a largely expected move since the trends in the sector these days is to see the biggest run-ups after positive Phase III results and then again leading into a drug approval decision.
Amarin's run was also largely based on speculation of a buyout, however, and when a couple of patent concerns still lingered and a final decision on Vascepa's New Chemical Entity (NCE) status was yet to be rendered, the opportunity arose for the traders to move out and allow for a batch of new longs to move in that were taking positions on either a potential buyout or for just the potential of the product on the market, which is expected to be blockbuster, based on highly-positive Phase III results.
Investors - and potential suitors or Amarin - will likely know this week whether or not Vascepa will be designated as an NCE, which could be the last piece of a potential buyout puzzle. Because NCE extends a product's exclusivity on the market, the final determination is a valuable factor in determining the true value of any potential deal, whether it be partnership or buyout.
Amarin also released its second quarter report last week, and while no surprises were evident, the commercialization update regarding Vascepa contained the words that investors likely clued into most. The commercialization of Vascepa, according to comments contained within the report, will include, "An acquisition of Amarin, a strategic collaboration, or self-commercialization, the latter of which could include third-party support."
The late-week rebound for AMRN shares may have just been the start of another run. Many predict that any buyout deal would come in at well north of the twenty dollar mark and Canaccord Genuity also reiterated its 'Buy' rating on the stock last week, with a price target of $26.
A buyout deal will likely lead to an immediate price increase - and look for the speculation to pick up steam following the NCE announcement, regardless of which way the decision goes - but the move higher could take a little longer if the company does in fact 'go it alone,' which is not the most likely scenario, in my opinion.
MRI Interventions (MRIC): MRI Interventions looks to have stabilized in the low two dollar range following a run earlier this summer that led to a quick triple in share price. With shares trading back to their current levels, the company may be worth another look as its technology has been shown to significantly enhance existing MRI suites to better enable medical professionals to conduct less-invasive procedures on the brain and heart through ClearPoint and ClearTrace MRI-augmenting units, respectively.
The company conducted a stock offering last month to raise developmental funds and also has a deal in place with Boston Scientific Corporation (BSX) that came with a $13 million up-front payment. MRIC is also partnered with Brainlab, a leader in the image-guided surgery field in the US and Europe, for the advancement of the ClearPoint technology Siemens AG (SI) has partnered for the development the ClearTrace system.
The medical community is constantly looking for more precise ways to conduct highly-intrusive surgeries and procedures and this company has a chance to play a key role in that evolution.
One to keep an eye on.
Spectrum Pharmaceuticals (SPPI): Shares of Spectrum started to rebound during the closing days of the week after having dropped quite significantly following a very positive earnings report that included total revenue of nearly seventy million dollars while FUSILEV revenue nearly doubled its in-take from the same quarter of 2011. As if that wasn't enough, Spectrum reported that it now has nearly $280 million on the books.
With numbers so impressive, many investors were caught by surprise at the ensuing 15% price drop. Spectrum was carrying huge short interest, though, and the shorts were able to play the angle that even though Spectrum reported record earnings, they actually "missed" on some analyst predictions, as expectations have risen above actualities following quarter after quarter of beating the street. The slow growth registered by Zevalin was also parlayed into some doubt.
Given the strength of the numbers, however, any decline in the SPPI is not likely to last.
Even the nay-sayers are giving FUSILEV the respect it deserves on the market and have finally started coming to terms that the long-expected rebound of generic competition might not ever materialize. Zevalin, on the other hand, is only in the early stages of growth and still has the potential to gain quick momentum. The deal for Allos Therapeutics (ALTH) also adds another FDA-approved product to the Spectrum portfolio and we can't ignore the cash on hand that the company has been able to compile.
In the meantime, let this latest correction be a stark reminder that such moves can materialize out quickly in this sector, especially when the shorts are pouncing big. The shorts can cause a nice "squeeze" at times - and SPPI squeezed higher over the past months - but barring any surprising, milestone news, the shorts can also weigh a stock down pretty good. It's easy to assume that a good story always beats the shorts, but that's not actually the case. Once the element of surprise was gone from the Spectrum story - as robust growth for FUSILEV no longer surprised anyone - the shorts were able to play their game.
That's not a bad thing, though, as the stock could be a pretty good buy again, especially if Zevalin starts gaining traction to complement the FUSILEV growth.
Sunshine Heart (SSH): Shares of Sunshine Heart slipped by 15% on Friday on the announcement of a seven dollar pricing for a previously-announced stock offering. According to the press release issued, the offering size had been increased from 2,500,000 shares to 2,875,000 shares and Sunshine has also "granted the underwriters a 30-day option to purchase up to an additional 431,250 shares solely to cover over-allotments, if any."
The offering is expected to close on or about August 15, 2012, subject to customary closing conditions. This company, whose shares were trading for under three dollars barely a month ago, has realized some very significant milestones recently and will have well use for the newly-raised funds.
European medical authorities approved last month Sunshine's medical device, C-Pulse, for the treatment of Class III and ambulatory Class IV heart failure. Commercialization is under way and it's likely that the company will recognize its first market sales right around the same time it initiates a trial in the United States geared towards an eventual FDA approval.
Another take-away from the offering last week was the filing of an amended S1 that may have hinted at a large strategic partner coming on board. According to the filing, in part:
"A strategic investor, which is not a current stockholder of our company, has indicated an interest in purchasing approximately $3 million of our common stock in this offering at the public offering price. However, because this indication of interest is not a binding agreement or commitment to purchase, the underwriters may determine to sell more, less or no shares in this offering to this investor, or this investor may determine to purchase more, less or no shares in this offering."
Also noted in the filing, the new investor will send a "board observer" to Sunshine who will monitor developments and who could then be able to recommend that the initial monetary investment should turn into something a little bit bigger, such as a partnership or all-out buyout. Such a move is standard operating procedure for large players of the sector who are looking to potentially evolve an initial investment into a potential new revenue stream of their own. Sometimes big-money funds will also send a representative of their own to the board of a company just invested in, but with SSH still trading at relative "developmental levels," common sense would indicate that a big player in the medical device industry may be looking to make an early move on C-Pulse, where a 'first right of refusal' for a potential sale or partnership could more easily be achieved.
With the funds now raised to move forward with development and commercialization of C-Pulse, and multiple milestones still pending, last week's pullback is one to watch.
Explosive Trace Detection (ETD) / Global Defense:
Implant Sciences (IMSC): Shares of Implant Sciences have dipped to below the $1.40 mark again and may be worth a keen look as a milestone event is pending for later this month that has the potential to launch the company into the mainstream of the ETD environment and bring in millions in government contracts.
It's expected that the US Transportation Security Administration (TSA) is set to decide during the last week of August on whether or not to approve Implant's Quantum Sniffer (QS) ETD technology for inclusion on the TSA list of qualified products. Based on some significant key hires over the past months that include personnel with ties to various US government agencies and/or to competitors of Implant, speculation has it that the chances of approval are sound.
Keep in mind that is only speculation.
Should the approval come through, this will be as big an event for Implant Sciences as an FDA approval for a small pharma/biotech company.
Because the TSA has issued a December 3rd mandate that all inbound cargo on passenger aircraft will be screened from that time, Implant is positioned to take well advantage of the current trends in government-imposed security measures, especially since its technology holds significant advantages over the competition.
In the meantime, Implant has been making swift strides in the international market with its technology. Aside from being selected to take part in a layered defense plant for the Summit of the Americas in Colombia earlier this year, contracts for the QS have been won in high-threat markets such as Nigeria, China and most recently another one in the Middle East.
Remember, nothing is a sure thing in the markets, but this is a prime story to watch during the coming week, and especially for the duration of the quarter.
Clean Energy / Industrial:
Capstone Turbine (CPST): Shares of Capstone traded back down towards a buck this past Friday on another round of earnings where revenue and sales increased, but the total numbers still missed the expected mark, according to various analyst estimates. All signs continued positive on this company's trek towards profitability, as margins also increased modestly, but investors are still awaiting signs that profitability is inevitable, and not still just a far-off possibility.
The company's clean-energy, low-emission microturbine units have been gaining steam in the market, as evidenced by the "record backlog" of orders referenced in this quarter's report, and could still become a key part of fueling the future with potential in the industrial and private sectors.
History has evidenced that CPST is a solid - even if speculative - buy in the one dollar range and as long as orders keep rolling in at the current pace, that should still remain the case, at least for trading purposes.
Ardour Capital did "downgrade" the CPST stock from a rating of "Buy" to "Accumulate" last week. The funny thing is, though, that in order to "accumulate" a stock you have to "buy" it - so what kind of downgrade is that?
I still like CPST as a buy at a buck or below. Even a trip to $1.10 returns ten percent, but speculative runs to $1.50 or above are also common, historically speaking, with this one.
Titan Pharmaceuticals (TTNP): Titan shares dropped by nearly ten percent on Friday after the company reported another quarterly earnings report that was unimpressive, to say the least. Investors are awaiting more from the company aside from "We are continuing to make good progress in our ongoing licensing discussions and are in the process of negotiating the agreements for a strategic partnership for the development and commercialization of Probuphine," because that has been the case for a couple of quarters too long now.
Probuphine and Titan's ProNeura drug delivery technology hold value potentially higher than the current TTNP market cap, in my opinion, based on patents alone, but thus far management has failed to turn its potential into anything more than solid trading opportunities.
The current prices look to be the bottom of a trading range and a solid speculative buy, with the intent to sell into any spike, but investors are growing more hesitant to consider this one a long term hold after a few quarters now of status-quo.
It is worth keeping in mind, however, that Titan has surprised a few times in the past. Shares soared once on news years ago after Vanda Pharmaceuticals (VNDA) reported positive Phase III results for Iloperidone, now known as Fanpt, and then again after the product gained FDA approval, since Titan was due to receive a royalty from Fanapt sales. Titan has since, however, dished out that Fanapt cash flow to Deerfield as a part of a financing deal and Fanapt has failed to catch on big in the dense schizophrenia market anyway - hence the reliance on an ultimate Probuphine approval.
With another quick slip south, TTNP is one to watch this week. Still a nice 'night on the town play,' in my opinion. For those new to that analogy, I consider 'night on the town' money to be what you'd spend going on Goose and fun out on the town. Skip a night on the town and play a nice speculative stock. If it hits, you've got a whole lot more nights on the town to play with, but if not - all you've lost is a bad hangover.
Cel-Sci Corp (CVM): It's been a while since this company has issued real news, but don't let Cel-Sci slip too far below the radar. With Multikine well into global Phase III trials now, any interim update could send shares higher. They currently trade towards the lower boundary of a recent range and if Multikine proves efficacy in treating head and neck cancer, then huge gains could be in store. Still considered highly speculative, however, since many cancer immunotherapy products have failed during late stage trials, it's one to watch and a few shares could go a long way if the product proves successful.
Roundup: Weak economic data from Japan could lead to an early-weak decline in the global markets, but keep in mind the schizophrenic nature of today's media that leads to constant market volatility. It's no surprise that global growth is still slow, so there's little reason to cause daily alarm based on the story of the day. It's wise to devise strategies based on any eventuality which includes, in my opinion, keeping some cash on the sidelines in case any nice dips occur, as it hurts to see buying opportunities develop only to already be fully invested at that point.
The Olympics are out of the way now, and what a Games we saw - good job, London (how 'bout them Spice Girls?) - so eyes in America will be all on politics for the coming months.
With that in mind, I think it's time for a vacation.
Disclosure: Long AMRN, IMSC, TTNP, CPST, CVM.
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