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 markets flew last Thursday afternoon and Friday morning after much-anticipated comments from the US Federal Reserve indicated that stimulus for the ailing economy would continue to be forthcoming until the economy picks up steam on its own. Investors liked the news and sparked the run that built on momentum created the previous week when the European Central Bank (ECB) issued similar comments of its own.
Encouraging as the stimulus and the new multi-year market highs may seem, however, investors will ask this week whether the current state of the global economy justifies such enthusiastic market returns, or whether September's run is just a head fake, with a move to the downside all but inevitable. Judging by some weekend headlines and uncertainties in geopolitical flash-points this week, it's safe to assume that much of the economic media coverage is ready to head south - and maybe justifiably so.
Comments from both the Fed in the US and from officials of the ECB in Europe were encouraging for investors over the past couple of weeks, but by no means were those comments unexpected or a surprise. Additionally, none of those comments can mask the realities of citizens in most major economies leaving their respective work forces as global growth continues to slow - all while the US and European economies continues to roll sluggishly along.
The coming earnings season has yet to be labeled a pending disaster, but there have been signs by some big players that the season will most likely disappoint. Few are likely to be caught by surprise from these potential developments, but with market sentiment already having been so high for so long, it's arguable that the potential for downside outweighs the potential for upside right now - especially with presidential elections right around the corner and growing global unrest again dominating the news headlines.
Up market or down, it's likely another exciting week ahead of us. As always, there are sure to be plenty of stocks and stories to keep an eye on. Here's just a few of them...
Healthcare, Biotech, Pharmaceutical:
Amarin Corporation (AMRN): As exciting and much-watched as Amarin Corporation is these days, it's tough to keep this one off the watch list. Last week another wrench was thrown into the storyline when an 8k filed by the company indicated that the FDA had again delayed issuing a final decision on whether or not to grant a new chemical entity (NCE) designation for Vascepa. Vascepa was approved back in July for the treatment of very high triglycerides and an NCE designation would provide the product years of protection from generic competition. Many investors and potential buyers of the company view NCE as much more rock-solid protection than patents, being that patents can be challenged in court and a company can easily burn through tens of millions of dollars - at least - defending those patents.
Amarin, however, has been building a solid portfolio of patent protection and it could be argued by the other side that such patent protection will also provide the near air-tight protection that investors and potential buyers (or partners) look for in an investment.
The delay last week sparked a slew of new articles from various media publications - some quite negative - that led to a week of wild volatility that saw AMRN shares dip to below the thirteen dollar mark for a time on Wednesday before recovering to back over fourteen by the end of the week.
Another event may have led to the late-week share price rebound.
It has been long-speculated that Amarin would eventually be bought out by a larger company and such speculation propelled shares to a price of nearly twenty dollars early last year. Some may believe that talks along those lines may be materializing into a reality since the company pulled itself from a major investor presentation this week. While one could only speculate as to why the company pulled out, advanced buyout or partnership talks are valid reasons why a company would take such action. Based on the potential valuation of Vascepa over its lifespan, it's also a valid reason why the AMRN share price quickly recovered following the mid-week drop.
Synergy Pharmaceuticals (SGYP): Synergy Pharmaceuticals is another company that should be considered a potential buyout play based on the development of Plecanatide chronic idiopathic constipation and constipation-predominant irritable bowel syndrome. As described in previous weeks, Plecanatide shares origins and the same mechanism of action with Ironwood Pharmaceuticals' (IRWD) recently-approved Linzess, previously known as Linaclotide. Plecanatide may turn out to be the superior product, however, since Linzess - already partnered with Forest Laboratories (FRX) - was noted to cause severe bouts of diarrhea in patients during trials while Plecanatide's side effect profile thus far in development has been stellar. Those early results will be in the spotlight this December as key Plecanatide Phase IIb/III trial results are slated for release. Results from this trial will not only potentially confirm earlier results, but it also provides investors with a relatively near-term catalyst that could spark a move as quickly as the one that materialized earlier this year that ran shares to seven dollars.
Synergy shares also received a modest boost to above the five dollar mark following the approval Linzess a couple of weeks ago. That spike quickly subsided, but the full potential of the company and its chief developmental product may not yet be realized by investors, especially in comparison to IRWD's market cap. Some analysts have been noted to agree, as demonstrated by near-to-mid term SGYP price targets of at least double that of the current share price.
As the Plecanatide story plays out, Synergy made another move last week to boost its value in the eyes of investors and potential buyers of the company. On Wednesday it was announced that the company would expand its gastrointestinal (GI) pipeline by filing an Investigational New Drug (IND) application for SP-333 in the treatment of inflammatory bowel disease. While still very early in development, the IND broadens the company's GI platform and could potentially position Synergy to become a quick leader in the field of GI treatment, given the other indications the company intends to treat with Plecanatide. The initiation of trials is planned for later this year, offering investors and potential buyers of Synergy a second pending catalyst for late-2012.
Shares spiked by over five percent on Friday as investors absorbed the prospects of this company building a second pipeline product, but the real short term interest revolves around Plecanatide success.
Given Friday's rise, however, SGYP will be one to watch this week.
Sunshine Heart (SSH): Last week a volatile and high-volumed week for Sunshine Heart after investors reacted to some bullish analyst coverage the previous week that slapped a price target on SSH of nearly double where shares were trading at the time. The price pop sent shares to well over the nine dollar mark from under seven before closing Friday at $8.74, still on increased volume. Canaccord Genuity initiated coverage of the company with a 'buy' rating and a price target of eleven dollars. In justifying the new rating, Canaccord cited the encouraging results of the North American feasibility trial for the C-Pulse Heart Assist system, a device that has thus far proven to not only halt the progression of heart failure in patients with Class III and ambulatory Class IV heart failure, but potentially reverse it as well.
As noted in previous weeks, C-Pulse also received an approval in Europe this summer, making it a likely scenario that the company could register its first commercial sales in conjunction with the launch of a US trial that is planned to begin within months and will be designed with an eventual FDA approval in mind.
With the initiation of analyst coverage, all the pieces may be falling in place for Sunshine. The company's cash position is solid thanks to a stock offering conducted months ago, which - according to an amended S1 - included the backing of a major "strategic partner" who also sent a member to the Sunshine board as an observer. The offering money gives Sunshine enough cash to last through the mid-way point of the upcoming US trial, a key milestone event that could then spark the yet-to-be-named "strategic investor" to take additional action.
Last week's volatile week for Sunshine should put some new eyeballs on the stock this week.
Neostem, Inc. (NBS): In just the past four weeks, Neostem has made some significant strides in its share price and an influx of trading volume also supported the run. NBS began climbing a few months ago on positive pipeline progress and then received a further boost as the company decided to divest its majority stake in a subsidiary, Erye, in order the strengthen its balance sheet. Then, recently, the company also reported that it had received approval from a data monitoring committee to continue moving forward with its Phase II PreSERVE trial, designed to measure the effectiveness of AMR-001 in preventing or treating major cardiac events following heart attacks. Such approvals are positive in the sense that they provide a firm validation of trial progress, which is especially noteworthy in the sector of regenerative medicine where the technology is still relatively unproven. The intended market for AMR-001 - especially considering its potential use in also treating congestive heart failure - stands in the billions.
Regenerative medicine has been identified by many as being the next significant medical breakthrough and the early results by companies such as Advanced Cell Technology (ACTC) and Neostem are consistently providing investors with solid validation of the technology as a new hope for the future of medicine and as a target for investing dollars. Such validation could be a key reason why NBS continues to attract investor interest, which consequently leads to a higher share price.
Last week Neostem announced key news in regards to protecting its technology as subsidiary Amorcyte, LLC announced "a significant expansion in its claims granted to protect the use of CD34+ cells, acquired from blood or bone marrow, to impart a therapeutic benefit to tissue sustaining an ischemic injury." The company received notice of additional patent protections from both the US and Japanese patent offices, reinforcing the company's potential to bring AMR-001 to market on a broad and international scale.
One major benefit to an investment in NBS as a 'stem cell choice' is the fact that the company already has a growing revenue base. In early 2011, NeoStem completed the acquisition of Progenitor Cell Therapy a large-scale contract manufacturing facility that has the potential to bring in additional revenue to fund its clinical-stage pipeline candidates. Revenue generated by 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.
By no means should investors believe that Progenitor revenue will alleviate any additional need for financing, Neostem has positioned itself for success with this deal.
Last week's price and volume spike should have this one back on the radar.
AEterna Zentaris (AEZS): Not much has been heard from AEterna Zentaris since April when the company's Phase III Perifisone - partnered at the time with Keryx Biopharmaceuticals (KERX) - failed Phase III trials and company shares plunged. During this past trading week, however, AEterna shares received a swift spike in share price while trading volume also picked up pretty heftily. In fact, on Friday alone volume was up by nearly five times the daily average. No news accompanied the rebound in share price, but the company has or is slated to present at a few high-profile investor conferences and investors may be paying the stock some attention again, noting the pipeline potential beyond just the failed Perifisone indication.
Perifisone still remains the company's most advanced product candidate and another Phase III trial testing the treatment against multiple myeloma is ongoing. Investors may pay little mind to the continuation of its development following the noted failure, but there have been instances in the past of other drugs failing in one tumor type, but succeeding in others, as noted by a report earlier this year. Additionally, AEZS has multiple product candidates in Phase II trials and yet others in pre-clinical development. With that being the case, there could be some merit to an argument that says AEterna shares have been oversold since the severe drop-off this April and could still provide investors with a nice risk/reward story while shares remain suppressed.
Given the ferocity behind last week's price and volume spike, however, this stock's time of vacationing on the beaches of Spain for the summer could be numbered as investors jump in again. At the close of August the company announced that the first patient had been treated in a Phase IIa trial for AEZS-130 in patients with cancer cachexia. For a small company looking to recover from a failed late-stage trial, the positive progression of other pipeline candidates proves crucial for a rebound.
With company in the spotlight again via investor conferences and volume surges such as that seen last week - especially on Friday - this could be a hot one to keep an eye on.
Titan Pharmaceuticals (TTNP): Titan shares were tipped during last week's stock watch for having some possible catalysts pending, but TTNP made even more noise last week and quickly flew to the dollar mark on monumental volume - in relation to daily averages - as the company announced that it had "entered into a Stock Purchase and Option Agreement with an affiliate of the potential licensee of the rights to commercialize Probuphine."
According to Friday's release, "Titan sold 3,400,000 shares of its common stock at $1.25 per share and agreed to an exclusive option period to execute the proposed licensing agreement (to October 31, 2012, which, if needed, can be extended to December 31, 2012) so that the potential partner can complete certain internal tasks."
This news is huge for Titan shareholders as it is finally a firm validation that the company is, in fact, in talks to partner Probuphine. Quarter after quarter company officials noted that talks were underway, but this is the first definitive proof that they are. While the final terms of any potential deal are still unknown, the up-front stock and purchase agreement are indicative that both sides are intending to quickly seal a licensing deal.
It's expected that in October the company will file with the FDA for the approval of Probuphine in the treatment of opioid addiction. Probuphine is also being developed for the treatment of chronic pain and utilizes the subcutaneous ProNeura drug delivery system, which comes with inherent value of its own given the abuse and overuse of common prescription drugs today.
With a new deal looking to be in the works and a nice boost in share price, it's time to keep an eye on Titan again.
Roundup: With the latest quarter coming to a close, speculation will start trending towards quarterly results that will again start in earnest within weeks. Many predict a disappointing season, although since that is already largely assumed, the numbers alone may not influence market trends unless we see a lot of "worse than expected" results. On the other hand, general sentiment could head south quickly, given that most analysts and pundits believe that the market has more downside potential than upside right now. That means we may be heading to the valley side of the "peaks and valleys" stock market game. There will always be success stories, though, whether the market goes up or down and that is where an investor's solid due diligence can pay off heftily.
This week was a somewhat abbreviated Weekly Stock Watch, but hey - Eli Manning had 500 passing yards.
Disclosure: Long TTNP, AMRN, SGYP.
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