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.
Although last week was one of sideways trading as the markets held their multi-year highs, this week and beyond could give investors some short term cause for concern. The the third quarter earnings season is predicted to be soft and there are no real economic motivators expected to catalyst markets any higher than their current levels. Stimulus talk and promises from the Fed in the US and from the European Central Bank across the pond fuelled much of the recent market run, but while stimulus is nice, the facts are that investors may key more on the sluggish economies as many believe - including this guy - that there is more potential for market downside than up.
Regardless, there's always going to be plenty of hot stocks and stories to watch. Here's just a few of them...
Healthcare, Biotech, Pharmaceutical:
AEterna Zentaris (AEZS): Shares of AEterna Zentaris have been on the move since the opening moments of September, but really caught fire late last week after Roth Capital initiated coverage on the company with a rating of 'Buy' and a price target of $1.75. That target values AEZS shares at more than double that of last Friday's close and more than triple the share price of just a few weeks ago. AEterna shares were cruising along earlier this year before the announced Phase III failure of Perifsone in metastatic colorectal cancer - which was partnered at the time with Keryx Biopharmaceuticals (KERX) - sent shares plunging. Although Perifisone was - and still is - engaged in a Phase III trial for multiple myeloma (MM), investors used the colorectal failure as reason enough to lose confidence in the company and its stock. As a result, shares remained trading for about half a buck since that time - until the rebound began a few weeks ago.
While Friday's monumental volume and notable share price rise did not continue into the new trading week this week - at least not at the onset - volume remained high as investors took note of the enthusiastic Roth price target. Shares were down by nearly ten percent, however, as profit-takers likely booked some profits and moved on to the next quick mover.
As justification for the 'Buy' rating, Roth noted the company's advancing pipeline that consists of the aforementioned Perifisone, AEZS-130 - a diagnostic test for Adult Growth Hormone Deficiency (AGHD) which has already proven successful in Phase III trials - and AEZS-108, another anti-cancer agent that has already proven successful in multiple Phase II trials. The company plans to file an NDA with the FDA early next year for AEZS-130 while AEZS-108 is being prepared for a near-term launch of a Phase III trial for endometrial cancer with other earlier-stage trials still planned.
As AEZS noted earlier in the year when the stock price collapsed from the two dollar level to fifty cents, investments in developmental companies are inherently risky so it's always a wise idea to bank profits into any speculative runs that may materialize before catalyst events unfold, but this is a story worth watching right now with the combination of price, volume and positive analyst coverage.
Peregrine Pharmaceuticals (PPHM): The healthcare sector has the tendency to bring on a swift dose of reality quicker than most others, as evidenced by AEterna and Keryx earlier this year and again by Peregrine Pharmaceuticals on Monday morning. Peregrine shares were trading for well over five bucks last week before crashing by over eighty percent at points on Monday when it was revealed that data from the latest bavituximab trial contained enough discrepancies to be considered unreliable. Volume was through-the-roof, indicating a mass exodus of the stock by investors of all types and some also speculated that creditors will ask for their money back. Aside from the already-distributed bad news, look for a slew of law firms to jump on the bandwagon looking to file class action suits on behalf of investors against the company - such action in the trend when events like faulty trials make news.
While the trial disaster killed any investments made those who bought at the top, it's also important to emphasize the timing aspect of a speculative investment - PPHM was already a huge winner this year after moving from fifty cents to five bucks in quick time, but this week's reversal is a reminder that it's important to bank at least some profits when the opportune time arises.
It could be a while, in my opinion, before this one recovers.
Amarin Corporation (AMRN): Shares of Amarin Corp opened the new trading week down by over six percent as investors still await news as to whether or not the FDA will ultimately grant a new chemical entity (NCE) designation for Vascepa, recently-approved for the treatment of very high triglycerides. An NCE designation would provide the product more rock-solid protection from generic competition even as the company's patent portfolio surrounding the product grows. A second delay in the NCE decision earlier this month sparked some high-profile debate as to whether or not the coveted designation would be granted, leading to the high volatility of AMRN trading and Monday's quick share price decline.
Currently, however, AMRN may remind some of Human Genome Sciences before that company was bought out by GlaxoSmithKline (GSK) earlier this year. Like Human Genome, Amarin has been long-speculated to eventually be bought out by a larger company. Such speculation propelled shares to nearly twenty dollars once before but - also like Human Genome shortly before the buyout - have dropped significantly from previous highs as uncertainly keeps many investors on the sidelines.
Previous estimations valued an Amarin deal in the mid-twenties, but much of that depends on the outcome of the NCE status. It's also worth noting that, NCE or not, AMRN shares may be slow to recover if the company indicates that neither a buyout nor a major partnership is in the works. Given the potential of Vascepa over its lifespan, however, AMRN is still one to keep an eye on and could rebound significantly as commercialization picks up steam.
Synergy Pharmaceuticals (SGYP): Synergy Pharmaceuticals has remained a hot company to watch leading into the fourth quarter of 2012 as a key trial catalyst could make or break the near to mid term future of this company and its share price. As confirmed last month, Synergy's Phase IIb/III trial testing Plecanatide in the treatment of chronic idiopathic constipation (CIC) has completed enrollment and is on track for a December results release. Investor sentiment regarding this trial is positive, especially since Ironwood Pharmaceuticals' (IRWD) recently received an FDA approval for Linzess - a product previously known as Linaclotide which shares origins and a similar mechanism-of-action with Plecanatide.
The Ironwood approval served as validation of the technology and proof positive that both companies recognize the close comparison was the entrance into a material definitive agreement by the two companies at the mid-September mark where it was agreed that Synergy would receive a license to Ironwood's method of use patents on plecanatide for the treatment of chronic constipation. The agreement further stated that Ironwood would receive "a low single digit royalty on net sales and both parties agreed not to challenge each other's patents covering certain GC-C agonists."
This licensing agreement helps to clear the path for Synergy to partner Plecanatide, which has demonstrated a superior side effect profile to Linzess in trials. During the Linzess trials, some patients experienced side effects that included severe cases of diarrhea that were extreme enough to force 6% of them to abandon the trial altogether. Thus far in developments for Plecanatide, no such side effects were noted, according to publicly-released information.
As Synergy undertakes numerous actions to position itself for late-year success, this will be a hot one to watch for the next few months.
Valor Gold Corp (VGLD): Shares of Valor Gold traded up by nearly ten percent at the week's open on more than double the average volume as the start-up exploration company advances plans to exploit Nevada's remaining gold deposits. The company controls 8,000 acres of land in the prolific Battle Mountain-Eureka Gold Belt and along the Northern Nevada Rift and, according to a recent press release, has already discovered surface and shallow drilled gold on its Red Rock property.
Investors often find mining companies as a risky proposition as the future value of such companies is dependant on the intensity with which mining is conducted, a factor that cannot be gauged by following releases of public information. Valor did, however, announce earlier this month a veteran presence on its 'Geological Advisory Board', demonstrating an early commitment to carrying out the business plan.
Valor is an intriguing start-up to monitor as the company only went public months ago and has already stated that surface and shallow-drilled gold was found on its properties, which the company has also stated its intent to expand. With gold - and companies successfully drilling for gold - a hot commodity over the past few years following the collapse of the global economy, it may be worth keeping a company or two in the sector on the watch list.
Roundup: The 'Weekly Stock Watch' was a little late this week, but better late than never. No ground-breaking economic news was released over the past week, nor is any expected to materialize over the coming week, but it'll be interested to see how the media plays the speculation surrounding the ability of the markets to hold these multi-year highs. A push here or a shove there by those with influence could lead to a quick market decline, planned stimulus or not, while politicians from both sides of the isle are going to play the numbers to their favor. Geopolitical factors overseas have drawn quite a bit of attention from the economy for the time being, but it's only a matter of time before that subject once again becomes center-stage for the presidential elections. On a lighter note, Eli and G-Men soared over Carolina last Thursday night - looking like true Super Bow champs - and the Mets have actually put together a three game winning streak, for the guy that still cares.
Looking towards next week, a predictably-dull earnings season will be upon us and the presidential debates will begin.
Sound exciting? Probably not, but hey, that's why we have Goose and Football.
Disclosure: Long SGYP, AMRN.
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