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. This week is all about Friday's market drop and the prospects of a continued decline moving forward. Given the new bear market, we'll also take a look at some evolving deals, bargains and potential steals that may be taking shape with eyes towards an eventual rebound.
For the better part of the last six months the analysts, pundits and investors have all wondered if, or more aptly - when - the next market correction would take shape after seeing the DOW soar to levels approaching previously-established record highs during a nice period of rebound. Most of the pullbacks experienced over the past few quarters were easily halted, only to be followed by another push higher, but all that changed last week when the DOW dropped by more than two percent on Friday to put an exclamation point on the end of a tumultuous week.
When the closing bell rang, all of the early-year gains were effectively erased and already-jittery investors were wondering what's next to come.
The catalyst behind the drop were poor numbers on the employment front. New jobs are still tough to come by, an indicator that the US economic rebound may be slowing, if not halted, and the unemployment number jumped to 8.2% from 8.1%. In May, the actual number of new jobs added was less than half of what analysts estimated, and revised numbers from April were nearly 40,000 less than what had been previously-reported, according to published reports.
That, needless to say, is far from a show of strength and predictably had investors running for cover.
Combined with the discouraging numbers in the United States was the continued economic turmoil in Europe that has threatened the solvency of a Euro Zone that includes Greece. Stealing the headlines all week once again, however, was Spain and its banking calamity. On the back burner, possibly warming up for a high-profile crisis of its own, is Portugal. Together, these three countries form a trio of trouble for Europe, where regulators can only do so much to save the economic zone.
More worrisome for Europe is the fact that Germany took a hit in its manufacturing numbers, as did most of the world's top economies, a fact that spells uncertainty and fear for the trading week ahead.
It's not uncommon for the markets to experience a May pullback anyway, as many of the fat cats cash out to enjoy the vacation season, but the amount of data supporting a sharp downswing could lead to a protracted period of turmoil heading into the summer months.
About the only good news coming from last week's calamity - depending on how you look at it - was that the price of oil dropped to below a hundred bucks a barrel. That's great news for those looking to fill up at the pump and take a road trip, and it's also great for the price of airline tickets - if the savings in fuel costs for the airlines is actually passed on to the consumer - but it's tough for some investors and especially tough for Vladimir Putin, who needs oil to remain near record highs to be able to support his reinvigorated 'tough-guy' agenda.
Although the drop in oil prices that could put money in the pockets of average Americans, the continued troubles on the jobs front is likely to put a strain on the re-election hopes of the current US President, Barak Obama. With the campaign season only beginning to heat up, look for the politicians on both sides of the isle to spin every bit of news to their favor, with little concern for the effect that their information - or misinformation - has on the economic recovery.
There's enough going on right now to convince any investor to stay away from the market and the pending volatility, but there's a few encouraging signs out there, too.
With the drop in the Euro rate, European vacations are only coming that much cheaper, and if Greece actually does leave the zone and return to the drachma, then a trip over there might turn out to be as much of a bargain as a Bazooka Joe was back in the day.
On the investing front, the annual American Society of Clinical Oncology (ASCO) meeting is in full swing, bringing encouragement and hope to the future of cancer treatment.
Additionally, the swift drop in the broad market is sure to open up some solid buying opportunities for those with an iron stomach that can bear out the price decreases, pick up a few shares, and wait around for any rebound that could - and should - materialize. Those that bought during the depths of the 2008-09 drop made out pretty well, and while this go-round is not likely to even approach those dramatic drops - Sirius XM (SIRI) at a dime and Nordstrom (JWN) for under ten, to name a couple that we likely won't see again - there's sure to be other bargains out there of which investors can take advantage.
This week, aside from keeping tabs on those stocks and stories that will garner news-based headlines, we'll take a look at some potential deals and steals that are materializing with the downswing. If the market drop keeps up, then investors are going to have ample time to load up in preparation for a market rebound. That said, investors willing to buy into such a dramatic drop are going to display patience and have an inherent indifference to risk and volatility.
For those that waited all this time for the Mets to score a perfect game, though, the wait for a rebound should be no trouble at all.
Here's a few to keep an eye on this week, with some potential bargains out there thrown in for good measure...
Amarain Corporation (AMRN): Trading volume of more than double the norm sent shares of Amarin Corporation (AMRN) flying higher last week after the awarding of a key patent from the U.S. Patent and Trademark Office (USPTO) covering the pharmaceutical composition of Amarin's AMR101, a treatment for high triglycerides.
Although the news led to a quick spike in the AMRN share price when announced, the stock was not immune to Friday's market meltdown. Amarin closed the day at under eleven dollars after a nine percent Friday drop.
Amarin has had its ups and downs over the past couple of quarters, but the potential of AMR-101 on the open market cannot be denied. Highly successful in multiple Phase III trials, it's expected that the FDA is going to give Amarin the green light for AMR-101 in an approval decision that is slated for July, according to a recent company report.
Amarin is also sitting on a solid cash position, reducing some of the inherent risk associated with investing in 'FDA decision stocks', which another key factor when looking to attract new investors and/or potential buyers.
Given the fact that many large pharmaceutical companies are looking to boost pipelines depleted by patent expirations, Amarin is certainly one to watch for its buyout potential as well. Such rumors ran the AMRN share price to nearly twenty bucks about a year ago, and it's likely that the buyout/partnership talk will again be reinvigorated if the FDA approves, as expected.
Given the volatility and expectations that an FDA approval is right around the corner, Amarin is one to keep on the 'hot list' and is also one that could be viewed as a nice deal, should Friday's decline in price continue.
Jim Cramer has also mentioned this one as a buy.
Human Genome Sciences (HGSI): When are partners not really partners? When GlaxoSmithKline (GSK), a company currently partnered with Human Genome on multiple product candidates, including the already-approved lupus drug, Benlysta, is denied on a buyout offer of HGSI and then takes its bid hostile.
In response to the hostile bid, Human Genome management has implemented a "poison pill" that would make it near impossible for Glaxo to take control of the company without the board voting in favor of any deal. In turn, Glaxo is looking to replace Human Genome's current board with members of its own choosing.
The cat and mouse game is not likely to cede until a deal is done, but for the time being Glaxo may have little incentive to up its offer of thirteen dollars per share. Having its hands in Benlysta revenue already, in addition to other of HGSI's pipeline products, potential suitors are unlikely to want to jump in and outbid Glaxo's offer and then have to share revenue with Glaxo if the bid wins.
This one is going to have to be settled between HGSI and GSK, and it probably won't be easy. Shareholders of Human Genome who saw their shares approach thirty bucks within the past 52 week will consider the buyout offer weak and management is drawing a fine line in the sand, adamantly declaring the bid as undervaluing the company.
Fortunately, stalemates don't necessarily work in this business, so something has gotta give, eventually.
In the meantime, the drama will build.
The most impressive percentage gains have likely already been had for HGSI, but any dips could be worth the buy as a final deal might come in at a modest premium to where shares are currently trading.
Meanwhile, the board members at Human Genome are probably muttering to themselves in reference to Glaxo, with whom they've shared a solid partnership for years, "With friends like these...."
It's dog eat dog in the world of big business.
Synergy Pharmaceuticals (SGYP): As the market tumbled lower on Friday, shares of Synergy Pharmaceuticals held strong and jumped by six percent, and then added another couple of percentage points to the spike during after hours trading.
Volume was twice the daily norm to support the share price jump, which provides investors with an indication that even while big money is flowing out of the market, many still like the solid risk/reward profile surrounding Synergy, a company that has enough cash in the bank and catalysts pending to potentially make a splash in the sector, even in a down market.
A stock offering earlier in the year halted what had become an impressive run to over seven dollars, and shares did drop by four percent last Wednesday as the bear market began taking shape, but Synergy may be ready to roll again, judging by Friday's impressive action on a dramatic down day overall for the markets.
Another factor in the potential new interest attracted to Synergy last week may be attributed to a NY Times article published last weekend that offered investors another angle to consider in regards to the potential of Synergy's Plecanatide to meet an unmet medical need in the conditions of chronic idiopathic constipation (CIC) and constipation-predominant irritable bowel syndrome (IBS-C).
As outlined by the Times piece, other treatments for CIC currently on the market, specifically Miralax, are not only being misused, overused and abused, but safety data surrounding its use has never been fully investigated nor finalized. This fact has raised concerns among many physicians, many who even admit to over-prescribing the product, especially in regards to overuse in children.
With no FDA-approved standard treatment for CIC in children, doctors have admitted overprescribing Miralax for years to children, which potentially leaves another door open for Synergy, who can storm into the children's market and replace the existing treatments which have never been approved for such use.
Plecanatide's safety profile may give it an overall advantage, as well, as the drug has yet to demonstrate any side effect concerns, not even diarrhea; a significant note because a competing product, Ironwood Pharmaceuticals' (IRWD) Linaclotide, has been known to cause serious cases of runny stools. The idea of meeting a huge unmet medical need in children, as described by the Times article, only widens the already-robust scope of this company's product potential.
With Phase II/III Plecanatide results due out later this year, Synergy could continue to attract the investor interest that took shares to over the seven dollar mark for a period last month. The analysts have already jumped on board and Friday's action could be an indication that investors are watching.
One to keep an eye on this week.
NovaBay Pharmaceuticals (NBY): NovaBay Pharmaceuticals was by no means immune to Friday's tumultuous turmoil in the markets with shares dropping by nearly ten percent on volume nearly double the daily average, but a Thursday PM press release added to the already encouraging outlook on the company's pipeline potential.
The official release informed investors that the company had received seven new patents, including, as quoted from the PR, "three new composition of matter patent issuances in Australia, New Zealand and Mexico and four Notices of Allowance in Canada, Japan, South Africa and Mexico on its proprietary Aganocide compounds which includes its lead compound, NVC-422."
NovaBay's growing portfolio of patent protection should not go unnoticed as the company's pipeline advances into the later stages of development. The market for anti-invectives is in the range of tens of billions of dollars annually and NovaBay stands to infiltrate that market on multiple fronts.
NBY shares have recently dropped to the dollar mark from a range of roughly $1.30, although no news hit the wires to justify the drop. In fact, just after the initial drop, the company announced the encouraging news that patients had started being dosed in the Phase IIb BAYnovation trial testing its technology in the treatment of Adenoviral Conjuctivitis.
The drop in share price, and the fact that the company's current market cap could actually be less than what its portfolio of patents is worth, may be attributed to concerns of the failure of a previous trial that was conducted with then-partner Alcon for the treatment of 'pink eye'. Investors fled after those results, but another look at the data confirmed that efficacy was demonstrated against the Epidemic Keratoconjunctivitis (EKC) infection, possibly the most contagious form of the infection that often threatens a victim's vision, and based on that data NovaBay has continued development. Investors may need to see another round of positive results in treating that indication to become whole-heartedly convinced.
That said, the Aganocide technology is moving forward on multiple fronts and stands a worthy chance of breaking into a very lucrative market and combating the current trend of antibiotic resistance. Because NovaBay's technology mimics a body's white blood cells, the chances of a patient becoming resistant to treatment is slim to none, according to results demonstrated thus far, giving this company a huge advantage while moving into the later stages of development.
FuelCell Energy (FCEL): FuelCell is slated to report earnings this week, with a conference call scheduled for 10AM on June 6th. Shares raced to the $1.40 mark last week from a dollar on indications that increased production, collaboration from foreign partners and the lowering costs of natural gas were fueling growth quick enough to where investors, analysts and company officials can see the light of profitability at the end of the tunnel growing brighter.
Aside from the quarterly earnings report, any positive guidance issued by the company in conjunction with the report could fuel another run, even if the bear market continues for the broad markets, because this company is positioned to take advantage of the global shift towards cleaner energy - already demonstrated by its ability to capitalize on the decline of natural gas prices.
Bloomberg and Forbes have also issued positive reports on FuelCell over the past couple of weeks, and encouraging news from Korea indicating increasing demand for the company's technology joined further news that existing companies have extended their service agreements.
All of these catalysts provided the 'perfect storm' for FCEL shares to run quick, as they did last week before a stall on Friday on a big down day for the markets.
Keep an eye on the FuelCell earnings report this week - it could be time that this company is taken to the next level.
Capstone Turbine (CPST): Capstone Turbine announced last week that its quarterly report will be released on June 14th, still nearly a couple of weeks away, but also a key date to keep in mind for investors - like those of FCEL - that are looking for potential growth stories in the clean energy sector.
Capstone's power-generating microturbine units have been gaining traction on the international and domestic markets, although the company has not yet approached the end-goal of profitability. That fact has led to continued volatility and the inability of the share price to sustain highs for an extended period of time.
Back to trading for a dollar, CPST could end up being proven as a nice steal at these levels, as runs to the $1.50 mark and above are not uncommon when large orders are announced or earnings reports indicate exciting times ahead.
Like FuelCell, once profitability is in sight, then a sustained run could take place, and that's what makes guidance just as important as the realized numbers during the upcoming report.
Just the fact that this one is trading at a buck again is enough to keep CPST on the watch list.
Oncothyreon Inc (ONTY): Oncothyreon presented at the annual meeting of the American Society of Clinical Oncology (ASCO) meeting in Chicago over the weekend, announcing data from two clinical trials of PX-866, a pan-isoform phosphatidylinositol-3-kinase (PI-3K) inhibitor.
A near-four percent drop on Friday indicates that investor interest in PX-866 may be minimal at the time, as Stimuvax trial results are the more pending potential catalyst. ONTY shares took quite the dive earlier this year when it became apparent to investors that those results would not be released until early next year, a few months beyond when most anticipated they would become available.
The announcement of a stock offering around the same time took care of getting all the potential discouraging news out of the way at one time, which frees ONTY to be worthy a potential rebound pick for those looking for a potential 'next Dendreon' in the cancer immunotherapy game. Although trading much lower now, Dendreon (DNDN) soared by well more than quadruple its price after the prostate cancer vaccine Provenge passed Phase III trials a few years back.
A little bit of ASCO exposure could do ONTY some good, but most investors are keyed in on Stimuvax right now, leaving only the most serious of long-term investors heavily interested in the PX-866 data.
Siga Technologies (SIGA): SIGA shares have taken a hit over the past couple of weeks as the broad markets dropped like the bats facing Johan Santana during his last start, but an eight percent spike on Friday returned them to the $2.50 level after news hit the wires that a previous ruling on a lawsuit brought forth by rival PharmAthene (PIP) was final and that PIP is due half of all future earnings for Siga's smallpox antiviral, ST-246, minus the first forty million in profits.
Siga had previously asked the court to take another look at the initial ruling. It's expected now, that the court has upheld its initial decision, that an appeal will be in the works.
While SIGA shares spiked eight percent on the news, maybe a sign that some investors found closure with the news, PIP spiked by nearly thirty percent - but it's likely that this story is far from over.
SIGA could still be in a position to rebound.
The company has over $40 million in the bank as of the last quarterly report and a huge contract award from the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services (BARDA) in its pockets to boost the nation's biodefense stockpiles with the smallpox antiviral ST-246. Although last week's court ruling indicates that Siga may have to share a large chunk of its future profits, the long term potential is still there, regardless of the ultimate outcome.
It's likely that SIGA's drop over the past couple of weeks were in anticipation of the ruling, but this will be a story worth watching as SIGA has proven to provide short term speculative price spikes - unrelated to any news - and should an appeal ruling turn in the company's favor, then an all-out rebound could be in store, although that could be a wait.
Teletouch Communications, Inc. (TLLE): Shares of Teletouch Communications also took a hit on Friday, dropping by 20% on volume nearly twice the daily norm, but there are encouraging signs from the company that indicate the volume boost may be a positive sign and an all-around turnaround may be shaping up.
Teletouch, through its subsidiaries, is a leading U.S. wireless services, cellular, consumer electronics and public safety equipment distributor and is a leading Authorized Services Provider and billing agent of AT&AT&T (T). The most significant event in regards to the company's relationship with AT&T came late last year when ongoing litigation was settled, providing investors with a resolution of uncertainty while also securing continued stability in the T/TLLE partnership.
As a result of the settlement, Teletouch received cash and other consideration in excess of $18.5 million and a mutual agreement between the two companies to forgo any future litigation. The two entities also agreed upon a renewed 3-year distribution and 6-year dealership agreement, re-establishing the security of a continued partnership with a huge player in the wireless services market.
Although the good news regarding AT&T had a positive impact on investor interest and share price, new considerations came to light when a revolving debt agreement with Thermo Credit came to an end relating to trouble that Thermo had with its own creditors. The sudden crunch put TLLE in a cash-conservation mode that effected some of its businesses, but also allowed it to concentrate on other areas of its business, such as distribution for its wholesale businesses.
This is where Teletouch has been marking swift progress and demonstrating its potential for growth.
Just this month alone Teletouch's wholly-owned subsidiary, Progressive Concepts, Inc. dba PCI Wholesale, has landed multiple distribution agreements with key players in the industry, including Wilson Electronics, Parrot, Inc., Aerovoice, Inc., and PureGear, among others.
The flurry of new deals and partnerships and the resolution of the AT&T litigation establishes Teletouch as a potential rebound and growth play at a time when investors are looking for potential deals in a down market.
Implant Sciences (IMSC): Implant Sciences dropped over six percent last week as the stock market as a whole took a dive, but the stock is still trading significantly higher for the year. That trend higher may continue as the year progresses, making any potential dips that materialize as a result of the broad market drop worthy of a speculative look.
Implant's Quantum Sniffer explosive and narcotic-detecting technology is making huge headway on the international market, with recent orders destined for the Middle East and Africa, but it's expectations of approval for use by the US Transportation Security Administration (TSA) later this year that could provide the catalyst to bring this company to the next level.
Implant already plays significant roles in providing security for high-level, national events, as well as growing its business into the private and corporate worlds, and there's reason to believe that the company is still in the early stages of growth.
Should a major US contract come to fruition, investors who pay little attention to overseas developments could start to jump on board as the potential of Implant's technology becomes more widely-known. The developments overseas should not be dismissed, but an approval for use by the TSA could be the validation that investors might be looking for.
One to watch as a potential growth story in the making.
Last week's price drop came on light volume.
Facebook Inc (FB): The Facebook fiasco continued last week. After slipping downward for most of the week, FB lost over six percent of its value on Friday during the major market drop and closed at under $28 with little sign that investors will rush in enough to prevent a further slide.
Although a recovery at some point may be likely as Facebook implements its business plans of the future - the same plans that fueled enough hype to drive the IPO price to nearly forty bucks - enough bad press continues to circulate to keep serious investors at bay.
If the markets continue to drop as a whole, there seems to be little to halt a FB drop into the teens right now; for one, the numbers are not there to support anything different, making it just as speculative a rebound play as anything else out there.
FB, in my opinion, is still far from being considered a buy.
Mannkind Corporation (MNKD): Mannkind shares have been hammered by bad news as well as a bad market, but some recent insider buying and the potential of Afrezza to eventually be an FDA-approved, inhaled insulin alternative to the needle for diabetics keeps this one as an intriguing pick to eventually realize a wallop of a rebound.
When the FDA last denied Mannkind an Afrezza approval, it was not the efficacy that concerned the regulatory agency, but the fact that the trial was conducted with a different inhaler than the one the company intended to market. That bodes well for the success of the next trials. Investor concerns of financing continue to plague the share price, but with Al Mann already a billion dollars-plus invested in his company, these concerns may be unwarranted.
Already a potential rebound play for the potential of an eventual Afrezza approval once studies are completed with the next-generation inhaler, MNKD may become even more so a rebound story if it is continuously knocked down by broad-market factors.
One to keep an eye on and possibly an 'average down' play for those long-invested.
McDonalds (MCD) and Yum! Brands (YUM): McDonalds has taken a hit along with the market lately, dropping to the mid-nineties after trading near a hundred not too long ago, but Yum! Brands took even more of a hit, dropping by over eight percent on Friday amid a manufacturing slowdown in China.
Both companies make up some of the world's most recognizable restaurant brands and, due to the low cost and variety of each company's respective menu items, could hold strong through the worst of any market turmoil. People will have to eat, and if low on cash, they'll go to the low-cost option.
Any protracted drop in the MCD and YUM share prices could open up some nice opportunities to pick up some more secure, modestly-potentialed rebound shares, but also provide an opportunity to throw shares in a long term portfolio, one that still banks on the international growth of these respective chains for years to come.
Even with an investing strategy based on looking for potentially lucrative high risk/high reward plays, there's always room for established veterans.
I like the continued growth potential on the international market of America fast food chains, and these two allow us to buy into that game.
Also Noteworthy for the week:
Celsius Holdings (CELH): Possibly positioned for rebound growth, shares of Celsius Holdings have remained relatively stable through all the recent market volatility. Volume is by no means strong enough yet to establish any trend in growth or recovery, but any piece of news large enough to attract a significant amount of new eyes could put this company and its stock back on the radar quickly. CELH has its days in terms of volume, but it should still be considered as trading below the radar.
Cytosorbents Corp (CTSO): Cytosorbents shares have been trading with more volatility than the market as a whole lately, rebounding strongly from a dip to below a dime after recent earnings report, but then slipping back to ten cents along with the market drop last week. Any dips back to ten, and certainly below, could be an attractive pick-up price for investors looking towards the mid to long term as CytoSorb becomes established in the market place as a treatment for conditions of high cytokines.
Since Cytosorbents is a smaller company, a slower roll-out should be expected, especially given that the medical community has to become convinced that the treatment works before whole-heartedly jumping on board. An already-completed trial in Europe showed that CytoSorb works enough to warrant approval, as the European medical authorities approved based on those trial results, surely a strong sign of validation.
The HemoDefend blood purification technology could help the company land a partner and lead to revenue while CytoSorb continues its roll-out, and the US Army has also jumped on board to support the company with the awarding of a grant late last year.
One to keep on the radar as consideration for a buy at the dime level. When this one moves, it moves quick. If medical professionals become convinced of CytoSorb's ability to treat sepsis and other conditions based on use in Germany, then CTSO could start preparing for the big time. Already the company is undertaking preparations to comply with US FDA approval guidelines.
Advanced Cell Technology (ACTC): Advanced Cell Technology dropped by two percent on Friday to levels that could have investors interested in this company as well as a speculative future growth story. ACT became the arguable leader in the field of regenerative medicine when Geron (GERN) put its stem cell pipeline on hold last year. Although still speculative, early results from trials using ACT's stem cell technology in the treatment of severe vision loss have been encouraging and additional steps are being considered to add credibility to the stock that is still considered a penny play. The lower this one goes, the more attractive a buy it may become.
Ampio Pharmaceuticals (AMPE): Before Friday's dramatic stock market drop shares of Ampio Pharmaceuticals had been on the move for days following continued positive developments on the pipeline front. On Thursday the company also announced that its patent protection for Optina in the treatment of macular edema will extend into Europe. The 'repositioned' status of Ampio's pipeline, which means that the pipeline is based on already-approved drugs treating new indications, could put its product candidates on an expedited path to the FDA since a safety profile has already been established.
Friday's dip to below three dollars again should put AMPE on the radar again, as pending catalysts expected later this year - that should include the initiation of definitive trials tailored towards FDA approval - could reinvigorate investor interest.
Agenus Inc (AGEN) back at five dollars...The banks: Citi (C), Bank of America (BAC) and JP Morgan Chase (JPM) - during the crash of '08, '09 a lot of money was there to be had with buying the banks cheap, and although the same dramatic drops may not materialize this time around, any protracted dip would be worth the buy. For a dabble into the sector as a whole, take a look at the SPDR Financial Select ETF (XLF)...Amazon Inc (AMZN) down by two percent on Friday. As with MCD and YUM, there is always room for a safer rebound play with established veterans in any portfolio, especially when factors driving down the share price may have more to do with market direction than actual events related to the company...Titan Pharmaceuticals (TTNP) is beaten down and forgotten, but could rebound to the dollar mark quick on the right Probuphine update.
There are sure to be plenty more deals and steals out there if the market drops, these are just a few to watch for the coming week. Happy Trading!!!
And how 'bout them Mets?
Disclosure: Long TTNP, AMPE, CTSO, CELH, MNKD, SIGA, SGYP, IMSC, CPST, FCEL, NBY.
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