|By Scott Matusow, @scottmatusow|
|Wednesday, 06 February 2013 06:33|
While trading catalyst driven small cap biopharmas can be risky. If executed with discipline and closely monitored technical chart analysis, these types of trades can offer rewarding returns to investors.
Along with the rest of the market, a few of our recent catalyst trade picks have done very well.
Unfortunately, in the same article, we mentioned ArQule Inc. (NASDAQARQL) which was trading around $2.90 a share before reporting negative Phase III data. That caused the stock to sell off to the $2.50 mark. Catalyst trades offer significant returns as well as potentially punishing losses for mishandled trades. Investors must be nimble and diligent.
Today I focus on three small cap firms that may offer good upside potential as catalyst trades.
ImmunoCellular Therapeutics (NYSEAMEX:IMUC)
ImmunoCellular anticipates reporting interim safety analysis data in the first quarter of 2013. Afterwards, the company expects the final safety and efficacy results late in the second half of 2013.
According to John. S. Yu, MD, ImmunoCellular's Interim Chief Executive Officer:
“We believe that ICT-107 represents the next generation of cancer immunotherapy by targeting both tumor cells and cancer stem cells with a dendritic cell-based vaccine. We deeply appreciate the oncology community's enthusiasm for the ICT-107 clinical program and their shared interest in exploring the therapeutic potential of this potentially breakthrough technology, as reflected in the pace of enrollment in the trial. I congratulate the ImmunoCellular clinical team for this successful milestone in efficiently and rapidly completing enrollment in this complex clinical trial.”
Dr. John Boockvar, director of the Brain Tumor Research Group, associate professor of neurological surgery at Weill Cornell Medical College and a neurosurgeon at NewYork-Presbyterian Hospital/Weill Cornell Medical Center remarked:
“This potential vaccine tested in patients with Stage IV glioblastoma is designed to leverage the patient's own immune system after surgery and chemo-radiation treatments to hunt and destroy remaining brain tumor cancer cells - one of the clinical trial testing sites for the experimental vaccine. Previous Phase I study results show the vaccine may improve patient survival by enabling them to remain disease-free longer when the vaccine is combined with standard treatments. I look forward to seeing the Phase II results.”
On IMUC’s chart, the relative Strength Index (RSI) has turned bullish. The Moving Average Convergence/Divergence has also turned bullish. It appears that Immuno may be close to breaking out, and additional buy-side volume could take the stock to near the $2.65 level, perhaps even higher to the $2.80 range. In yesterday's trading session, the stock filled a gap around $2.40. With the company's near term catalyst approaching shortly, we see ImmunoCellular Therapeutics offering good upside potential.
Immune therapies could end up being the next standard for cancer treatments, so ImmunoCellular Therapeutics is one to keep a close eye on.
Sarepta Therapeutics (SRPT)
Everyone has been watching Sarepta very closely ever since the company reported promising data late last year for its drug Eteplirsen, which is in Phase II clinical stage for the treatment of Duchenne Muscular Dystrophy (DMD), which caused the stock to massively rally from around $14 a share to a parabolic price of $45 in one trading session!
The company is hoping to gain accelerated approval for the drug by the FDA this year. According to The Street’s biotech reporter Adam Feuerestein;
“It's reasonable to assume FDA will convene an advisory panel to review eteplirsen if the agency allows Sarepta Therapeutics (SRPT_) to file for accelerated approval. I'd say a panel is a near certainty, given the novel exon-skipping mechanism of eteplirsen and the lingering controversy over the small number of Duchenne muscular dystrophy patients with the drug to date.
I don't see an eteplirsen advisory panel as a negative. In fact, I'd wager that a panel would bolster the drug's chances of being approved early. The convincing efficacy and safety data generated already, coupled with powerful patient testimony, would make it extremely difficult for any expert sitting on the panel to vote against eteplirsen.
I say, bring on FDA panel. It's a positive for Sarepta.”
We’d actually agree with Adam, and I believe an advisory panel might happen sooner than later for Eteplirsen.
The main thing we notice on the chart is the up-trending RSI and MACD, yet the stock seems relatively flat. This could signal another run for Sarepta, which,if true, could touch the $30 price range soon.
Possessing a treatment for DMD that ultimately proves to be successful might constitute a huge break-through medicine. I expect the stock price to continue to head up in anticipation of an advisory panel convening soon here.
Navidea Biopharmaceuticals (NAVB)
Navidea expects an approval decision from the FDA in April of this year regarding its Phase III drug Lymoseek in regards to marketing Lymphoseek for use in Intraoperative Lymphatic Mapping (ILM).
According to the company, Lymphoseek is: A radiopharmaceutical agent being developed for use in external lymph node imaging and intra-operative lymphatic mapping. Lymphoseek has been evaluated in well controlled Phase III clinical trails in patients with breast cancer and melanoma.
On the NAVB chart we see the RSI beginning to trend bullish again, along with a nice flag pennant pattern forming. More often times than not, this is healthy for a stock that just made a nice leg up into a new trading range. Notice the reluctance to sell after the leg up into the new trading range. I take this as a sign that the stock will continue to trend higher over the next few weeks. I think a short term move to at least $3.50 is on the horizon.
We believe Lymphoseek has a very good chance at gaining FDA approval. The greater question is just how valuable the asset is. The market might not be huge for the drug, but none the less, we do expect a nice upside trend to continue into April.
Disclosure: Author Scott Matusow is long IMUC