|Upcoming FDA Decision Revives Shares of Navidea|
|By Brian Wilson, Lead Contributor|
|Thursday, 28 February 2013 08:30|
This was in reaction to a complete response letter (a rejection) received after the initial NDA submission was made, although this rejection was due to compliance issues with a third party manufacturer. Navidea has presumably addressed this issue, and paved the way for Lymphoseek's introduction to the market.
Note that a PDUFA goal date is the date that the FDA is mandated to make a decision on a submitted drug application. Lymphoseek,being the primary developmental program of Navidea, is a big driver of the company's valuation. Anticipation of a positive or negative outcome of any impending FDA decision has the capacity to drive biotech and small pharma stocks quite a bit before the PDUFA goal date itself. This is why long term investors in these types of companies will generally ignore the "mountains and valleys" caused by short term speculation. Speculators, on the other hand, will generally try to either ride short term momentum or go against the crowd depending on their style of trading.
Navidea's trading history this year has quite volatile (or choppy if you want to put a nicer spin onto it), although it sets up a potential run up opportunity as we head towards a likely FDA approval coming on April 30th.
NAVB was very tame until January 31st, when it was announced that the company would be offering 1.5 million shares of common stock at a price of $3.10 per share for $4.8 million. While public offerings dilute the positions of other shareholders, NAVB rocketed up to $3.35 per share for a number of reasons.
One is that NAVB was trading well below $3.10 per share at the time, which virtually guarantees a NAVB rally up to at least $3.10 following the news. Another is that this basically gave Navidea a nice chunk of change - worth about $4.8 million.
I think the most important factor here may have been the bullish (positive) sentimental effects of seeing J.P. Morgan Asset Management take a stake in the company ahead of an FDA decision on their lead product. To the market, this seems to indicate that the chances of FDA approval are indeed very high. This is something I'd agree with myself given the data that was included with Navidea's NDA, and the (lack of) issues brought up in the complete response letter received in 2012.
However, the enthusiasm didn't last very long, and NAVB dropped back below the $3.00/share level in February. Although Navidea was presumably turning more attention towards Lymphoseek at BIO CEO 2013 (a healthcare conference), trading volume in the market dried up and NAVB simply wasn't seeing enough buying interest.
This seems to be changing, in part due to the proximity of the PDUFA goal date. Someone taking out a position in NAVB now only has to wait two months before the decision. Although certain traders may view two months as an eternity, this is actually a very short period of time for most long term pharmaceutical stock investors to wait!
As more bulls (and some bears) place bets ahead of the FDA decision on Lymphoseek's NDA, expect the stock price to move in accordance with the popular opinion. Since I agree with the market, I think that NAVB is more likely to stay flat or rally than to decline throughout the next two months. If the FDA approves the product, we may see a "sell the news" reaction, which may cause a dip in the stock's price but does not represent a significant shift in long-term opinion.
Lastly, I want to add that playing this particular run-up may require traders to be quite nimble due to the low price per share, the short term volatility, and the subpar liquidity in this stock. It may be tougher than usual to scalp gains on a stock like NAVB.