Tuesday registered another solid up day for the markets as investors embraced positive discussions taking place between Democrats and Republicans during the opening days of the week, but an about face of media coverage Tuesday evening could spark a little bit more uncertainty into the markets regarding the outcome of negotiations. Concessions were made by both sides this week as they played a game of "offer, counter-offer," but indications on Wednesday morning were that Republicans were preparing a 'Plan B," which was to adopt their own tax bill should President Obama not budge on his latest proposal. Since everyone in the know knows that anything the Republicans put forth will not make it through the Senate, there is reason to believe - again - that we may end up going over the cliff at the end of the year. Even the leaders of the two parties cannot muster enough support from within to rally behind what is on the table now, so we may not be as close to the end of this thing as previously thought. Should make for a nail-biting couple of weeks for those keeping track.
All that aside, the markets have prevailed and December has looked pretty green so far. With each of the DOW's hundred point swings higher, however, one can't help to believe that what we may be seeing is a case of "buy the rumor, sell the news." With that in mind, it's quite possible that a case of "sell the news" can materialize whether a fiscal cliff deal is announced or not, just like the markets rallied into the elections in November, but tanked afterwards. The lack of a deal would likely lead to a more pronounced drop than if one were to be agreed upon, but we could be setting up for a fall either way. After all, even with a deal, some taxes will be going up, which will make some investors a tad more apprehensive about holding into the new year.
Trading strategies should not be altered, in my opinion. Having some cash on the sidelines prepares one for any eventuality, while individual entry and exit strategies can still be adhered to - especially for catalyst-based trades - regardless of what is going on in the surrounding market.
As those stories all play out, here are a few stocks and stories to keep an eye on ...
3D Systems Sets 52-Week High
Shares of 3D Systems Corp (DDD) pushed through the fifty dollar mark on Tuesday and set a new 52-week high in the process. 3D shares have been flying all year long as 3D printing technology has been thrust to the forefront of next generation technology and, judging by recent analyst coverage of the company, there could be more to come with this run. JPMorgan Chase (JPM), for instance, upgraded its rating on DDD shares to "neutral" from "underweight," but other analysts also initiated coverage with "buy" ratings and price targets at or in the range of sixty bucks. Analysts argued that the wide-spread acceptance of the 3D printing technology and the growing earnings estimates warranted the positive coverage and enthusiastic outlooks. In light of the company's triple in price during the past year, many other large media outlets have also jumped on board with coverage and/or reporting of the stock.
3D printing has been around for a while, but is methodically catching on mainstream with double digit growth projected moving forward. DDD and some other companies, such as Stratasys (SSYS) - and to a lesser degree Hewlett-Packard Company (HP) - have benefited greatly from the growth of the industry. As indicated by the analyst coverage mentioned above, DDD and other companies in the sector may still return very solid gains over the long term. Since shares have run so far so fast, however, it's also worth considering the precautionary note that some profit taking may develop over the near term, as it's a general rule that stocks which experience such runs often experience a pullback at some point. For those interested in remaining with - or accumulating into - the 3D printing technology, it may be best to do so modestly at first, and then average down if the opportunity arises in the event of a pullback.
Much of the recent reporting can be interpreted by some as "hype reporting," while others may consider the 3D sector as trading in a bubble right now. There's little doubt that the technology is for real and will become a big part of the printing technology of the future, but a jump in here might be considered "chasing."
You can't argue with a triple in price through the course of a year, though, especially for a multi-billion dollar company, so this will be one to watch, and it never hurts to keep a stock on the watch list for a period of time before jumping in anyway.
Organovo Signs Software Partner
In keeping with the theme of 3D printing technology, Organovo Holdings (ONVO.PK) also made some noise this week and may be worth keeping an eye on as a still-developing company with big potential in this rapidly-growing sector. Organovo has applied the 3D printing concept to the field of healthcare and biotechnology by developing the NovoGen MMX Bioprinter, which uses live human cell samples to generate 3D "bioprints" of human tissue that can then be used as disease models and enhance therapeutic drug discovery and development. The potential of this technology over the short to mid term is significant, as mentioned above, in the realm of therapeutic research and development, but looking further on down the road Organovo could potentially put this technology to use in generating organs for patients awaiting transplants, as previously discussed. That specific potential was highlighted by The Economist magazine a couple of years ago while other high-profile coverage from CNBC validated ONVO's potential more recently.
With the 3D sector as a whole receiving the attention it has over the past year, Organovo was able to land the collaboration of both Pfizer (PFE) and United Therapeutics (UTHR) early-on in the development of its technology. Aside from the development of the MMX Bioprinter, these evolving relationships will be worth monitoring moving into the new year as UTHR currently retains the option to acquire a license from Organovo in relation to the results of the ongoing collaborative effort. Such a license - if the option is enacted - would provide Organovo with up-front cash money and a future revenue stream from royalties paid.
On Tuesday Organovo issued an update on its collaborative efforts by announcing a deal with Autodesk, Inc. to create the first 3D design software for bioprinting. Autodesk is the leader in cloud-based design and engineering software and, as described in Tuesday's press release, "will represent a major step forward in usability and functionality for designing three-dimensional human tissues, and has the potential to open up bioprinting to a broader group of users."
ONVO shares have not enjoyed the broad-based runup that others in the sector have, most likely because its bioprinting technology is not fully mature, but it could provide an opportunity for those that have missed the big sector-wide run this year to play the technology into the future, although just a bit more speculatively so. Shares have hovered right around the two dollar mark for some time now and volume has remained relatively steady. With that being said, though, it is obvious that ONVO is receiving its share of attention. Volume was more than four times the daily norm on Tuesday with a noted - although brief - spike right when the news hit the wires during mid-day trading. Both could be signs that accumulation is taking place in the background and once that accumulation is complete, then shares may have the opportunity to appreciate in value for the short term.
Over the long term investors will be watching for new or expanding partnerships and the development of the NovoGen MMX bioprinter. Judging by the huge moves in other stocks in the 3D printing sector, ONVO, too, could have its day.
Healthcare, Biotech, Pharmaceutical:
Vanda Moves On Sleep Drug Study
After dropping back towards the three dollar mark earlier this week on news that the company's schizophrenia drug Fanaptum received a negative approval opinion in Europe, Vanda Pharmaceuticals (VNDA) was on the move again on Tuesday when shares spiked by nearly twenty percent on very high volume following the announcement of positive results from a Phase III trial for the sleep drug Tasimelteon. According to Tuesday's report, Tasimelteon met the primary endpoint of the trial and "demonstrated significant improvements across a number of sleep and wake parameters including measures of total sleep time, nap duration, and timing of sleep."
This positive development reinvigorated life into VNDA shares, which otherwise been stagnant for months, and provides the company another avenue of revenue potential following Fanapt's disappointing launch. Some may remain skeptical, however, since Tasimelteon has been considered a "me, too" product in the past and it still needs to muster an FDA approval before commercialization can be considered. That said, the sleep-aid industry is a multi-billion dollar industry, so should Vanda make even a small dent in that business, then a market cap of significantly higher than one hundred million could potentially be justified, especially with the cash on hand that Vanda keeps in its war chest.
Investors will also look to see if a partner will materialize for Tasimelteon, assuming approval. Novartis (NVS) is already on board for Fanapt, so some may speculate that if NVS sees value in Tasimelteon, then an all-out merger or acquisition could be consummated between the two. Vanda could be had now by big pharma for relative chump change, but a lot depends on how the big boys value the sleep-aid product. Meeting a Phase III endpoint is a good start, but there's still a little while to go before realizing success.
It's been a roller-coaster week for VNDA shares, but the story is worth watching again.
Hemispherx BioPharma Loses Forty Percent In Value
Hemispherx BioPharma (HEB) is one of the hotter stories to watch for the remainder of the week. The company's drug for chronic fatigue syndrome (CFS), Ampligen, is currently before the FDA for approval review and an advisory committee is due on Thursday to vote on its decision recommendation. Shares plummeted by over forty percent on Tuesday, however, when the FDA released documents to the public indicating the an earlier review of the product cited agency concerns over the safety, efficacy and data compilation during the clinical process. The FDA also indicated that the data reviewed may not be enough to support an approval request. Such concerns were not previously aired publicly, hence the significant drop in the HEB share price.
Another aspect to this story is that CFS has proven to be a tough cookie to figure out and a growing lobby of citizens diagnosed with this illness have little or no effective treatments on the market, hence the huge amount of attention the HEB story is receiving. To be fair to the Ampligen story, effective means and methods for compiling data in testing and treating CFS are still being developed, given the complex nature of the illness and the unknowns surrounding its root cause. The FDA itself is treading new ground here, as it did with Human Genome's lupus-treating drug last year, given the complex nature of lupus, too. That illness went half a decade in between treatment approvals.
The Tuesday reports make it hard to believe that HEB will receive an approval for Ampligen, but at the same time the CFS lobby is looking for something on the market to help treat their condition. It will all be in the spotlight on Thursday for that advisory committee meeting and investors should expect a significant amount of volatility leading into the decision date. If it looks like a no-go, shares may drop by another forty to fifty percent. A positive opinion, however, could result in a very quick rebound.
Press releases were circulating on Wednesday morning, however, from various law firms looking for investors wanting to file a class action suit against HEB for withholding information. Expect some bad press over the coming days, with some solid supporting arguments being put forth, too.
A hot one to watch.
Roundup: Early indications on Wednesday are that another up day could be in the works. It's been a solid week of gains thus far and investors could be in for even more. As usual these days, watch the headlines for updates on the cliff negotiations, as that will likely drive the trading patterns from now until the end of the year. Regardless of the outcome, however, a dip could be in the works whether a deal is done or not, as many investors may take the 'sell the news' approach to the whole ordeal. In the meantime, enjoy the gains.
Disclosure: I am long ONVO.PK.