While catalyst trading small-cap biopharmas can be risky, if done with the correct discipline and closely following the chart technicals, they can be very rewarding. A few of my recent catalyst trade picks have done very well as of late. Let's take a look.
I first wrote about BioLine (NASDAQ:BLRX) on January 15th of this year when the stock was trading in the $2.80 range. The stock recently hit a high of $4.85 on January 31st, so this was a very successful catalyst trade pick.
Another recent successful pick of mine has been EDAP TMS SA (NASDAQ:EDAP), which I first mentioned in a catalyst trade pick list on January 3rd, when the stock was trading around $2.10 a share - the stock currently trades near $3.60.
However, in the same list article, I mentioned ArQule Inc. (NASDAQ:ARQL) which was trading around $2.90 a share before reporting bad Phase III data, causing the stock to sell off to near $2.50 a share. We can see from these examples that the rewards these catalyst trades offer can be very good, and subsequently, the potential punishment for mis-trading them can also be very significant.
In this short write-up, I would like to focus on small cap companies I feel offer good upside catalyst trade potential.
ImmunoCellular Therapeutics (NYSEMKT:IMUC)
The company is currently conducting a Phase II trial of ICT-107, which is a study in patients with newly diagnosed glioblastoma.
Immuno expects to report interim safety analysis data which is anticipated 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.
The relative Strength Index (RSI) has turned very bullish here. The Moving Average Convergence/Divergence has as well turned bullish. It appears to me that Immuno is close to breaking out, and additional buy-side volume could take the stock to near the $2.65 level soon, if not higher to $2.80. In yesterday's trading session, the stock filled the gap we see above, which was around $2.40. With the company's near term catalyst shortly approaching, I think Immuno offers nice upside potential.
Immune therapy could end up being the next standard in terms of cancer treatment, so Immuno is definitely one company to keep a close eye on.
Sarepta Therapeutics (NASDAQ: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 well-known biotech writer Adam Feuerstein:
It's reasonable to assume FDA will convene an advisory panel to review eteplirsen if the agency allows Sarepta 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.
I'd have to agree with Adam here on Sarepta, and I believe an advisory panel might happen sooner than later for Eteplirsen.
Adam is often-times known for being a bear on many small-cap biotechs, so when he is bullish on one of them, he is usually right.
The main thing I notice above is the up-trending RSI and MACD, yet the stock seems relatively flat. This could be the beginning signs for yet another run for Sarepta, which I think could touch the $30 price range soon.
Possessing a treatment for DMD that ultimately proves itself 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.
Above, 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.
I 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 nonetheless, I do expect a nice upside trend to continue into April.
Disclosure: I am long IMUC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky - always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.