Markets worldwide continued to trade relatively flat leading into Wednesday's trading day as uncertainty stills abounds in relation to the Cyprus bailout package that some believe could pose a threat to the stability of the still-rebounding global economy. As discussed earlier in the week, however, concerns over a drastic backlash against the eurozone (EZ) economy based solely on the instability in Cyprus may be overblown, as the ordeal looks to be one more involving Russia and Cypriot banks than anything else, but fears will remain, nonetheless, that a similar situation could arise in Greece, Italy or Spain - countries whose failures could greatly effect the health of the European economy. That is likely the reason why European shares fell rather significantly after the recent Italian elections, but have only been modestly effected by the Cyprus fiasco.
On this side of the Atlantic investors can be reassured the Fed will maintain its current measures of stimulus as long as long as uncertainty exists globally and in Washington, according to comments made during day one of a two-day meeting. As a result, investors - who currently look to be in a holding pattern following the early-year record run - can be reassured that no broad changes to current conditions are forthcoming, pending the result of budget talks and a clearer picture of what sequestration may bring. Initially, it looks as if the doomsday scenarios laid out before the 1 March deadline kicked in were more fear-mongering by Washington than anything else, but also keep in mind that the full impact of any newly-implemented measures is not expected to be felt until 1 April or beyond.
Wednesday could also bring another round of the modest consolidation we've seen over the past few trading sessions, which will leave investors monitoring the news wires for developments overseas and at home.
As the noted news items develop, there are still plenty of individual stocks and stories to keep an eye on. Here are just a few of them for Wednesday, 20 March 2013 ...
Titan Shares Drop Amid Probuphine Dosing Concerns
Shares of Titan Pharmaceuticals (OTCQB:TTNP), which had returned a share price triple since last summer, plunged by forty percent on Tuesday and threatened to drop even lower on Wednesday following the circulation of a report indicating that the FDA may be somewhat disappointed in the results of a recently-completed Probuphine trial. Probuphine is a subcutaneous implant designed to treat patients of opioid addiction and has already been proven successful in multiple late stage trials, but the latest results may indicate a need to up the dosage, according to information published to the FDA website on Tuesday. An FDA advisory panel meeting is slated to take place on Thursday where the panel will likely either recommend approval or - as those who bailed out on Tuesday fear - recommend that the company consider altering the Probuphine dosage before moving forward. The latter suggestion, unfortunately, may hint at the need for an additional trial, which therefore likely chased away the shorter-term traders on Tuesday..
Regardless of the uncertainty created on Tuesday, however, investors should note that the latest round of trial results confirmed the results of earlier studies and proved that Probuphine works. Even if the FDA wants more dosing data, it's likely just a matter of time before the company gets the approval it desires, although the time frame may have just been extended again. That said, Thursday's panel review will paint a better picture for investors. The possibility still exists that the panel will recommend approval based on the current results, especially since Probuphine is a unique approach designed to treat a swiftly-growing patient population, and has already demonstrated success in doing so.
Tuesday's trading action was more indicative of the short-term traders exiting their positions in anticipation of a possible catalyst extension. Additionally, the opportune short sellers of the sector - who often jump on top of any share price spike since the odds say retreats will materialize more often than not - also likely to took advantage of the news to push shares lower.
Moving forward, consideration will be paid as to whether yet another nice buying opportunity has developed for TTNP, which once flew to over two dollars from a penny before most recently realizing a quick triple. Although some doubt was created this week regarding Probuphine's effectiveness, general consensus still has it that the treatment works. In fact, anticipation was high enough over the past week's leading into the FDA advisory review that some popular financial media outlets were labeling Titan as "The Next Big Thing In Biotech" before Tuesday's drop. Enthusiasm about the company's potential remains. Also of note, Titan has already landed a commercial partner, a key milestone for investors who were long-anticipating such an event and another sign of validation that players in the community believe in the potential of Probuphine.
Thursday's advisory review is key, as it always was. It's still possible that a positive recommendation may be forthcoming, for the reasons outlined above, but a negative recommendation has the potential to send shares to below the dollar mark again as it may indicate another round of trials with altered dosage may be needed. In that event, it could be yet another solid entry point for those playing the same mid-to-long term catalysts over and over again with this stock. It should be noted, however, that each dip endured by Titan shares has time and again come back to offer huge dividends to patient investors. It looks like that story may repeat itself - yet again.
This latest price action also emphasizes the benefits of having entry and exit strategies that involve the use of trading shares, along with a potential position held for the long term to see the story out. Such a strategy often allows investors to take advantage of the volatility of the sector and come out on at least "house money" before the endpoint is fully played out.
The latest Probuphine news has put Titan right back into the thick of the biotech/developmental map and makes this one of the hotter stocks to watch for the week. Any further dip could offer another buying point to play the next catalyst, which may be the final FDA decision, but bear in mind that the shorts will likely take advantage again on Thursday if the advisory review is negative.
Talk Of GE Capital Spin-off A Non-Factor For The Short Term
Headlines were circulated during the early hours on Wednesday that General Electric (GE) may have plans to spin off its financial arm, GE Capital. Such a plan, while still not imminent, would be right in line with GE's post-recession goals, which have included streamlining its financial unit and returning the company to its core businesses in the industrial sector. The potential spin-off should be monitored by investors, but should be considered a non-factor, at least for the time being. Rather, attention should continue to be focused on the returns seen by reinvigorated growth in the industrial arm and the return of capital to shareholders. In regards to the latter, a recent dividend hike and an enhanced share buyback plan have been the stories to note.
Supporting the share price turnaround, which has GE sitting at just below its 52-week highs, has been a notable boost in both revenues and margins, a trend that is expected to continue through the coming quarters as the global economy continues to pick up traction. The cost-cutting and streamlining measures that have already been put in place over the recent past, which included the sale of GE's remaining stake in NBC, ensure that GE will not take too much of a financial hit in the case of a slowdown in the global recovery.
As the market hovers at near-record high levels, yet threatens to pull back as financial concerns in Europe intensify, the potential for a broad-market pullback exists. Such action could also lead to a pullback in GE shares which, as mentioned above, are trading near their 52-week highs. Given the healthy earnings numbers demonstrated over the last quarter, and with guidance and expectations still positive for the duration of 2013, any pullback would just create and entry or add point for investors looking to beef up the long term and/or retirement portfolio with a stable bet. The renewed health of the dividend rate and the anticipation of a continued share buyback by the company will also offers investors a reason to believe moving forward.
There is plenty to like about GE right now, with or without a financial spin-off, and continues to be a nice one to consider as an "add the dips" play with eyes towards the stable, long term portfolio.
Healthcare, Biotech, Pharmaceutical:
AEterna Settled Back Below Two
Shares of AEterna Zentaris (AEZS) were hammered a couple of weeks ago after the company announced that it would discontinue its ongoing Phase III Perifisone trial at the recommendation of an independent data and safety monitoring committee who suggested that the trial would not meet its endpoints in the treatment of multiple myeloma. This was the second major failure for Perifisone in roughly a year, as another trial - conducted in cohorts with Keryx Biopharmaceuticals (KERX) failed in the treatment of colorectal cancer. As described at the time of the MM failure, however, many investors had already discounted the potential of Perifisone after the KERX fiasco and were already looking towards the remaining pipeline products as the key towards seeing this one pay off as a speculative investment.
With shares now having settled below the two dollar mark again, with much of the short term volatility now out of the equation, it's worth again entertaining the prospects and potential catalysts that could make AEZS a solid speculative pick once again. Moving forward, all attention will be focused on the next two pipeline products with a shot.
AEZS-130, a diagnostic test for Adult Growth Hormone Deficiency, may provide the next potential catalyst for the company and its shareholders. Over the near term it is expected that AEterna will file an NDA with the FDA, which could renew some investors interest in the stock after its recent slide. AEZS-130 in not expected to bring in huge revenue, but - if approved - could bring in enough of a cash flow to help offset some of the costs associated with the further pipeline development of AEZS-108. It also helps that AEterna maintains world-wide rights to the product, and has already been tagged with an orphan drug designation from the FDA. Any solid news from the company, such as the mentioned NDA filing, may be enough to return shares back to the north side of the two dollar mark.
AEZS-108 is currently being measured for effectiveness in multiple cancer types and has already proven successful in numerous Phase II trials. It is also being prepared for the near-term launch of a Phase III trial in the indication of endometrial cancer, according to the latest information published to the company's website. 108 holds more market and revenue potential than the aforementioned and, with the failure of Perifisone, becomes the new "primary focus" of the company's investors. With many investors still remaining skeptical over the recent drop, any positive developments in regards to 108 during the coming months may help to plant AEZS back on the speculative radar screens.
Considering the fact that Perifisone may have been discounted by many investors before the drop anyway, it may be likely that the move to under two bucks may have been a bit overblown and the result of opportune short selling more than anything else. At the same time, the move to over three dollars earlier in the year was just as unjustified, given the lack of news, so it's reasonable to believe that a recovery to in between the edges of these two recent trading points could materialize over the coming weeks, especially if positive developments in relation to one of the above-mentioned pipeline products hits the wires.
Having settled at speculative levels again, AEZS is one to keep on the radar.
FluoroPharma Sideways Trading Could Indicate Opportunity
FluoroPharma (OTCQB:FPMI) is another company whose shares have recently settled and whose sideways trading could be indicating consolidation in anticipation of forward-looking events. FPMI has developed a pipeline of positron emission tomography (PET) imaging agents that are used for the efficient detection and assessment of various forms of coronary artery disease and certain types of cancer. The most advanced of its products, CardioPET, is currently being tested in Phase II trials and early indications from that trial were encouraging, which leaves the door open for further updates to provide potential price catalysts over the coming quarters as the trial progresses.
Another product, BFPET, a blood flow imaging agent for the detection of ischemic and infarcted tissue within the myocardium in chronic CAD patients - have also proven positive, has also already returned positive initial images from a Phase II study and offers another avenue for potential news flow as the trial evolves.
Although volume would indicate that investors are not whole-heartedly buying into this story just yet, given the early stages of its Phase II development, those looking to find the speculative play before the move may be attracted to the ten billion dollar market being targeted by the above-mentioned imaging agents. The successes demonstrated thus far were enough to attract the attention of Zack's, whose price target remains well more than double the current levels, and it's likely that additional investors and/or analysts could become interested as the Phase II trials advance.
Shares are currently trading at just about the mid-way point between the 52-week high and low and investor interest has been tepid so far this year, although volume has spiked a bit. In a market when everyone is making money, however, because each day brings a new record high, speculative picks such as FPMI with pipelines still in the early stages of Phase II can go largely ignored since much safer investments are also heading north. That said, when the market levels off or pulls back - as it looks like it may be doing now - some of those profits banked during the record breaking run may be returned to the speculative market, and that is where the likes of FPMI could benefit - especially if the ongoing Phase II trials continue to produce results.
The current sideways trading indicates a speculative holding pattern, but this is one to watch moving forward due to the size of the targeted market and the early potential of the company's most advanced imaging agents. Still should be considered highly speculative, however, until the latter stages of development are reached with the continued success we've seen so far.
Roundup: International trading on Wednesday was highly indicative that markets are not over-stressing the Cyprus situation, as they may have initially as the crisis was making headlines over the weekend and into Monday's trading session. US markets also looked to open Wednesday on high note, too, after comments from the Fed meeting quieted any uncertainty surrounding the potential lifting of stimulus measures over the short term. Investors will look for additional insights as the meeting wraps up today, but the next distractor is likely to be the ongoing budget negotiations that have left the United States without a fixed budget for nearly four years running now. It'll also be worth looking for any clues as to how harshly a quick decrease in spending and the furloughing of government workers can hurt the economy, once the sequestration measures are put into effect. Just like that, we can also start looking towards the next earnings season, which is just around the quarter. Investors will then receive a nice insight into whether or not the 2013 tax hikes and other factors killed consumer spending enough to flatline the economy, as we heard at points during the current quarter that they might have. It's a hovering market right now, with neither a protracted spike or dip expected, but there's still plenty to pay attention to.