Another day, another deadline - such is the merry-go-round of Washington. In a last ditch effort to thwart off the potential impact of sequestration on the economy, the U.S. Senate on Wednesday passed a budget that is en route to Congress for its stamp before possibly reaching the President's desk and potentially becoming the first approved budget in years. Of course, that's still an uncertain proposition, given the long-lasting stalemate between the two political parties, but the country is as impatient as ever with the status quo and the politicians know that their political capital is spent, making it likely that a deal will be reached this time. After all, another election season is quickly creeping upon us (although it'll be an off-year season) and the viability of some political careers may be on the line.
The new deadline to get a deal done is 27 March, enough time to halt the building momentum behind planned budget cuts and the furloughing of government workers. General market action seems to indicate that few are panicking over this date, as world markets generally traded favorably on Thursday, more interested in comments from the Fed over the past two days than anything else.
Panic over Cyprus, too, has died down over the past few days, as investors consider any turmoil on the small island nation to be more relevant to the country itself, with due respect to Russian involvement, and not threat to take down the euro with it. Still a story to watch, but not the market-moving drama that many assumed it to be at the outset.
As the week comes to a close, investors will be gearing up for the next earnings season and deciphering clues as to whether stocks are positioned for another leg up - in light of another record day for the DOW on Wednesday - a move to the downside, or just set to hover sideways until next quarter's numbers start rolling in.
As these and other major stories play out, there are still plenty of individual stocks and stories to keep an eye on. Here are just a few of them for Thursday, 21 March 2013 ...
Obagi Buyout Brings Focus To Amarin
Shares of Obagi Medical Products (OMPI) jumped by 28% on Wednesday when reports circulated stating that Valeant Pharmaceuticals (VRX) intended to purchase Obagi for a total of about $344 million. That placed the value of the deal at about a twenty eight percent premium, in line with the stock's spike for the day. Rumors of an Obagi buyout have been swirling for months and serves as another example of how similar stocks in the sector can trade accordingly with the given hype of the moment, settle into a lull period when the hype dies down and then simply re-emerge as a buyout story overnight when the news and timing is right. Obagi, for instance, spiked to over seventeen bucks last summer before pulling back to the low teens. The company's specialty of creating products intended for distribution in the fields of dermatology, neurology, and branded generics boosts Valeant's commercial pipeline and returns a nice premium to shareholders, as well, but more on that aspect later.
In terms of the impact on the sector, investors will again turn attention to the next potential buyout story. With that in mind, the oft-discussed Amarin Corporation (AMRN) is very likely to jump to the front of the speculative foray. In similar fashion to the scenario described in the preceding paragraph, Amarin shares have on numerous accounts approached the twenty dollar mark when buyout speculation was ripe and investor mood high. When a deal never materialized, however, shares - much like OMPI - dipped back to previously-traded levels as the hype died down. Obagi's Wednesday deal is a reminder that investors should not forget about the hot buyout stories just because they slip below the radar.
Lost in the backdrop of the buzz on Wednesday was the fact that AMRN again slipped below the eight dollar mark. For those still speculating on the potential of Vascepa to eventually achieve blockbuster status in the treatment of conditions of high and very high triglycerides, the current levels could continue to prove a nice entry, accumulation or 'average down' point with eyes towards the coming quarters. There are few definitive notes out there in regards to how well the commercial launch is going, but guidance has been tame thus far, leaving the potential for a modest surprise to reinvigorate the interest of the sector and its investment community. Next quarter's earnings report, however, will provide much more insight into any early successes and the pace of growth that should be expected for the coming quarters. Investors should also bear in mind that the pace of growth should expand significantly once Vascepa is approved for both the Anchor and Marine indications, which is also likely to take place over the coming quarters.
What's not breaking news to anyone following this story for even a short period of time is the fact that the lack of a decision on Vascepa's New Chemical Entity (NCE) status will likely continue to hamper any buyout talk as it leaves some doubt as to the true value of the product, sicne NCE would provide more rock-solid protection than patents alone, according to general street sentiment. Amarin continues, however, to boost its patent portfolio and company officials have previously expressed confidence that the patents alone would be enough to ward off any lawsuits or competition from generics over the near to mid term.
Before the NCE story became a long-running drama, companies such as Teva Pharmaceuticals (TEVA) and AstraZeneca (AZN) were rumored to have interest in Amarin and it's likely those names would reappear, should NCE ever become a closed story.
In the meantime, Amarin over the coming days is likely to hold a lead in the discussions as to potentially becoming another Obagi story - one that rose on hype, slipped back during a lull in news and then quickly spiked again when the news finally hit. As previously discussed, too, the same scenario took shape for Human Genome Sciences before that company was eventually bought out by GlaxoSmithKline (GSK). Like Amarin, Human Genome also had a drug that was predicted as a potential blockbuster in Benlysta, but shares slipped drastically when the buyout hype died down, only to double overnight when the offer finally materialized. The inherent nature of the sector alone puts the Amarin story as potentially in line to see the same fate as those discussed above.
Also inherent to the sector, however, is lawsuits and investor strife. Yes, even when good news hits the wires, the sharks can circle and investors will remain unsatisfied. In this case, law firms have recognized some investor discontent in regards to the pricing of the Obagi buyout and are looking to litigate whether or not the board did all it could to bring in maximum value for shareholders. Many shareholders themselves are likely to lay pressure on the company, too, so while there is no certainty of an altered outcome, the proceedings from this point will be worth watching. Meanwhile, those happy with the outcome can cash out and take advantage of a dropping euro rate and head to the Med for a nice vacation.
Healthcare, Biotech, Pharmaceutical:
TrovaGene Hovers Below The Radar As Market Rises
Earlier in the week we focused some attention on the fact that the more speculative stories out there can become quickly lost on investors when the broad markets are rising and just about everyone out there is making 'easy money.' As the DOW continuously sets new highs and the other indices follow, investors can sleep easier at night by taking the risk out of their portfolios and just sitting back until prices reach a point where profits should - or need to - be taken. Along with the plush vacations, bills paid or Prada heels bought by the wife, some of those profits could be turned once again towards the speculative sector, however, to some of those stories ignored by the broad market run.
Having dropped significantly from its early-year highs, TrovaGene Inc. (TROV) could be one of those recently-ignored companies to keep an eye on. TrovaGene has developed a pipeline of diagnostics that are able to detect certain cancer types through simple urine samples and, according to a recent update issued by the company, the validation of certain of these tests is progressing smoothly. Additionally, numerous of TROV's pipeline diagnostics are slated to reach the point of commercial availability at different intervals throughout the current year. Validation for the urine-based HPV carrier test, specifically, is expected to wrap-up soon, while other clinical trials continue to progress.
One of the more high profile study progressions of note relates to an ongoing collaboration with the University of Texas MD Anderson Cancer Center. This collaborative study is designed to detect transrenal BRAF mutations in the urine of patients with advanced or metastatic cancers, according to published reports, and may result in the commercial availability of yet another diagnostic later this year. The studies alongside MD Anderson poses as a notable sign of validation, given that organization's reputation and status in regards to cancer treatment. Over the shorter term, TROV expects to launch a KRAS oncogene mutation test during the upcoming quarter.
TROV shares had more than tripled in just a short period of time as the pipeline progressed and a couple of analysts jumped on board, but as mentioned above, the latest pullback may offer investors another look at this still-developing story. As the global healthcare industry becomes increasingly burdened with booming costs, professionals and regulators are consistently looking for more cost-effective and less-invasive procedures to identify and treat society's ailments of today. TrovaGene's pipeline of diagnostics does just that and takes advantage of those noted cultural shifts.
Overall trading volume was relatively light even during the January run, but has tapered off even more as the markets continued to trend higher and investors either decides to pay less attention to the speculative market or pulled their money from it entirely. If volume continues to lighten up, some volatile price action could be in store as the bids and the asks bounce around a bit - proof positive is the fifty cent to one dollar price swings seen on any given day - but if news permits and volume flows in at an increased rate, then the conditions could again be right for another move higher as the company's expected catalysts unfold.
Still worth keeping an eye on.
Titan FDA Advisory Committee In Focus On Thursday
As noted on Wednesday, an FDA advisory panel is slated to recommend (or not) approval for Probuphine, a long-acting treatment for opioid addiction developed by Titan Pharmaceuticals (OTCQB:TTNP). Probuphine is a subcutaneous implant utilizing Titan's proprietary ProNeura drug delivery technology and is also being investigated for the treatment of chronic pain. The major benefit provided by Probuphine over other products already on the market is that it does not allow patients the opportunity to overuse, abuse or skip the prescribed dosage. Doubt arose earlier in the week about its effectiveness, however, when the FDA claimed in comments posted to its website that the Probuphine results may not be impressive enough to warrant an approval at the current dosage levels. That led to TTNP's forty percent share price drop on Tuesday and has Thursday's panel review well in the spotlight.
The early-week comments may have little bearing on the panel's vote on Thursday. Evidence suggests that Probuphine works and that could be enough to land a positive recommendation and ultimately and FDA approval. Given the scale of the overuse and abuse of prescription medications in today's society, the fact that ProNeura regulates release and is as effective as other treatments on the markets could be a good enough argument to convince regulators to send Probuphine to market. For that reason, the odds may be cast in the favor of Titan, although some would suspect that Tuesday's trading action indicates otherwise. As previously mentioned, however, that action may be more attributed to opportune short selling than anything else, especially since TTNP shares rebounded rather significantly during early trading on Wednesday before settling just modestly higher.
Always a volatile story to follow, Titan is again in the spotlight on Thursday. A positive review could reinvigorate investor confidence and easily send shares back to the recently-achieved highs, while a negative vote may send TTNP back to the dollar level or below. The one thing we do know, however, is that Probuphine works, just maybe not effectively as the FDA likes at the current dosage - so if anything else, the path to market may be delayed a bit, but the story will roll on.
For the reasons listed above, though, a positive advisory panel recommendation would come as no surprise and neither would an outright approval, when the time comes.
Still a hot one to watch.
Roundup: International markets traded mixed on Thursday with Asian shares modestly higher and Europe's modestly lower as the Cyprus talks continued to make some noise. Indications are that the US markets will trade flat to mixed, too, as investors are satisfied with comments from the Fed, but still anticipate drama over budget talks. BlackBerry (BBRY), too, although not highlighted today, will also garner some attention for the remainder of the week as investors and consumers anticipate the arrival of the Z10 and the BB10 platform. Shares spiked as high as seven percent on Wednesday and are threatening to move even higher as reception of the product revival - while modest at first - has been gaining steam. For the picture, though, all eyes are on Washington - as our elected officials ever-so-slowly crawl to a budget outcome - and on Europe, where the European Central Bank is laying some smackdown on Cyprus to come up with a plan to bail out a country whose GDP rivals that of the New York Yankees. Funny enough, the Yankees may be in just about as much trouble this season as the Cypriot banks, given the rate of that team's expanding disabled list.