Despite some recent concerns that the record-setting market rally of 2013 was losing its steam, Wednesday saw another day of record highs as investors remained enthusiastic following encouraging comments from the Fed, while economic data overseas, specifically in China, represented a continued global recovery. The record-setting day in the U.S. sparked international rallies on Thursday, although early indications were that U.S. markets may experience tempered trading, given existing concerns that each move higher could just create that much more of a dropoff, should a pullback materialize. With earnings season underway, more and more attention will be paid to the "hits" and "misses" of the street, with ample consideration given to the fact that it's no secret company's have been under-guiding during the recovery period in order to look that much better if a stronger-than-expected report hits. Guidance moving forward, however, has been tempered, meaning weak earnings reports during the current quarter could end up pushing the markets lower, as many pundits expect will be the case.
Although new highs are still being set, volatility has increased, an indication that skepticism remains as to whether or not the rally continued. It also provides an indication that the traders may be taking hold of the market as the 'buy and hold' game may have been milked for all it's worth during the early-goings of 2013. As mentioned earlier this week, profit-taking money could start pulling out of the broad market, should expectations of a downturn arise. If that is the case, that money - along with any sideline cash that investors have been hording in case of a dip - is likely to find its way into individual stocks and stories that may have been trading below the radar as the big players in the markets rallied.
We'll continue this week to follow a few of those that could attract some speculative money, given pending catalysts, recent developments and overall growth potential.
As the noted news items of the day develop and the earnings stories roll in, there are still plenty of individual stocks and stories to keep an eye on. Here are just a few of them for Thursday, 11 April 2013 ...
Sunshine Heart Announces Public Offering
Sunshine Heart (SSH) announced on Wednesday that the company has initiated a public offering of common stock pursuant to a previously-filed shelf registration. According to Wednesday's press release, the funds will be used for the cliche 'general corporate purposes,' but more importantly will also be used to fund the ongoing clinical trials, development and commercialization of the C-Pulse Heart Assist System. C-Pulse, as previously described, is an implantable medical device designed to treat Class III and ambulatory Class IV heart failure. Studies completed thus far have demonstrated that this device, which is implanted outside of the bloodstream, may not only halt the progression of heart failure, but also reverse the effects of the disease. Sunshine has already received an approval in Europe for its flagship device and a post-approval trial is being conducted on that continent as another trial simultaneously gains traction in the United States. The latest stock offering will help fund the progression of those trials.
Investors are rarely enthusiastic when it comes to hearing news of a company announcing a stock offering, but such events are the standard for the developmental sector. Sunshine, as we have previously discussed, has also made no secret of its intentions to raise cash, so investors are not likely to be caught by surprise by Wednesday's announcement. Moreover, those investors that may be building a longer term position to see this story play out - as well as traders looking to take advantage of any dips - may appreciate any pullback in price that materializes from the offering. Sunshine has traded in a relative "under the radar" range ever since a monumental price run last year pushed shares towards twenty when the likes of Reuters jumped on the story, and the stock is currently sitting at the lower end of its range.
Astute investors often utilize a strategy that includes flipping a handful of trading shares at opportune points that develop as a result of the volatile nature of this speculative sector, while also potentially building a core group of shares to see the story play out. The trading shares can offer investors the chance to come out on "house money" before the end-game is met, while the core shares still allow for one to remain invested, should unexpected news or developments hit the wire in the meantime. The core also allows the potential to reap the rewards, should the goal of FDA approval and commercialization be met. In the case of Sunshine, investors accumulating now are looking further down the road and gauging the potential market for C-Pulse.
According to statistics posted by the National Institutes of Health (NIH), heart failure is an all too common condition where the heart becomes unable to pump sufficient blood to meet the demands of one's body. The condition is progressive, effecting over five million people in the United States alone, and leads to over a quarter million deaths per year. Over 1.5 million of these cases fall into the category of Class III heart failure - more in the ambulatory Class IV category - where current treatments may temporarily relieve a patient's symptoms, but are not fully capable of controlling the effects or symptoms. C-Pulse's potential to break into that market justifies a high amount of speculative interest in the company's stock, especially given the early results.
Some are concerned about the time left on the table to see the end-game play out. Full results from the U.S. trial are not expected for nearly another three years. That leaves a lot of time for an investor's money to sit idle while awaiting the key milestones. With that in mind, there are other avenues that investors can entertain to remain interested in the meantime. For one, it's likely that at some point the company could entertain discussing interim results, which may be speculated to be compiled at the trial mid-point. Previous financing agreements have hinted that there already exists significant partnership or buyout interest in regards to C-Pulse and current funding agreements keep the company financed through the mid-way point. With that in mind, it's worth speculating that C-Pulse could be shopped around if interim mid-way data looks solid.
There are some very optimistic estimates out there regarding Sunshine's potential and as the U.S. trial progresses, attention is likely to come back on this company by a wider range of media outlets and analysts. By that time those investors already in may find themselves in a prime position to play the volatile moves that develop in this sector leading into trial results and unfolding catalysts. Although Sunshine has slipped below the radar for a bit, it's still one to keep an eye on.
Inovio Receives Boost From Federal Grant Money
As discussed on previous occasions, Inovio Pharmaceuticals (INO), since it is known for developing a potential universal flu vaccine, is one of those companies out there that can move quickly when news circulates the wires in regards to a new flu outbreak. It happened during the winter when an epidemic outbreak criss-crossed America and it's happening again as the bird flu hits China. Although other factors have contributed to the rebound, it's likely that the newest flew outbreak helped Inovio shares shrug off disappointing results from a collaborative trial earlier this month, more on that later. Aside from the attention brought to Inovio as a result of another flu outbreak, investors were encouraged by news this week that the company had received a $3.5 million grant from the National Institute of Allergy and Infectious Diseases (NIAID) to advance its SynCon platform technology and its preferred method of vaccine delivery, electroporation, specifically in the cause of allowing the warfighters to stave off the effects of potential biological warfare.
SynCon is Inovio's proprietary technological platform from which numerous synthetic vaccines have been developed intended to treat a number of infectious diseases and cancer types. Among those in development are a universal flu vaccine, which has already returned positive - although early - results, and a hep C vaccine, for which the company will initiate its own trials this year, given the failure of the above-mentioned collaborative effort. It should be noted that Inovio's relationship to the failed trial revolved around the use of its electroporation technology and has no bearing on the development of its own SynCon-based vaccine development. Digestion of that fact likely also assisted the stock's rebound from the post-news lows.
With SynCon and electroporation, too, Inovio has developed a nice one-two punch, given that it offers vaccine candidates and a potentially superior method of delivering them, too. Electroporation, as described on Inovio's website, uses controlled, millisecond electrical pulses to create temporary pores in the cell membrane and allow dramatic cellular uptake of a synthetic DNA vaccine previously injected into muscle or skin. This method of delivery allows Inovio to more accurately and effectively direct its vaccine technology into the intended cells, while minimizing the risk of damaging surrounding cells and tissue. Consider it like using the precision of a cruise missile to hit its target. Thus far in development, electroporation has "demonstrated best-in-class immune responses" in relation to vaccine delivery.
The early successes of both the SynCon platform and the electroporation technology were the primary factor in attracting the NIAID grant money. Although a relative insignificant amount in comparison to the costs associated with bringing one - let alone many - products to market, a multi-million dollar grant comes as a huge plus for a small and still-developmental company, and it should also be encouraging to investors that this is not the first federal money issued to Inovio. Pending the results of the current collaboration, the money flow could continue at points in the future, as well, although investors should not assume that additional cash-raising will be needed over the course of pipeline development.
Inovio has other funding help, too, aside from just the grant money. Of the nine programs in development, six of those programs are being funded by third parties, a huge easing of the monetary burden moving forward. Again, though, that's not to say the company will not have to raise cash at points in the future since the pipeline is still considered a 'Phase II' pipeline, for the most part. More lucrative partnerships could materialize as the Phase III stages are reached.
With its SynCon and electroporation technologies attracting the interest of federal grant money and other intersted parties, Inovio remains one to keep an eye on. Upcoming Phase II results could set the stage to play some Phase III catalysts, but recent trading history has also shown that the volatility with which Inovio trades makes it worth using the 'trading shares' strategy, while also potentially accumulating for the long term.
Assured Pharmacy Positioned To Capitalize On Industry Trends
Over the course of the past few weeks we've been hitting a lot on the topic of following shifting trends in the healthcare industry. The booming nature of the diabetes epidemic, for instance, brought us to company's such as SanuWave Health (OTCQB:SNWV), AntriaBio, Inc. (OTCPK:ANTB), and MannKind Corporation (MNKD). Following the trends - or even better, attempting to identify them before they become trends - can turn into a lucrative business for investors looking for a place to ingest some speculative money.
Another booming sector worth keeping an eye on is the chronic pain market. It's tough to scroll through companies in the pharmaceutical or developmental health care sectors without coming across a company that is either marketing or developing some treatment or another for chronic pain. BioDelivery Sciences (BDSI), for instance, has developed a film that is placed inside a patient's cheek and delivers a steady supply of pain killer while Titan Pharmaceuticals (OTCQB:TTNP) is developing its subcutaneous treatment for opioid addiction, Probuphine, for use in the chronic pain market, too. Using Titan as a transition point, that brings to light another trend in the industry worth monitoring - that of eliminating, as best as possible, the abuse and misuse of medications and prescriptions, which also falls in line with preventative medicine, since abuse just creates more long term problems and financial burdens on the industry. Titan's ProNeura technology delivers a steady supply of buprenorphine to patients with a 'stick' inserted under the skin in order to control intake of the drug, and therefore eliminate the potential for abuse.
Assured Pharmacy (APHY.OB), on the other hand, is taking a unique approach to attacking multiple of the industry trends listed above. With a number of "specialty" or "boutique" pharmacies already opened in the United States which offer services for medical professionals and patients of the chronic pain sector, Assured monitors the prescription habits for physicians while also ensuring education, assistance and prescription services (including delivery) for chronic pain patients in need of the more personalized care that large pharmacies such as Walgreen (WAG) or Rite Aid (RAD), for example, cannot provide. This more personalized service allows Assured to tighten prescription controls and heavily eliminates the potential for misuse by patients. Another benefit that fits the cost-effective trend is that the personalization helps to enable a patient to identify early on the medication most applicable to his or her condition.
Assured has four locations operating in relatively modest markets and those locations brought in just over $14 million dollars last year, according to the most recent annual report, which was down from the year prior. With a foundation set, the company is next looking to move into major metropolitan areas where increased customer bases would help to boost revenue and potentially offset some of the losses that are still coming in. The current market cap of the company may be an indication that investors have not yet bought into the belief that Assured's personalized prescription services could yet compete with the much larger and more established players in the sector, but expansion could be key, as can the above-mentioned shifts in the industry that are streamlining towards the more personalized and preventative options available for patients with Assured Pharmacy.
Still gaining traction in the market, Assured has tough, but manageable road ahead of it. The chronic pain market is currently measured in the tens of billions of dollars in the United States alone and a move into the big cities could enable this company to better capitalize. Additionally, the tight monitoring of prescriptions and decreased potential for abuse may set the standard for such services, which could make Assured more desirable an option for public and private health care professionals and/or relevant insurance companies.
Another key point not to miss in terms of trends is the fact that we're currently operating in the "me" generation, where more than ever before people tend to put their own needs and desires ahead of those of society as a whole. There's another area where Assured can capitalize, as this company's personalized service will not have patients feeling as if they are being herded like cattle in front of the pharmacy window at CVS only to be treated as another number and brushed away - there's a lot to be said for that in today's society.
When following the trends, Assured could be worth a look
Conclusion: International markets traded modestly higher on Thursday and U.S. markets were positioning to open on a similar note. Investors are comfortable that the Fed won't be involved with stalling any rallies over the short term, but again - earnings season is key as indications earlier in the year were that there could be a slowdown in consumer spending and other economic indicators. Everyone's favorite word of early 2013 - "sequestration" - also hasn't been heard from in a while, probably because the politicians told us how it would spell 'gloom and doom' if implemented, but budget discussions and governmental layoffs still hold the potential to impact markets. Early headlines on Thursday morning discussed possibilities of tens of thousands of Department of Defense workers being dismissed - not just furloughed, but dismissed. Similar cuts elsewhere could start to have an effect on the economy. As mentioned above, the threat of a stall in the record-breaking rally has many investors - including this one - looking at speculative alternatives that could produce both short and long term gains with the profits taken from the broad rally. In my opinion, these are the times when DD matters most and the trading game becomes the most fun. There's a lot to keep an eye on these days.
Disclosure: I am long APHY.OB, SSH, OTCPK:ANTB, OTCQB:SNWV. 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.