La Jolla Is Too Much of a Gamble Right Now

Includes: CEGE, LJPC
by: VFC's Stock House

A comment from a reader:

Do you think LJPC's Lupus drug may have some sort of miracle afterlife (similar to Titan (OTCQB:TTNP))? I have made efforts to reach the company to no avail, but the trading action on this "dead" stock has been very unusual the last two weeks. Check it out - very interesting.

VFC's Take: Rather than compare this stock to TTNP, I'd compare it more to CEGE. Cell Genesys (CEGE), like La Jolla, had their bets hinged on one product candidate. When GVAX was proven to be causing deaths, instead of preventing them, the stock price of CEGE crashed and the company had nothing else in the pipeline on which to rely. The same can be said about La Jolla - when Riquent was shown to be a failure in Phase III Lupus trials, the stock price of LJPC also crashed.

In TTNP's case, the stock rose from the dead because Fanapt had passed Phase III trials but got caught up in the politics of the FDA, therefore a reversal of fortunes was the result of human elements, not science. Additionally, Titan had Probuphine in its back pocket - also a drug that passed initial Phase III trials.

Riquent, for the most part, looks to be DOA - and the company knows it, judging by the reduction in workforce and operations.

Now, back to CEGE; although that company and stock looked to be dead, it became a trader's stock and those that were willing to jump in at below ten cents after the crash ended up making a bomb because rumors of a buyout or resuscitation of GVAX swirled, causing the stock to rise and then trade with volatility.

In that case, it was the traders and rumors that were doing the playing in regards to stock price - not clinical trials or long term shareholders - and that is where I think that LPJC is right now.

The company talks of a buyout or resumption of operations based on cash on hand, but I would not recommend jumping into this stock as a long term investment because its future is too much of a gamble right now and does not rely on the advancement of product candidates.

Could it double in a week? Yes, but only on pure manipulation or 'rumor' of a buyout - not because of anything solid regarding the pipeline which is now non-existent.

For the same twenty cents you could buy ANX, OTCPK:BIEL, OTCPK:BMSN or OTC:SPNG - all companies that have something solid to develop for the future.

I'd treat LPJC as a gamble right now and I wouldn't use any long term money for this one. The risk is definitely there for the risk/reward profile, but I'm not sure I could gather up enough of a possible reward profile to jump in - even at these prices.

Disclosure: No position.