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Neurochem
by Bill Alpert

  • Highlighted companies: Neurochem Inc. (NRMX)
  • Summary: Neurochem Inc. (NRMX) is a Canadian company that is testing a drug for Alzheimer's disease; the results won't be known until next spring. A second drug, aimed at kidney disease, failed to get FDA approval on Aug. 11. Yet after dropping to 9.23, the stock traded up to 18.40 by month's-end, and currently rests at 15.70—clearly the result of a short squeeze. More 4.3m shares have now been sold short, which represents 45 days' trading volume. August's runup was the result of a) insider buying and b) shorts being forced to buy back their positions. Francesco Bellini, CEO, has been a big buyer, using borrowed funds secured by his Neurochem holdings.
  • Quick comment: Neurochem has come under analysts' radar recently for their equity credit-line agreement with Citiplatz Ltd. (incorporated in the British Virgin Islands). Basically, they get to 'draw-down' capital from Citiplatz (no less than $20m and no more than $60m), in exchange for which they agree to sell them future common shares at a discount (3%). They cite not wanting to dilute share price under current market conditions as their reason for not seeking more traditional financing vehicles, saying the 'good news' expected before termination of the credit-line should provide value for shareholders. George Soros recently purchased 15,000 shares for his portfolio.

NRMX 1-year Daily Chart

Source: Neurochem - Don't Stand in its Way