At the end of every year tax loss selling and hedge fund facelifts push some stocks down too far. Investors are looking to bite the bullet and take losses on stocks to offset gains on other stocks for tax purposes. Portfolio managers are looking to sell their mistakes before they have to report their positions on December 31 to give the appearance they didn't make any unwise judgments.
The selling barrage from investors and managers halts in January after the close of the year because it is too late to hide losses or reduce 2013 taxes. These stocks often rise significantly as few are left who are willing to sell at the grossly discounted prices. The selling pressure lasts until December 31 and sometimes buying pressure begins early to move the stocks up before December 31 in anticipation of the January Effect.
TrovaGene Inc. (TROV) is focused on developing and commercializing molecular diagnostic tests designed to transform the way life-threatening diseases are treated and monitored. Its core portfolio of proprietary diagnostics is designed to detect rare genetic mutations associated with cancer that pass through the kidney that can be extracted from the urine.
As such, medical oncologist can frequently obtain samples that provide real-time information about a cancer patient's disease progression, level of response to therapy and prognosis. The tests have the potential to be used by millions of cancer survivors to monitor for disease recurrences over their lifetime.
The intellectual property estate includes methods of extracting, preparing and detecting cell-free DNA and RNA in urine. The company is in the process of commercializing its first cancer monitoring test. It has collaborative agreements in place with large life science and pharmaceutical companies to explore the use of technology in cancer and non-cancer indications.
Human Papillomavirus (HPV) urine test
Trovagene and Strand Life Sciences Pvt Ltd., of Bangalore, India, have entered into a Memorandum of Understanding (MOU) to license and validate Trovagene's proprietary Human Papillomavirus (HPV) urine test and High Risk HPV DNA Assay for clinical diagnostic and carrier screening use in India and countries in the South Asian Association for Regional Cooperation ("SAARC").
First urine-based cancer mutation monitoring test
Trovagene, Inc., a developer of cell-free molecular diagnostics, today announced availability of the first urine test for cancer mutation monitoring through the company's CLIA laboratory. The robustness of Trovagene's ultra-sensitive assay procedure has been demonstrated for detection of the BRAF V600E mutation from cell-free DNA in urine. This mutation commonly occurs in melanoma as well as several other prevalent cancer types.
The company expects to continue development of integrated assays that can detect oncogene mutations in parallel including an assay that detects multiple KRAS mutation. Its objective continues to be to launch a KRAS mutation assay by year end. (there are 2 more days left in the year, so expect to hear from the company early January). It also plans to sign additional clinical study partners. In 2014, it intends to launch additional tests and continue to collaborate with clinical and pharmaceutical partners to identify new clinical utility for the tests.
As you can see from the chart above, Trovagene has been in a downtrend for the last four months and is unjustified. Read the expert below by Mars Report which wrote an excellent article December 25th. You can read it here.
A recent federal court ruling with Sequenom may have returned the share price to the low $5s and unjustly so. On October 31, 2013, a court granted Ariosa's judgment and invalidated patent No. 6,258,540 saying the patent covers a phenomenon of nature, which is not patentable. Sequenom holds an exclusive license to the '540 patent, which underlies its MaterniT21 Plus prenatal diagnostic test, from Isis Innovations. The court found that the '540 patent does not cover any novel methods or inventions, and instead covers a natural phenomenon, inherited cell-free fetal DNA, or cffDNA detected in blood samples. It rejected Sequenom's argument that certain parts of the patent's claims are patentable "because they are novel uses of a natural phenomenon, rather than a patent on the natural phenomenon itself."
The announcement sent shares of Sequenom plummeting over 30%, subsequently dragging down the share price of Trovagene as concerns were raised whether or not their patents would be subject to a similar outcome. However, Trovagene holds the patents to a proprietary form of detecting free-cell DNA and RNA in urine, not plasma and serum where the court stated that the amplification and detection of DNA sequences in plasma and serum was "well known by 1997." In addition to that fact, Trovagene is the only company developing free-cell DNA and RNA detection in urine, which completely removes any litigation risk Sequenom was even subject to in the first place.
Currently, Trovagene has a market capitalization of $111 million. This is extremely undervalued as they are developing and expanding its cell-free molecular technology into a pipeline of potentially groundbreaking commercial medical testing and screening products using advanced science to help in the prevention and treatment of a multitude of different cancer. Also, its technology is protected with over 50 patents worldwide. Trovagene is a way to invest into a unique diagnostic oncology play that is like no other. The company corporate presentation (presented December/13) projects future revenue at a billion dollars (page 13 here). Based on the above findings, I believe Trovagene deserves a price per share of $10-12 short term and much higher longer term.
TROV will be developing PIC3CA in 2014. These mutations occur frequently in cancers in the breasts, colon and endometrium. Development of a urine based diagnostic tool is a big catalyst and would be a huge milestone for the company. The price per will eventually reflect this.
Trovagene Inc. is the definition of the "January Effect" in my mind. Astute investors are urged to do further due diligence on this company as it will likely reward investors with substantial gains in the near future and also long term.