By M.E. Garza
Failing to understand the implications of cashing in too quickly may be a problem that continues to plague uninformed traders in stocks that rise as quickly as some do.
For example, the volume and news interest in Advanced Cell Technology (ACTC.PK) is still there, but after yesterday’s session it has become apparent that those only interested in fast money have begun to take profits. Just as they did when the stock doubled to $.09 on December first, short sighted profiteers handed over their shares to investors who gladly took the stock back up to an intra-day high of $.20 a few days later.
While taking profits is never a bad thing, taking them too quickly has a way of haunting impatient market players. Especially when they trade stocks that have risen - on real news and science events.
On Monday, those who purchased discounted shares of ACTC stock from traders who headed to the exits were met with new rumors about potential European pharma partners for the company’s embryonic stem cell derived therapies. Shares began to bounce off session lows, as the unconfirmed rumors and reports spread late in the day. It would not be surprising to see them continue climbing, just as they have after previous profit taking sessions during the past two weeks since ACTC has positioned itself near the front of the stem cell stocks pack.
Those familiar with the technology platforms presented by ASTM and ACTC understand the implications and tend to be real investors in these companies. They see that the science these companies have spent tens of millions of dollars developing for years is getting closer to moving out of the lab and into spaces filled with patients eagerly awaiting life-changing treatments. These are markets with vast unmet medical needs that potentially represent billions of dollars in profits.
As reported during last year’s 4th Annual Stem Cell Summit in New York City, industry experts estimate that there are up to 300 firms worldwide engaged in some aspect of stem cell research and commercialization. Of that number perhaps 75-100 are creating stem cell therapies and of those a mere handful are toiling in the garden of embryonic stem cell research. And while the vast majority of stem cell companies are focused on developing drugs that can address up to 70 different clinical indications only two have ever gotten the green light from the FDA to proceed into clinical trials. ACTC, a stock trading its shares for less than the price of a stick of gum, is one of those two companies. Geron Corporation (GERN), whose shares trade near the $5 mark, is the other.
Forget the new rumors involving interest from large European pharma players who have reportedly taken notice of ACTC, and the fact that just last week, biotech behemoth Cephalon (CEPH), purchased a 20% stake of an Australian stem-cell therapy company in a deal that could prove to be worth $2 billion. As everyone who read the report from London in last week’s Wall Street Journal knows, rising pressure to find new products is prompting big pharmaceutical companies to license or acquire biotechnology companies' experimental medicines when they've barely been tested in human trials.
“Traditionally, the sector's big players preferred drugs with solid clinical evidence to show they work” writes Jason Douglas, who covers the health industry for Dow Jones. “But faced with the loss of patents on some big sellers, an overhaul of its own research-and development-priorities, and demand for more innovative medicines, big pharma is gambling more of its deal dollars on riskier bets in an effort to replenish its pipeline with new technologies.”
Chances are, speculators will continue to rush in to these stocks in days ahead, but chances are only real investors who take the time to research and understand the implications of recent and future announcements from these companies will see multi-bag profits here. Rest assured, also, that regardless of the latest rumors, profits will come as those milestones and news events continue to unfold.
Disclosure: Long ASTM, ACTC