AdventRx Pharmaceuticals (ANX) is a company that is rarely mentioned among the bigger players, though this may soon change as it gains attention heading into its 2011 product pipeline catalysts. As it begins the new year, the stock seems poised to make new 52-week highs as it announced the much anticipated positive 12-month results for ANX-530, was awarded a $500,000 grant, and marketed itself at numerous healthcare & pharma conferences. These events quickly took the share price from $2 to $3 in a matter of weeks, before suddenly dropping back to even par on the eve of financing news leaving potential investors hungry for the new year.
Currently sitting at a market cap of only $32.5M, the potential to grow exponentially is beginning to make waves among expert biotech investors. The flagship product, ANX-530 or Exelbine, for the treatment of non-small cell lung cancer, is a novel emulsion formulation of the already approved drug vinorelbine. Sales of non-small-cell lung cancer drugs will increase from around $4 billion in 2009 to more than $6.5 billion in 2019 in the leading markets of the USA, France, Germany, Italy, Spain, UK and Japan, according to health care advisory firm Decision Resources. This represents a significant upside potential in the company’s market cap, and more importantly, the fact that it uses a currently approved formulation drug leaves it highly likely that the FDA will approve it for commercialization.
As far as its financial standing goes, the company enjoys a sound balance sheet, with $30M cash on hand, a low burn rate of roughly $5M per year, and little to no debt at $1.7M, it seemed that the possibility of raising capital was nearly extinct. With key FDA catalysts expected on 9/1/11 for PDUFA of Exelbine (ANX-530, non-small cell lung cancer), and 1st quarter FDA meeting for ANX-514 (decrease chemo side-effects drug, a $2 billion dollar market), the stock seemed poised to enjoy a nice run up in price in anticipation of positive news. Then, just as soon as the stock hit a high of $3.40, on 1/7/11, retail investors cringed as AdventRx announced a capital raise of $22.5M from RA Capital Management, healthcare-focused specialists at a per unit purchase of $2.75.
While at first this may sound like news that will set back the stock’s potential, it is important to notice that BioSante Pharmaceuticals (BPAX) underwent a similar occurence of a private financing (not open to the public) which caused shares to drop from a high of $2.20 to $1.61 over night. Consequently, due to its FDA catalysts, the stock went on to appreciate to a new 52-week high of $2.53 in a matter of two months following this announcement, which further illustrates that institutions such as RA Capital will only invest large sums of money under extreme confidence that the stock is currently undervalued leading into future events. Furthermore, it is essential to understand that these large institutions also have access to medical professionals which often guide their decisions, thus this move by AdventRx should be viewed as a positive development for both short and long-term investors.
Institutional ownership has been strong in the company, as both RA Capital and Tang Capital have added to their positions in 2011, maintaining a solid support for the company’s share price going forward.
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Another key metric that is vital in measuring institutional and retail confidence is short interest, as a lower percentage of float usually indicates a more positive sentiment in forward-looking events. AdventRx is no exception in this category, as it has seen its short-interest drop significantly during the past 12 months in anticipation of the 2011 calendar year. The stock’s short interest saw a peak of 8M out of 14.3M float during April of 2010, which was followed by a dramatic decline on the even of the company’s announcement to resubmit ANX-530 during 4th quarter of 2010.
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With the stock sitting on three year support around the $2 area, AdventRx is about as safe of a biotech investment as you can find. With institutional investors adding to their positions, it will be nearly impossible for the stock to drop below this support given any unforeseen events taking place.
As far as current technical analysis goes, the bearish wedge formation that has been in place since early December of 2010 seems to be coming to an end, which should follow in a strong breakout of the stock to test the previous $3 resistance level. Both MACD divergence and full stochastic seem to be on the cusp of breaking out and trending higher, as well as the Relative Strength Index which is indicating a bottom in selling of shares, with a potential catalyst nearing to influence buying once again. The 50-day MA also crossed the 200-day MA which gave way to the "Golden Cross," often referred to one of the most bullish technical indicators for strong upwards movement in price in the near-term.
If the past is any indication of the future, we could once again see a strong breakout of the bearish wedge as seen previously from November to December of last year.
Disclosure: Long ANX