Oncothyreon: Consider Buying Dips but Beware of Volatility

| About: Cascadian Therapeutics, (CASC)

To say that Oncothyreon (ONTY) has been a high-flyer for 2010 is an understatement.

Propelled by the winding down of Stimuvax Phase III trials, this stock has jumped from three bucks to ten in a short amount of time as the investment community started taking notice and predicting that another potential Dendreon (NASDAQ:DNDN) might be in the works.

A positive mention by Jim Cramer on CNBC's 'Mad Money' last month also didn't hurt as ONTY trekked towards ten, but with a market cap approaching $400 million, it was understandable for some investors to become squeamish and bank a portion of the profits that were still lingering on the table.

After all, even in an investor's most confident picks, it's always wise - in my opinion - to pull some profit from the table after experiencing a significant run in price; and ONTY's three to ten in just months should be considered significant.

With that being said, however, if Stimuvax is proven successful in these Phase IIIs, then there's little doubt that we'll have another Dendreon story on our hands, and the recent price run will just be considered a start.

Stimuvax is a cancer immunotherapy treatment, like Dendreon's Provenge, that has been partnered and developed with commercial partner Merck KGaA for the treatment of non-small cell lung cancer. ONTY also has multiple PI-3 Kinase Inhibitors in Phase II trials, but it's the near-approaching end of the Phase III Stimuvax trial that provides the best short and long term potential to bear market-moving news and keep the price increase going.

Previous safety concerns during the trials were found to be without merit, and ONTY hasn't looked back since they were re-started.

A stock offering earlier in the year also couldn't dim the prospects of this company, as the cash put into the coffers only offered investors a more confident outlook on ONTY's financial position.

With all the positives, however, there's always the prospects that Stimuvax doesn't make it to market. That issue has been debated in the press and on the financial blogs and websites for the better part of a few months now, but the truth is that we're not going to know what the results are until we know.

That means it's still a waiting game, and it's still a good idea to protect some profit when the opportunity presents itself.

Yes, ONTY will most likely enjoy another monster price increase if the Phase IIIs are positive, but the recent run has also created a lot of room to drop if the results don't quite meet expectations.

So what does it all mean?

Expect volatility, and while there's still room for upside if the trial results are solid, entertain the idea that it might not work out for the positive. At this point, I'll consider ONTY a 'buy the dips' play - while also taking some money from the table into any subsequent spikes - but it's up to each investor to decide how significant a dip and spike is to trigger a buy or sell.

It's definitely shaping up to be an exciting period for Oncothyreon.

Keep a close eye on it.

Disclosure: No position. VFC's Stock House is not compensated to cover ONTY.

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