I am vilified by some because weeks ago I expressed my concern that Zalicus (ZLCS) could fall below $1.10/share. Today, on the market's plunge, the stock fell to $1.05/share before rebounding to $1.14/share, impressive considering how far the markets fell. I doubt I will receive love-letters, but C'est la vie! The market is far more brutal than me; I am but a small-time private investor who knows the only way to win is to ride on the coat-tails of the big boys... and my ability to pick the very best biotechs below $3/share certainly doesn't hurt.
In case any wonder regarding my view of Zalicus, my share price analysis has moved from fundamentals to technicals. On technicals, when Zalicus touched $1.25/share on August 8, 2011, I became concerned that it could retest the lower resistance level from 2010 around $1.10/share. I well remember those days when I was maligned by bashers because I bullishly thought the stock price would go up. And go up it did, much to the chagrin of bearish followers who called me every name in the book. So when I expressed that I had become bearish on my Seeking Alpha homepage, I was nearly strung up by the Zalicus faithful or bag-holders holding shares above $2/share. They wondered, some even entertaining conspiracy theories, or writing to the SEC of all things, How could I, the once Zalicus champion of long investors, express such a negative, extreme view? Simple: (1) the overall market looked ready to shipwreck, (2) Exalgo sales royalties failed to meet expectations, and (3) the company wasn't delivering on key stock moving catalysts. So yes, I punted. I reversed my view 180 degrees, an ability I have because I respect the volatility of penny-land biotechs to turn and bite you. But oh! How I have been loathed because I refused to become a pig who got slaughtered.
Thus, now it has happened--the stock price has plunged below $1.10/share to $1.05 before rebounding, and the cadre who cringe at the infamous name 'Stocklasar' has crawled back into the shadows. Meanwhile, some are already calling for a bottom, but following the stock's rate of decline, my thesis is it's better to wait even if it means missing the absolute bottom. However, the problem is, the next lower resistance level is around $0.83/share, which I am willing to state that should that happen, it would make Zalicus a STRONG BUY.
Nevertheless, if you believe in the Zalicus story, Thursday's close at $1.14/share is a gift for the year-plus investor who is convinced Synavive will return excellent results in phase 2B and at least one of the ion channel candidates will capture the attention of the biotech world.
Yes, I don't like the indebtedness Zalicus has incurred; yes, I don't like the meager royalty returns of Exalgo, but if you are a steely investor with a 3-5 year horizon, then $1.14/share is a gift. On the other hand, if your trading horizon is days, weeks, or a few months, you may want to sit on the sidelines to see whether $1.05/share was the true bottom.
Indeed, it is my opinion that the way Zalicus could recapture the favor of the market would be by: (1) announcing a new cHTS collaborative partner, (2) surprise investors with Novartis (NVS) news in the area of oncology, (3) celebrate if Sanofi (SNY) moves Prednisporin into phase 3 and triggers a $3M milestone, or (4) answer my own pessimism with impressive Q3 Exalgo royalty figures. If any of these happen, I will be ready to state -- that the fundamental bottom irrespective of the technical picture is set in concrete.
Nevertheless, a buyer who purchases in fractions may have an excellent strategy. For example, one could commit 25% in the range of $1.14 - $1.25, 50% in the range of $1.05 - $1.13, saving the final 25% for either higher or lower entry points.
I am not anti-Zalicus, never have been, but I am a realist. When Exalgo sales failed to meet market expectations in Q2, it felt like getting punched in the stomach. Frankly, I don't believe Covidien's (COV) $200-300M/year mantra for Exalgo. The company is moving forward, but I remain bearish about the management's style of leadership. Should CEO Corrigan deliver the goods, I will happily jump on the bandwagon and applaud him; meanwhile, his recalcitrance frustrates me. This is a penny-land biotech, not a blue chip firm; it needs a CEO who takes it seriously that his presentation skills make him an excellent candidate to hire a speech coach. His gaffs and ummms are no longer funny; they are digressive to the image and growth of the firm in a very competitive environment.
However, thankfully, I saw some progress in the recent presentation where investors were treated to an updated Powerpoint presentation with a few new slides; Zalicus needs to be held accountable; the ion channel program alone (despite the air-sucking cash-burn) could someday be a triple grand-slam. So you see, I am not negative Zalicus, but I am a realist. I wish the Zalicus Board of Directors would step up to the plate and demand their CEO hire a speech coach. He appears to have skills, but not behind the podium.
Disclosure: I am long AIS.
Disclaimer: Seeking Alpha requires me to declare what stocks I hold at the time of publication. Currently, I hold shares in AIS. I do not employ the terms "LONG" or "SHORT" because I trade based on price targets: at a gain or loss. I am yet to "short" any stock, and "long" simply means I hold the stock at the time of writing. Thus, I hold AIS shares right now, but after 72 hours from the time of publication by SA, I am free to sell AIS.