Pain Therapeutics: A Smart Investment Opportunity Supported By A Game-Changing Pain Killer

| About: Pain Therapeutics (PTIE)

Summary

The FDA may approve PTIE’s new drug called REMOXY.

Pain statistics support the demand for PTIE’s medications.

Fundamental analysis is supported by technical analysis, showing there is a good opportunity to go long PTIE.

Increasing addiction rates demand an alternative and contrary make-up of PTIE’s drugs make for an interesting opportunity.

In this article, we will speak about a huge investment opportunity that you definitely must consider. It is about a pharmaceutical company that produces pain killers and pain control medications, which is called Pain Therapeutics (NASDAQ: PTIE).

Pain Therapeutics is operating in the biotech & pharmaceutical industry, having a market capitalization of $116.69 million. The current price per share is $2.55, which puts it in penny stock territory (less than $5.00). Thus, the risks associated with penny stocks and low market capitalizations should be considered. Investors who understand the risks should consider this opportunity. Here is some summary information for PTIE:

Price quotes as of Monday, 25 April, 2016

High

2.63

Low

2.46

Since 05/12/15 - (-30.14%)

Since 08/06/15 - (+66.67%)

Open

2.46

Previous Close

2.45

Volume

294,276

Average Volume

185,545

EPS

-0.25

Div & Yield

N/A

P/E Ratio

0.00

Market Cap

$116.69 M

Weighted Alpha

+42.20

Standard Dev

+1.42

Click to enlarge

The fundamental basis of traders' confidence stays in the production of a new pain control medication called REMOXY, which is not yet approved by the FDA. The approval could happen in September 2016, when the FDA review is planned. If it does happen, the sharp PTIE price uptrend that we have now - will get even stronger. This is a good opportunity to buy PTIE. If the uptrend pace (started on April 13) will maintain, you can get up to 50% return in the coming 2 months. And there are good reasons for it to maintain, as you will see here.

Later on, we will analyze the PTIE price chart and will go more in depth into the latest news and expectations on REMOXY, but now I want us to analyze the market in general. The healthcare and pharmaceutical industry needs no introduction - it is among the largest industries (with a nearly $4.5 trillion market capitalization), along with the oil, finance, and telecommunication sectors. Pfizer is responsible for three of the top 20 M&A deals in history, an example of the breadth and tendency for M&A in the pharmaceutical sector. By analyzing the pain phenomena in the US, PTIE is well positioned to exploit the demand for pain medications, which will remain at least at its current level. Many people are suffering with pain and PTIE may help them with products such as REMOXY.

Source:

According to the Institute of Medicine of The National Academies (IOM), 1 of 3 persons in the US suffers from moderate chronic pain, and the pain can also lead to many secondary consequences. Pain is still the number one reason for admission to hospitals in the US and the number one reason for missed work. The pain phenomenon costs the US economy very much, so an efficient pain control medication, as REMOXY is expected to be, will definitely push PTIE's share price up.

Cancer, migraine, cluster headaches, heart attack, and the like are also contributing to the increasing demand for pain medications as evidenced in the following chart:

Source: US Mortality Data, 1930-2006, National Center for Health Statistics, Centers for Disease Control and Prevention, 2009.

The chart above shows the cancer incidences starting with 1930, and we see that the number of incidences has steadily grown. The charts of other diseases are not much different; this is why the demand for pain control medications is and will be huge in the coming years. An aging population will only add to the demand for pain medications.

Now, what's so special about REMOXY? It is a unique oxycodone formula drug, based on DURECT's (NASDAQ: DRRX) ORADUR technology. Most of the analgesics on the market are opioids, which are often misused and abused. REMOXY is designed in such a way that it discourages the common techniques of tampering related to opium abuse. In fact, because of people's unawareness, the abuse of opioid drugs has caused a public health crisis, which PTIE is hoping to manage with REMOXY, a drug with a completely different approach to pain. A recent example of painkiller misuse is the case of Prince, the famous musician who recently died at the age of 57, supposedly because of painkillers. With its specific formulation, REMOXY has several properties meant to deter abuse by the common methods (snorting, smoking, injecting, chewing, and dissolving in drinks). The commercial opportunity for REMOXY is huge. For example, let us refer to a similar painkiller, OxyContin - it accounted for $2.4 billion in worldwide sales in 2014.

REMOXY is not yet approved by the FDA, but the latest news (from April 12, 2016) shows that it is accepted for a future review planned on September 25, 2016, and approval could be a catalyst to push PTIE higher.

Remi Barbier, the President and Chief Executive Officer of Pain Therapeutics reacted very positively on the news:"The acceptance of the REMOXY NDA marks another important milestone for Pain Therapeutics. We are grateful to the people, partners and patient investors who are helping to make this innovation a reality. We look forward to working closely with the FDA during the regulatory review process."

REMOXY is in focus, but it is not PTIE's only product. In May, 2015, PTIE announced a new update in their drug portfolio, which is FENROCK - another type of pain control medication.

On April 13, 2016, right after the news release and during the company conference call, PTIE's share price closed 7.14 % higher than the previous day, which is the highest figure since March 1, and the second since August 2015.

Here is the PTIE chart (D1 time-frame):

Click to enlarge

The general trend has moved in an upward direction starting with February 2016. There were some corrections until the last week, and it is easily noticeable that the last 3 candlesticks are bullish. The regional trend got a sharp direction up, while the price breaks the resistance levels again and again (see the red lines on the chart).

We think the general trend has good potential for the next months, and the FDA September review will be decisive for the next phase. Based on the current situation with REMOXY, we anticipate the general trend will keep its direction for May and June - as the volume increases and more investors start giving attention to Pain Therapeutics. Moreover, long-term traders should find this opportunity very attractive as REMOXY and other drugs in PTIE's pipeline could prove to be catalysts pushing the stock higher and making PTIE an acquisition candidate, which is a hallmark of the pharmaceutical industry.

Considering the current pace of the price movement (up $0.35 in two weeks), buying PTIE may bring the investor $300 - $600 net profit for each invested $1000, a target that may be reached from May to July. In the long-term, especially after the FDA decision scheduled in September, there may be a boom in PTIE's share price, and each $1000 invested today in PTIE stocks may generate a profit approaching 100%.

Our assumptions are also supported by other technical analysis indicators, so let's make a quick incursion into them:

Click to enlarge

Considering the daily chart, both the simple and exponential moving averages, with the periods 5, 10, 20, 50, 100, and 200 days, point to a buy signal. The same signal comes from MACD, RSI, Stochastic, Stochastic + RSI, and ADX, all with default settings. This is a strong inclination to buy on the part of technical analysis indicators, which can hardly be ignored.

The indicators applied to the W1 chart anticipate the same bullish sentiment for the coming months. All of the mentioned indicators point to a BUY signal, except the EMA and SMA with period 200, but this is because they are slow-moving and keep the influence from the PTIE downtrend ended in February this year. It is probable there may be a correction in the coming days, as the price finds itself at overbought levels, but in the long-term, the trend looks very solid. The next target is the psychological level of $3.00 per share, which can be reached in May.

The investment opportunity seems great, yet some risks are involved. In the long-term, in case the FDA does not approve REMOXY in September 2016, PTIE's share price can start a correction in September 2016. Also, the correction is possible much sooner in case there appear rumors about some side effects or no effects at all on the part of REMOXY. You should regularly check the news. And as previously alluded to, the low market capitalization could introduce liquidity issues. We advise not pouring your whole portfolio into this enticing opportunity in case you need funds for other purposes. This should hold for all investments, however, and not just this particular opportunity. The price swings could be violent, so you must have a strong stomach for volatility and trust the long-term case for PTIE. Still, we've showed there could be significant appreciation in the short-term as well.

Conclusion

When technical analysis agrees with the fundamental news on the same trend, it is impossible to ignore such an opportunity. PTIE's share price has gained 45.71% since January, 1 - and added 24.39% in the last month. Volume in the last weeks has jumped 50% and should increase as the company gets more attention. We think the increased volume will be representative of buyers as it has displayed as of late. Now is a great opportunity to go long PTIE and benefit from the upside of REMOXY and the increasing momentum the stock has experienced as of late.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PTIE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.