On a day this week when the DOW dropped by 200 points, these two companies experienced price collapsed due to factors not related to the broad market sell-off. Both, however, could be positioned to rebound rather quickly ...
Oncothyreon (ONTY): Oncothyreon shares were running big last year as investors started taking notice of the potential of Stimuvax, the company's Phase III immunotherapeutic treatment for non-small cell lung cancer that is partnered with Merck KGaA (OTCPK:MKGAF).
On Tuesday, however, shares dropped by nearly forty percent after the company's latest earnings report disappointed investors.
In truth, it might not have been the widened loss that spooked investors, but reports that the Stimuvax trial results would be pushed back to early next year, vice the late-2012 release that was previously anticipated and led to the eight to ten dollar range of trading that ONTY had enjoyed for months.
The cancer immunotherapy sector is a fickle one anyway, evidenced by the run from three bucks to forty after Dendreon (NASDAQ:DNDN) received approval for Provenge, only for the share price to collapse last summer when it became painfully apparent that sales for the prostate cancer treatment were seriously lagging, at least when compared to previous estimates by the company and analysts.
So when another company in this fickle sector announces what is deemed as a delay in trial results, investors get nervous; hence the forty percent haircut experienced by shares of ONTY on Tuesday.
The good news is that according to the above-linked 10k, Merck's independent data monitoring committee recommended that the trial continue, so the delay could end up being nothing more than a glitch - and a good chance to re-load shares for those that were still wanting in before the trial finished up. Although the company also noted in its earnings release that it had enough cash on hand to last through the year, the new results release date implies that another round of cash raising may be in store before the results come out.
A year is light years in the volatile biotech and small pharma market, so unless something else materializes in terms of news or hype, it could be a good few months before ONTY shares recover to near the ten dollar level in anticipation of results release.
It's also an election year, so be prepared for a volatile time moving forward anyway.
Still one to watch heavily, given the DNDN-like potential to skyrocket if Phase III Stimuvax results look good.
Lpath, Inc. (NASDAQ:LPTN): Shares of Lpath, Inc. were on the dive on Tuesday as the result of a agreement that priced shares at $.75, roughly twenty percent below where they had been trading leading into the announcement.
The drop was accompanied by volume of more than ten times the daily norm.
VFC's Stock House identified this company as a prime buyout candidate not too long ago, and also emphasized the potential opportunity that was opening up for long term minded investors during the recent price decline.
Lpath is noted as the industry leader in lipidomics-based antibody therapeutics, and has made a name for itself by becoming the recognized leader in this field and, with the development of its ImmuneY2 platform, Lpath is still the only company that has successffully taken the technology as far in clinical development as are its lead products, iSONEP and ASONEP.
ImmuneY2 contains the ability to generate therapeutic antibodies that bind to and inhibit bioactive lipids that contribute to the spreading and growth of various diseases and inflammatory/auto-immune disorders. The market potential for this technology in treating a plethora of modern day illnesses and diseases, should it advance past the clinical stages, is huge, and Lpath is first applying its technology to the treatment of Wet AMD and cancer, both multi-billion dollar markets.
ImmuneY2 and early study results for the technology impressed Pfizer (NYSE:PFE) enough to jump in before the Phase II stages of development were even close to being completed, a partnership that has the potential to grow since Pfizer holds a 'first right of refusal' for ASONEP to go along with its iSONEP investment.
Lpath had two ongoing proof-of-concept trials for iSONEP, PEDigree for the treatment of retinal pigment epithelium detachment ("RPE detachment" or "PED") and NEXUS, targeting Wet AMD, although both trials were halted in January after Lpath received news from the FDA that the company's fill/finish contractor, Formatech, Inc., was not in compliance with FDA's current Good Manufacturing Practice (cGMP) requirements during the period that the iSONEP clinical vials were filled.
According to a company press release regarding the issue, Lpath believes that "it has taken appropriate steps to oversee Formatech's manufacturing in order to ensure product quality, it has suspended dosing as a precaution to ensure the continued safety of all patients in its clinical trials."
Lpath has identified an alternate fill/finish contractor and plans to resume dosing for both trials within four to six months, a notable - but not drastic - delay in the expected time frame for trial progression. Pfizer still remains on board, a show of support that indicates the company believes that this is only a bump in the road and nothing more.
Although the share price looks beaten down pretty bad from where it traded just weeks ago, it could be that the bad news is out of the way and a reversal may be primed to begin once the alternate finish/fill contract kicks into gear and the trials move forward.
With Pfizer so heavily invested as it stands, it's always worth keeping an eye on this one for the buyout potential along with the long term prospects of the ImmuneY2 platform that opens up numerous possibilities of Lpath infiltrating multiple billion dollar markets.
Keep an eye on this one.
Disclosure: I am long LPTN.