Risky Alimera May Be Another Keryx Heading For Collapse

Apr. 4.12 | About: Alimera Sciences, (ALIM)

Alimera Sciences (ALIM) is among those biotechs where investors cross their fingers and hope for the best. After watching Keryx's (KERX) Perifosine fail, the biotech world gets uglier and uglier. The average daily volume is not even 350M shares and the stock in the last year has fallen from a high of $9.28/share. It's what biotech investors call a gamble, especially when the stock has been so beaten down.

On 27-28 February 2012, the share price jumped from $1.71/share to $2.94/share, then well over $4/share. On Tuesday, it closed at $3.38/share after falling over the week from $4.37/share. I don't know how anyone could recommend this stock. Its technicals are balancing along a cliff and if the enough day-traders head for the doors, it's all over:

  1. The RSI has fallen to 50.45 and MACD has been heading down for two-three weeks.
  2. At $3.38/share, a long-term chart shows the share price sitting on a ledge that shows little support.
  3. There is a monstrous gap between $2.50/share and $3/share. These often end up getting refilled even in a flash-crash.

As a musing, one non-scientific reporter called Alimera's Iluvien "very cutting edge" - which has nothing to do with empirical evidence. I remember BioSante's (BPAX) CEO promoting LibiGel and we all know where that ended up! It's this kind of hype that confuses ordinary investors. Iluvien has already been sent back twice to Alimera by the FDA, so one wonders, what's so "cutting edge"?

Nevertheless, the report from Europe released by the company was very positive. Iluvien certainly looks like the way ahead in Europe is positive; it's the U.S. that remains uncertain. But like many small biotechs, Alimera is hopeful about its outcome.

For a stock that was over $7/share, I imagine there is more than one retailer hoping to escape the cavern of drug development disappointment. While anyone can hope for a positive recovery, this is one of those stocks looking at the top from the bottom.

My suggestion is that investors carefully weigh the risks before getting in - why is because Alimera has not had a good last 12 months. In fact, it's been down-right miserable for those who bought above $7/share and are still holding.

STRONG SELL: Investors who got in early may want to take their profits, rather than risk another FDA delay, but to each his/her own.

Disclosure: I am long BPAX.

Additional disclosure: Investors buy and/or sell at their own risk.