After a five percent drop on Friday, shares of Ampio Pharmaceuticals (NYSEMKT:AMPE) started to rebound along with the broad markets on Monday, posting a three percent increase on the day. Ampio's drop over the past couple of months could be attributed to the dramatic increase in the number of shares short on a month-over-month basis, but as the market settles and Ampio continues to release encouraging pipeline results, then a quick rebound could take full effect.
Last year shares ran to nearly ten dollars as the potential of Ampio's "re-purposed" pipeline attracted the attention of the investing community. The spark of new interest was so quick, however, that it also attracted the attention of the shorts, which led to a decline in price to the current trading levels. It's common in the biotech / small pharmaceutical sector to see the shorts jump on top of such quick moves to the upside.
Ampio's pipeline is labeled as "re-purposed" or "re-positioned" because it consists of already-approved products with established safety profiles. Ampio has taken those products and, based on earlier studies, altered the dosage to treat indications other than those for which the product was already approved. In utilizing such a strategy, Ampio increases the risk of quicker-than-normal approvals, based on the already-established safety profiles.
Three products are currently chugging through development, all targeting highly lucrative markets, and success in early trials has Ampio now negotiating with the FDA on a design to conduct definitive studies in the United States that could lead to product approvals.
Last month the company moved forward with plans for its most advanced product, Zertane, in a move to bring the product for the treatment of premature ejaculation (NYSE:PE) to approval in Australia. That announcement was followed up by one that identified Ampio as preparing to discuss a pathway for U.S. approval with the FDA. In the meantime, two regional deals were signed with overseas partners to commercialize Zertane, offering Ampio the potential to bank some near-term revenue as the rest of the pipeline develops.
If all goes according to plan and the re-positioned pipeline is a success, then Zertane might just be the appetizer. Ampio's lead product candidate, Ampion, is being developed to become a key player in the anti-inflammatory market. If Ampion can break into even a fragment of that market, and it's likely that it could given the side effects of current anti-inflammatories like Tylenol and Ibuprofen, then the product has a good chance at achieving blockbuster status.
Results have been encouraging thus far in development -- with both safety and efficacy -- and a round of definitive trials could commence later this year in the US. Discussions with the FDA relating to these trials are ongoing.
Another re-positioned product, Optina, is being developed as an oral treatment for diabetic macular edema and diabetic retinopathy, offering the company another large market to target. Developmental results have been positive to date and the product completes a solid trio of potential large-market product candidates for Ampio, conveniently at a time when large pharmaceutical companies, such as Pfizer (NYSE:PFE) are taking measures to boost pipelines that have been depleted by key patent expirations.
Ampio also has a few ORP diagnostic devices on the back burner that would hold significant potential were they to reach market. These devices measure oxidative stress in patients, which is a much more accurate measure of a patient's total health than the current standard of testing vital signs upon arriving for medical treatment, especially when assessing patients suspected of having a heart attack or stroke.
While trading near its 52-week low again, AMPE is well worth a look as numerous catalyst are pending over the coming quarters, most notably the potential to initiate trials in the U.S. after discussions with the FDA.
The shorts have played their game, but the result may be another buying opportunity for those looking to play the trial catalysts and/or hold through potential FDA approvals. It looks as if the significant insider ownership percentage of nearly forty percent is remaining long and strong, often an encouraging sign for the retail investors.
It's been a volatile ride for AMPE over the past couple of quarters, but it looks like some stability has returned. If short covering accompanies that stability, then the stock could be positioned for a rebound.
Disclosure: Long AMPE.