Zalicus (ZLCS) is on a bullish run with a slight retrace on Tuesday because it slightly over-ran a few technical markets (e.g. upper Bollinger Bands).
From a technical standpoint, it will be important to watch how the stock price opens on Wednesday. There is still plenty of room to run (e.g. $1.35/share mark). The MACD and RSI are in break-out territory and the share price is sitting on the upper Bollinger band. The red line above is the 200 MA signaling that the stock has broken its lower range and is heading up.
Signs of Pipeline Progress
What is fascinating to consider is looking at Zalicus when it was over $3/share and then compare it where it is today. This will immediately explain why the share price is nowhere near where it should be. Take a look!
What investors see is the very opposite of what you'd might expect. The company has 'hit' all pipeline targets yet the share price ran in the opposite direction. Just consider these three points:
- Back in 2011, the ion channel program was in pre-clinical. Here in 2012, it is already moving out of Phase II into Phase II (e.g. Z160 and Z944) -- that's considerable progress.
- Synavive is wrapping up its Phase IIB trial on target. CEO Dr. Corrigan is correct when he tells investors that Zalicus is meeting all of its targets. Though biotech investing is inherently risky, this is a clear example of an excellent research and development firm.
- Exalgo has finally "kicked into gear" with 33% increased sales and the 32 mg version is on the way which should double its sales.
What investors see in the above chart is the absolute bottom which is a buyer's dream when you see the steep reversal pattern as the chart shows. Day-trading here could be very risky because the stock appears to have big legs and as the charts demonstrate, a full upward reversal could well be underway. And yes, biotech investing is always risky, but the reward can also be substantial.
With such a strong reversal underway, the immediate catalysts that loom on the imminent and not-so-distant horizon could quickly move the share back above $2/share. These are:
- Sanofi (SNY) announcing Prednisporin will enter Phase III
- Novartis (NVS) announcing a collaboration product
- Z944 update on its single dosing study
- Covidien (COV) announcing the 32 mg version of Exalgo
- Synavive's Phase 2B results (September)
Also, from the last presentation by CEO Corrigan, he mentioned that they are still working on the development of new products using their cHTS Chalice technology. Does that mean a new product may show up on the Zalicus pipeline? It's worth thinking about.
Investors should also take note that Dr. Corrigan continues to compare Z160 to morphine and gabapentin, two of the most powerful pain medicaments on the market. This point of information (Z160 = morphine) is one of my main reasons for investing now. Eventually the market is going to digest this news and those who got in early will be handsomely rewarded.
With over $50M in cash reserves and being a highly liquid stock, Dr. Corrigan is right to state that the value is in the firm. If the charts are at all an indicator of where the share price is going, this remains a VERY STRONG BUY.
Disclaimer: Investors buy and/or sell at their own risk. I declare that I may day-trade the stock at any time. For me "Long" means until I sell. I do not "Short" stocks.
Disclosure: I am long ZLCS.