The stocks below all have significant catalysts associated with them in my opinion. Catalyst trades in the bio-pharma sector can provide big profits if traded correctly. Some traders and investors who enjoy bringing more risk into play often times will hold through the catalyst event. While this does bring a lot more risk into play, the reward from engaging in this can be a massive one. It is my opinion traders and investors should consider using the option chain to better hedge or lever their positions accordingly.
Amarin Corporation (NASDAQ:AMRN) 6/25/12 pps: $13.39. Market cap: $1.83B
Amarin faces an FDA decision for the prescription fish-oil pill AMR101 on July 26th, 2012, which I believe the FDA will approve.
AMR101 is an investigational ultra-pure omega-3 fatty acid in a capsule, comprising not less than 96% icosapent ethyl (ethyl-EPA) in a capsule. Amarin is developing AMR101 for the potential treatment of patients with very high triglyceride levels and high triglyceride levels, or hypertriglyceridemia. Triglycerides are fats in the blood. Amarin's cardiovascular strategy leverages our extensive knowledge and experience in lipid science and the potential therapeutic benefits of polyunsaturated fatty acids in cardiovascular disease.
The chart on Amarin looks very bullish to me as I remarked in a prior article.
In my opinion, we can expect a lot of volatility up to July 26th, with waves of upwards movement in stock price to a level the chart seems to indicate should be around $16 to $18 a share up until July 26th. This is a strong catalyst event here for this company and for traders, but because we can expect a good deal of volatility, it's my opinion that getting overly aggressive and using margins with stops might see them getting taken out. In other words, if you trade this one smartly, you should be able to make nice coin provided you use your head.
Arena Pharma (ARNA) 6/25/12 pps:$9.19. Market cap: $1.68B
Arena expects an FDA approval decision for the weight-loss drug Lorcaserin any time between now and June 27, 2012.
Lorcaserin is intended for weight management, including weight loss and maintenance of weight loss. According to the Centers for Disease Control and Prevention, more than one-third of US adults were obese in 2009-2010. Studies have shown that a weight loss of 5% to 10% of body weight from baseline can result in meaningful improvements in cardiovascular risk factors (e.g., lipids, blood pressure and blood glucose), quality of life and functional capacity, and a significant reduction in the incidence of type 2 diabetes. There are currently limited pharmaceutical treatment options to help patients lose weight.
I mention Arena a lot in my bio pharma watch articles because the stock has been on fire. It is rare to see such an incredible and sustained move in a stock price solely on anticipation of a drug approval. Lately it appears that retail buying is drying up. Remember, stocks just do not keep going up unless the company has the mother lode of all treatments - a cure for cancer is one example.
Because of the high short interest, expect some bear raids between now and the approval decision. Bear raids are successful when again, buying dries up and the bid becomes weaker.
Before Lorcaserin's approval, I expect the stock to perhaps test the 11 dollar range again. Afterwards, I expect the stock to sell off somewhat and settle into the $8 to $9 range. Many people will disagree with me in my opinion here -- fine, but consider the market cap now is entirely on speculation only. Also consider that Vivus (VVUS) has much stronger institutional support at this time. Also for consideration is the fact the stock has traded up to the $11 dollar level without huge gaps, from around $5.50.
Some authors have speculated the Lorcaserin will receive a Risk Evaluation and Mitigation Strategy (REMS) to minimize inappropriate use of the drug and the risk of an unexpected safety problem. I find these views puzzling as REMS are not requested this close to the actual approval decision date. If a REM was going to be required by the FDA, one would have, and should have already been requested.
Vivus has its own weight loss drug, Qnexa up for FDA approval by July 17th, 2012.
On April 4, 2012, following the FDA's request, VIVUS submitted a Qnexa Risk Evaluation and Mitigation Strategy, (note that the FDA has made no such request of Arena for Lorcaserin) which was considered a major amendment to the NDA. Since the receipt date was within three months of the PDUFA, the FDA has extended this date by three months to provide time for a full review of the submission.
Adam Feuerstein released a report for thestreet.com yesterday, documenting how the discussion among panel members played out from the February 2012 Qnexa advisory committees' 20-2 vote in favor of Vivus' Qnexa, summarized in the panel minutes:
The committee members who voted 'YES' in question #5 noted that obesity is a disease for which there are inadequate treatment methods and that phentermine/topiramate (Qnexa) was shown to be effective in treating obesity with minimal adverse effects. However, they supported the requirement for a post-approval long-term cardiovascular (NYSE:CV) safety trial which should be conducted expeditiously. It was noted that the sponsor should be held accountable for conducting and completing this CV trial. Additionally, these committee members agreed that the phentermine/topiramate REMS should capture additional data on long-term adverse events such as heart rate, psychological, cognitive functions, and birth defects. Several members highlighted the need to require treating physicians to be certified prior to treating patients with this agent and that the same requirement should be instituted for dispensing pharmacies. Lastly, the FDA was also urged to require the sponsor to continue to re-analyze any available data regarding reproductive outcomes such as birth defects.
After reading the above, I would now give Qnexa an approval chance better than 60%. I still believe Lorcaserin is the safer of the 2 drug formulations, and I personally believe none of these type of drugs should ever be approved because they set a terrible precedent in my opinion, and they are dangerous and not worth the weight loss that most people can achieve with proper diet and exercise.
However, what I personally think is really moot in this case, and it appears to me that both drugs will get the nod from the FDA.
InVivo Therapeutics Holdings (NASDAQ:NVIV) 6/25/12 pps: $2.38. Market cap: $152.23M.
An investor not too long ago asked me to take a look at NVIV to give an opinion on it. On the surface, it looks like a good gamble based on everything presented by the company to date. There are some interesting catalysts coming up in the company that should take its stock price over $2.85 in the short term. If this stock traded on the Nasdaq, the price would certainly be substantially higher. Since it trades on the OTC, liquidity issues come to mind and it is hard to get a good sense of the booked shares on level 2 trading. While this company is in pre clinical, the very thought of NVIV actually having a potential cure to at least some forms of paralysis is very exciting. If the platform in the future confirms its work, we would be looking at a stock price potentially 20 to 40 times its current price. This one needs further and deeper due diligence. I am always wary of the "too good to be true" kind of stories, but again, this one does look promising on the surface.
Potential price moving catalysts to consider are:
Dr. Jonathan Slotkin, a renowned expert in spinal cord injury treatment and director of spinal surgery and spinal cord injury research at Geisinger Health System's Neurosciences Institute commented on Hydrogel:
Chronic peripheral nerve compression can have a devastating impact on an individual's quality of life and even impair one's ability to function on a day-to-day basis," said "InVivo's innovative technology platform has already demonstrated success in the treatment of traumatic spinal cord injury in several study models, and we look forward to examining how this latest technology performs in this new application.
Hydrogel addresses a 15 billion dollar annual market for peripheral nerve compression. Most existing treatments require 1 injection a week, there are roughly 3.2 million of these injections annually. Invivo's hydrogel uses time release technology that allows the drugs to be administered through 1 injection and offer a therapeutic affect for 1 year possibly 1.5 years.
The company has been receiving a lot of press lately, and from what I am hearing, the coverage will be increasing dramatically in the next few weeks. Over the past weekend, the company's CEO Frank Reynolds did an interview with the Fox news show, "Fox and Friends" The interview can be seen at this link. The interview mainly covers the company's biocompatible polymer scaffolding device to treat acute Spinal Cord Injury
This increased coverage is certain to attract a new wave of buyers of the stock in my opinion.
The company plans to move to the Nasdaq as soon as it qualifies for the exchange. This will allow institutional investors who are restricted from buying OTC stocks to invest in NVIV. In my opinion, this move could triple the stock in one week due to the exposure it would certainly receive from such a move.
Other potential catalysts include:
The company is moving to state of the art 26,000 square foot facility at one Kendall square in Cambridge, Mass next month. The new headquarters will enable InVivo to put all operations under one roof. Also, they will be able to manufacture an FDA compliment product so that they can satisfy FDA requirements to proceed with human trials. Human trials for the company's platform technologies are expected to commence before the end of this year.
In early July the company will be hosting the 2012 Langer Neurotrama Summit which is an open invite for scientists to discuss other applications for their gels, including, but not limited to, NVIV's application for devastating conditions like MS and ALS.
Based on all these factors, it is my opinion a stock price over $2.85 a share is on the horizon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Family members are long NVIV.OB, I hold no shares in my account.