Although the DOW remains trading strong at over 13,000 this week - pending the outcome of some key economic data releases that could change everything - extreme volatility still exists in some areas of the market, namely the healthcare and biotech sectors where FDA approvals for some companies and substandard earnings reports by others have largely effected the trading patterns rolling into the new month of August.
Here's a look at some of the more active movers with catalysts pending that could be worth keeping an eye on moving forward:
Amarin Corporation (AMRN): Since running to a new 52-week high of nearly sixteen dollars leading into a positive FDA approval decision for Vascepa in the treatment of very high triglycerides last week, Amarin Corp has been one of the most discussed stories out there as investors come to grips with the stock's drastic drop following a positive news release.
As previously discussed, the current trends in the biotech and small pharmaceutical sectors has it that the share price of many companies will drop in price following positive FDA approval decisions, a phenomena that allows the catalyst, day, swing and momentum traders - who all took advantage of the runup - to abandon their positions and go looking for the next catalyst trade. As this takes place, a more committed group of longs can initiate positions with an eye towards the potential of the drug on the market. It doesn't happen all the time, but again, the trend has been to see the biggest moves materialize following positive Phase III results than positive FDA decisions.
For examples, see BioDelivery Sciences (BDSI) and Avanir (AVNR), both of which retreated heavily following positive approvals. More recent examples are Vivus (VVUS) and Arena Pharmaceuticals (ARNA) and - you guessed it - Amarin Corp.
While each story has its own twist, the trend has remained the same - the share prices dropped following positive approval news.
In the case of Amarin, some expected that AMRN would be immune to such a drop because of big catalysts still pending, such as new chemical entity (NCE) status that could delay competition from generics, and the possibility of a quick buyout. Both scenarios still pose as potential catalysts and may be what has kept AMRN from revisiting the ten dollar mark - so far.
Another factor, however, that led to the quick price drop - especially on Tuesday - was the circulation of reports of insider sells. Insider selling is rarely looked at as a net positive by investors, but it's important to remember that insiders are people, too, and insiders may want to cash out and bank some profits on a good investment just like the next guy. Goose and Dom for everyone. It's also noteworthy that insiders often have to take advantage of slim opportunities where they can legally buy and sell, as was the case this week. While the shorts will always play the insider selling news as much as they can to induce panic selling, investors must gauge the situation on their own accord.
This time, there's not much there to worry about.
As for the prospects of an Amarin rebound, I liken this stock now to Human Genome Sciences (HGSI) when it dropped to below seven bucks. Everyone and their uncle anticipated a buyout by GlaxoSmithKline (GSK) at some point, but the share price kept dropping, nonetheless. When the buyout offer came, HGSI shares quickly doubled. Those that held strong - and took advantage of the dip - made bank.
While nothing is a sure thing in the stock market, and especially in the biotech/small pharma sector, the Amarin drop presents itself as a unique buying opportunity, in my opinion, as a positive outcome on NCE this month and a buyout offer could send shares towards twenty in a hurry. AMRN soared to those heights once before on buyout speculation, and there's little reason to believe that - in this instance - history won't repeat itself, barring any negative NCE or patent outcomes - or if the company decides to go it all alone in Vascepa's commercialization.
As Dendreon (DNDN) proves each and every quarter since the Provenge launch, the best strategy for a smaller player in this game is usually to either partner-up or sell-out in order to gain quick market share.
Amarin, however, sure looks nice the lower it goes, and I've picked up a few shares a various points on the way down. Shares rebounded slightly on Wednesday morning and AMRN is definitely still a hot one to watch.
Dendreon : On the subject of Dendreon, bad went to worse for the one time golden child of the sector. Shares initially collapsed about a year ago on poor earnings and questionable guidance, but the announcement of restructuring shortly thereafter sent them even lower. Another trip to the downside has materialized as another round of unremarkable sales revenue and guidance sent investors fleeing again, especially as the company announced that it would be closing its New Jersey facility and laying off more employees in an effort to trim costs. At one time, the full expansion of that Jersey facility provided a share price catalyst, and in a note of irony, its closing may be the final nail in the coffin for the company, according to some estimates.
Throw in some analyst downgrades and you've got a story of a potential death spiral. While Dendreon's drop certainly led to some of the trading volatility for the healthcare sector this week, there's reason to believe that the sector - and maybe even Dendreon - will rebound.
Profit margins and revenue, while still modest when compared to analyst and investor expectations, were still heading north, but will need to significantly pick up the pace in order to ward off a complete exodus of investors still holding on. Given that shares are again trading at their pre-Phase III levels, it could be said that the mass exodus has already taken place. It could also be said that another solid buying opportunity has opened up, if one is to believe that Provenge and the rest of the company's pipeline will catch on, eventually.
It's more likely, in my opinion, that we'll start hearing some buyout chatter now that the share price is low enough where a larger company could pick up Dendreon's technology for relative chump change compared to the market cap reached on FDA approval.
In another ironic twist, had Dendreon partnered or sold itself and Provenge early-on, it could be a whole different ballgame we're writing about - like the '86 Mets instead of the Mets of '12. As the old saying goes, "better late than never" - so let's see what Dendreon decides to do.
There's cash on hand enough to buy some time.
Sunshine Heart (SSH): Dendreon may be on the dive, but the same certainly cannot be said for Sunshine Heart. This company is fresh off probably its most significant announcement to date, the announcement of CE Mark approval in Europe for the C-Pulse Heart Assist System that has proven highly effective in treating - and even reversing - the symptoms of Class III and ambulatory Class IV heart failure. That milestone news positions the company to potentially register its first commercial sales later this year, right around the same time that a definitive trial should be initiated within the United States that will set the C-Pulse up with a date with the FDA.
If early results continue to hold true - and Sunshine just conducted an encouraging 2-year review on the first patient treated in the North America feasibility trial - then chances can be deemed solid on receiving an FDA clearance to augment the European approval.
Having traded as high as seventeen dollars earlier this year as investors took note of the growing potential for this company, a second chance may be upon investors to buy into a potential breakthrough product in the treatment of heart failure.
Aside from the CE Mark approval, the company realized other important milestones, too, as noted in the quarterly earnings announcement. Canadian regulators approved the next-generation driver for C-Pulse and completed the full one-year follow-up on patients participating in the feasibility trial. The company has also been able to trim costs, another positive note from the above-linked earnings report, and is well-positioned to start registering commercial sales overseas while evolving its approval-minded trials in North America.
It's also likely that continued success will have larger medical device companies taking a look at Sunshine Heart and its technology, noting the unique advantages of C-Pulse over existing treatments, such as the fact that device is implanted outside of a patient's bloodstream, allowing for a less-invasive implant procedure and less-costly and more convenient follow-on care.
Well worth a look, especially given the recent share price drop.
MRI Interventions (MRIC.OB): MRI Interventions is another medical device play that has retreated somewhat in price after having recently spiked on solid news developments and a burst of new volume. Like Sunshine, MRI's technology goes beyond existing treatments to enable the medical community to conduct less-invasive surgical procedures. As governments around the world are looking at curbing exorbitant health care costs, it's important to note that "less-invasive" also translates into "less-costly," which likely helps to give the company an edge in finding partnerships and potential buyers.
MRI Interventions is developing both the ClearPoint and ClearTrace MRI-augmenting medical devices to enable surgeons to conduct less-invasive procedures on the brain and heart, respectively.
This technology MRIC's technology has already caught on enough to land some high profile partnerships, a large reason why the share price tripled in price barely one month ago.
Aside from recent news that Tocagen would adopt the ClearPoint technology in one of its clinical trials against the most aggressive form of brain cancer, recurrent high grade gliomas including glioblastoma multiforme (GBM), MRIC has also already partnered with Brainlab, a leader in the image-guided surgery field in the US and Europe, in the development of the ClearPoint technology. Siemens AG (SI) has partnered for the development of ClearTrace and Boston Scientific Corporation (BSX) also jumped in with an up-front payment of $13 million to ClearPoint technology into its cardiac pacemakers and neuromodulation products.
Such high-powered interest from big players in the sector is a sign of heavy validation for a still-developing company such as MRI Interventions.
Volume has been extremely light this week, following a huge burst in July, and the share price has settled into an area where investors who missed out on the triple last month, may be ready to take another look as the pending trial catalysts and additional development of the technology provide reason to believe that there will eventually be a lot more left in the price run than what we've already seen.
Quite a few healthcare sector stocks have realized price retreats this week, an opportunity for investors who were previously on the sidelines to jump into potential rebound an growth plays. The above-mentioned companies are just a few of them.
Disclosure: I am long AMRN.