My mantra is that I invest to make money. For some reason that comment seems to be unsettling to some investors. It could be because I've held a favorite biotech stock, Zalicus (ZLCS), more than a year and less than year before selling. For me 'long' is until I sell. Which brings me back to Zalicus since I correctly alerted investors to its bullish potential pre-market Monday. I expect news on either this Thursday or Friday. Savvy investors will weigh my words. Therefore, in this article I'd like to make my case for investing in Zalicus, interact with readers who also trade to make money utilizing Zalicus, and then explain why I am currently debating my position in Zalicus.
First, both CEO Corrigan and CFO Renz have been promising us that Z160's lower back pain phase IIA trial will get off the ground by the end of August. I observe that the clinical trial is ready-to-go and I fully trust the promise of Zalicus executives. I've never known them to over-promise and under-deliver. Regarding August, there are two business days left: Thursday and Friday. Since investors look for catalysts, may I kindly suggest there is a big catalyst right in front of our noses? You see, Z160 has already out-performed giants like Prialt, morphine, and gabapentin/Neurotin in early clinical studies. How can you not be excited when you know this? For me, this is my major reason for investing in Zalicus. The company by year-end could have three major ion channel pain-relieving drug candidates: Z160, Z944, and a sodium channel drug secured by research at Hydra Biosciences. I think that by 2014, Zalicus' ion channel program will propel the share price into double digits.
Second, I'm going to be blunt and state how appalled I am at the current ignorance of the market regarding the approval of 32 mg Exalgo. My comment should not be read as a reaction, but as a commentary. The 32 mg Exalgo version in clinical studies was the "median" dose. It is the dose pain-doctors and patients desire. Now I've been listening to CEO Corrigan since 2010 and I can honestly state that the 32 mg dose is the dose Zalicus expects to drive the bulk of royalty sales. This is why I viewed the FDA approval like the approval of a new drug. Zalicus is not only going to get additional income from the shelf-stocking phenomena, Zalicus is going to see its royalty sales rise exponentially. And as for Watson being able to copy the 8, 12, and 16 mg versions, these inferior dosages will probably not make it to market until 2014 given the strict REMS requirements. I am simply stunned that the market is being so short-sighted. Zalicus should have broken and stayed above $1.50/share on this news.
Third, while SA may not feature articles that purely focus on chart analysis I cannot ignore this variable. After all, company fundamentals are only one component. The real power in investing is learning how to read the charts and couple that information with company events. Earlier on Wednesday, I released an SA instablog informing SA readers of my analysis of Zalicus' chart. For the record, it is a fact observed by the end of the day that the volume jumped and the stock price turned bullish ending at $1.38/share. Is someone listening or reading my analysis? I'll leave that for you to decide. However, in the spirit of fairness, I'd like to offer this chart after Wednesday's close; I think it's telling along with the rest of the information in this article.
Fourth, I want to clear the air about my trading patterns with respect to Zalicus because it seems to be the Wednesday evening subject of chat rooms. I've been 100% up front that "For me I am 'long' until I sell." That's not necessarily a negative nor a positive. I also tell my readers that "I do not 'short' stocks" and that is 100% true. I don't and I have not needed to because I've focused my investment strategy on stocks I think are going up, not down. My length of holding is driven by a wide variety of circumstances; I'll gladly offer a number of examples as lessons on investing: (1) personal goals, (2) not wanting to be 'a pig who got slaughtered' as many Zalicus investors did because they didn't ring the register when Zalicus went over $3/share, (3) tax-related issues, (4) wanting to move my money into another stock, (5) a negative down-turn that resulted in recording a loss, or (6) simply deciding it's time to move on. There's a rumor I 'pump and dump' Zalicus, but in reality, my articles only reflect what I think and what I am doing. When it comes to Zalicus, I think I know the fundamentals of that company as well as the next investor and probably better. But I invest to make money and not win the accolades of sour-grape bag-holders who are yet to learn the value of ringing the register or dumping shares when the company dilutes them into the abyss.
Fifth, I surprised my critics when I came down on the side of Zalicus regarding the recent S-3 SEC filing. Some cried, "Dilution!" while I argued that not only was the company planning for the future, it was protecting its present with the option of creating a poison pill. I still believe that. According to CFO Renz, Zalicus has witnessed a lot of "inbound traffic" and I think as the ion channel pipeline grows, there are going to be companies like Pfizer (PFE) who bought Icagen for its ion channel program. Given Zalicus' earlier history with Merck (MRK), it is no exaggeration to state that each ion candidate that goes into phase II is setting up the company for another $650M plus proprietary asset. Right now, it looks like Zalicus may have three drug candidates by early 2013. Meanwhile, Novartis (NVS) continues to file combinatorial cancer patents suggesting that Zalicus may very well be in a sweet spot as Amgen (AMGN) still licenses their Chalice software.
Finally, all eyes are focused on reading the impending news release on Synavive's results. I argue that according to the company, news on Z160 and the ion channel program is going to come first. Nevertheless, if Synavive fails, then I expect the share price to plunge below one dollar before the ion channel program leads to a recovery. If Synavive succeeds, then I expect that in good season the share price will break $2/share and heads towards $3/share. Is it worth the gamble? Well, isn't that what every day-trader is asking? Is holding for Synavive's results a good gamble or a bad gamble?
I'd like to tell investors, 'I'm holding long even if I lose my shirt!' but quite frankly that is not how I trade. I trade to make money, not lose it. If Zalicus suddenly goes south and I'm caught holding, I will probably register my losses, wipe my brow, and move on. Trust me, I'm capable of doing that because I'm no more married to Zalicus than the next biotech stock. Am I nervous about Synavive results? Yes, I am. Am I weighing my position going into news? Yes, I am. But I also correctly called Vivus' (VVUS) two FDA drug approvals in advance of news, so the fact I'm still hanging around may imply that while I am nervous, I am hedging my position against the longer-term ion channel program.
Ultimately, I want the very best for every investor which is why I wrote this article. I want investors to know before pre-market Thursday that the odds of positive news on Z160 is upon us. What any of us will do after that news is yet to be seen. Therefore, please take my advice: don't invest anymore than you're willing to lose and remember that your investment decisions are ultimately you're own. I happen to like the energy around Zalicus right now, so I am holding out for a potentially explosive upside -- of course, I could also be 100% wrong, but no one will ever have a leg to stand on that I didn't warn my readers of both the upside and downside. And that's what long-termers who are currently holding the Zalicus bag really dislike about me: I say it the way I see it and tough beans for those who held Zalicus and are now pigs who got slaughtered; they had their opportunity to ring the register and/or to sell on the way down, but more than a few listened to Mr. Calm investor who told them to hold and now questions my judgment because I've been very successful at making money. Go figure!
Additional disclosure: Investors buy and/or sell at their own risk. I declare that I may day-trade any stock at any time referenced in this article. For me "long" is until I sell. I do not "short" stocks. SA pays me one penny per view, but beyond SA and my own private stock account, I have zero connection to Wall Street.