As small pharmaceutical investors, there are many variables that are both beyond our control and even access. Clinical data can be misleading, company financials are often misrepresented or misinterpreted and stock offerings can come at a moment's notice with no anticipation or even apparent need for funds. However, one of our greatest assets as patient investors can be time, a variable we cannot control but rather utilize to our advantage. Many traders and investors use immediate and short term catalysts in order to enter and exit positions with small or substantial gains or chase bullish stock charts, hoping for additional gains or anticipate drops in order to open short positions. The techniques can be risky due to the volatility of stocks at the elevated levels that can fluctuate wildly from loss to gain in only moments. For investors able to watch stock charts and trading activity closely, much can be successfully anticipated and solid gains can be made via long or short positions. However, for the average investor not able or willing to take the required time to watch the markets closely, the best investments are often made contrary to these shorter term investors' techniques.
Although time itself can obviously not be controlled, it can be utilized to maximize gains while potentially minimizing risk. Many stocks trade at reduced levels due to the perception by investors that their money can be best utilized in the short term elsewhere before opening positions at a later date. Investors with the time, money and patience to take these positions well before the anticipated catalysts can make more substantial gains due to the compounded effect of slow growth over time. The math is simple as is the concept, but just a month or two earlier entry than the "masses" can reap huge rewards while having less risk than those making entry at elevated levels with any announced delays turning their positions "red" while the earlier entries could likely experience much less loss.
Consider the basic concept of a patient, long-term investor (A) willing to invest $5000 into a security at $3 and selling at $5 as opposed to a later entry (B) at $3.50 also selling at $5000. The earlier entry gained the investor 66%, or $3,333 versus the later entry who made 43%, or $2,143. Yes, this is "common sense" and a basic concept for investors. However, the simplicity of the math is often overlooked as well as the potential risk reduction. While the dollar amount benefit is apparent in this example, another concept is often ignored, that of risk. While approaching the catalyst event that catalyzed the share price to increase to $5, both types of investors exited with solid gains with obvious benefit to the earlier entry. However, both investors still undertook the same risk of the catalyst being a disappointment or the gains being muted by stock offerings or other news that could have minimized or negated much of the potential gain. Taking advantage of the wise early entry, the $3 entry security could have been sold at $4.26, a 43% gain much like investor who exited at $5.00, but the entry investor exiting at $4.26 did not exposure himself to the potential for negative news or stock dilution that may accompany many binary events that investor exposed himself to in order to have the same 43% gain.
Whether being for risk reduction or potential for more gains, early entry into securities at a time while overall investor interest is low, well before major catalysts, can be a profitable approach for individual investors to capitalize on what the author perceives as his second-best tool, time (second only to the initial research in the security, company and product line itself). Following are pharmaceutical companies that are currently trading at reduced levels but have major impending catalysts that could move share price gradually up to a certain catalyst, and then more quickly as the events approach and mainstream investor interest increases. This is a group of companies with differing levels of risk, different types of catalysts approaching and even trading on different exchanges. Interested investors should consider the risks, patiently pick entries and even exits (before, during or after the catalysts), perform more thorough research into any consideration and consider all the possibilities both before and after making entries.
NPS Pharmaceuticals (NPSP) long-term investors have had an impressive year with solid gains as a result of a continuous and strong uptrend in 2012. Shares held since January 3rd are now up over 43% on the year as a result of improving earnings and a growing pipeline. The company's most recent catalyst was its October 16th meeting with the FDA Advisory Committee for its lead product candidate, GATTEX, for the Orphan Drug indication of SBS (short bowel syndrome). SBS is a condition often experienced when at least half of a patient's small intestine is removed due to disease, injury or birth defect. It manifests itself in diarrhea or malnourishment as nutrients and fluids are inadequately absorbed in the remaining portion of the small intestines. GATTEX received a unanimous recommendation for approval by the FDA, which is the company's next major catalyst with the PDUFA (FDA decision) date of December 30th, just two short months away. While the share price did benefit somewhat from the positive recommendation, it almost seemed as if there was a general expectation of a positive outcome from the meeting already as the share price has settled back down somewhat, although still on an upward trend on its 4-month chart.
Although the company's shares did not respond with huge gains due to the likely expected outcome of the Advisory Panel meeting, it is my opinion that the company's share will likely still trend upward going into the end of year decision date. Investor interest should stay moderate with increasing volume and share price still possible even now as the likely drug approval appears to be imminent. Although the decision date is December 30th, I do expect an early approval due to the holiday season and the solid Phase III data and unanimous Advisory Panel recommendation. The likely "surprise" approval could generate some quick "knee jerk" buying pushing the stock possibly back over the $11 range, a solid potential gain from Monday's $9.17 close. However, the FDA decision is not the last near-term catalyst for NPS. Following closely in the heels of GATTEX is the company's next drug candidate, NATPARA. This therapy has been evaluated in a Phase III trial for adult hypoparathyroidism, yet another Orphan Drug indication. NPS indicates on its website that it intends to submit a new drug application (NDA) for NATPARA sometime in the middle of 2013, another event that should keep investor interest solid with additional gains possible with either entry soon, or immediately after any dip in the next couple of months. I advise interested investors to evaluate the company's cash position as well as its burn rate in order to ascertain risks associated with any possible upcoming stock offerings. Now trading at its simple moving average (SMA), current entry could be a wise decision for both mid-term and long-term gains.
Lpath, Inc. (LPTN) has had a catalyst-filled year with positive and negative outcomes giving a 52-week range of $4.56-$9.80 (adjusted for the October 5th 1-for-7 reverse split). The company is a leader in a new class of drugs, lipidomics-based antibody therapeutics, in which lipid signaling is the targeted mechanism. Lipid signaling involves a body's signaling event that uses a lipid messenger that binds a protein target, such as a receptor, kinase or phosphatase, which in turn mediates the actions of the lipid on specific cellular responses. The company's promising platform, Immune Y2 technology, has multiple possible applications on these cellular activities including inflammation, cancers, wet AMD and many autoimmune applications. Lpath has had a great deal of early-stage success generating and advancing therapeutic antibodies against specific bioactive lipids. These antibodies "sponge up" the targeted lipids and bind the receptor sites, thereby stopping the specific pathway signal. Currently a development-phase company, Lpath has three candidates in various stages of development: iSONEP, a monoclonal antibody against sphingosine-1-phosphate (S1P), ASONEP another formulation of the same S1P-targeted antibody and Lpathomab, an antibody against lysophosphatidic acid (LPA), a bioactive lipid potentially targeted for many indications.
Lpath started the year off poorly with the January 26 press release noting that the FDA had temporarily suspended two Phase II iSONEP trials due to cGMP (current Good Manufacturing Practices) compliance issues of the therapy by its contract manufacturing organization (CMO), Formatech. The issue was ultimately resolved with the FDA allowing the trial to resume enrollment as announced on August 27th, with the actual enrollment announced on October 3rd. The trial is significant not only because of its large market potential targeting wet AMD, but also because it follows a highly successful Phase I trial in which iSONEP appeared to stop the abnormal blood vessel growth, reduced the retinal thickness and also controlled the leakiness of the existing vessels (the actual cause of the disease's devastating effects). Additional data also indicated that iSONEP mitigated the fibrosis (scarred tissue) and inflammation, two key areas which would actually improve vision rather than merely stopping its progression. For more information on wet AMD and Lpath's revolutionary approach, please see this earlier article on advances in wet AMD treatment.
Suffering a slight drop after its October 5th reverse split, the share price seems to have settled down. Now trading on the NASDAQ exchange since its October 22nd uplisting, the greater liquidity and higher share price could prove to be profitable for new shareholders, although somewhat disconcerting for the already-existing shareholders. However, share price increase due to the uplisting was probably somewhat muted due to the company's financial situation at the time. The company's Q2 financials indicated that the company had $18.2 million in cash and equivalents. The resumption of the iSONEP trial, with Pfizer (PFE) as a notable partner, would necessitate a $6 million expense, reducing the company's cash position. With Pfizer sharing costs associated with the development of iSONEP, and NIH grants expected to also provide revenue, the company expected to have funding available to fund its activities through Q2 2014. Nonetheless, a November 2nd announcement by the company that it had filed a shelf registration statement for $20 million may provide the desired entry for interested new shareholders in order to obtain the desirable entry prices we discussed at the open of this article. With cash already in hand, the additional registration (should it be activated) should provide revenue to further develop the company's pipeline and also helps to mute the need for additional financing in the near future.
Interested investors should watch the price action closely early this week to ascertain a good entry point for LPTN's common shares. The company's Phase II data should partly or wholly be presented in 2013, and patient investors taking solid entries at current share prices may be able to ride the waves of anticipation for the large indication trial interim and final data. With the company typically filing quarterly results 2 ½ months after the quarter ends, it is actually overdue for its latest 10Q, something that should be researched closely by the older and newer shareholders once it is filed. Especially significant in the filing would be an indication on when interim and final data could be presented on the ongoing iSONEP trial. The wet AMD trials, the Pfizer partnership (with implications of company acquisition likely increasing with successful trial data) and events relating to the remainder of its pipeline are all catalysts investors must consider as they take positions for a possible exciting 2013. As seen from its pipeline, the company is tackling huge market indications. Positive interim and final data from the iSONEP trials would prove to be huge because they would help to legitimize the company's Immune Y2 platform, making it a possible valuable partner or acquisition target. With share price action for the week yet to be determined, I believe wise entries are possible this week for long-term gains. However, investors should watch price action closely after entries are made and have a plan ahead of time for wise exits if events don't unfold as planned.
Acura Pharmaceuticals (ACUR) has had a devastating year for its shareholders. The company's 52-week share price range says it all with a range from $1.32-$4.25. Acura's entire pipeline is built around developing tamper-proof drugs to combat medication abuse and misuse. The company's lead product and its only source of real income currently is OXECTA (oxycodone HCl), licensed to Pfizer who has been marketing the product since January of this year. Approved by the FDA in June of 2011, OXECTA's approval is for acute and chronic pain where the use of an opioid analgesic is appropriate. Developed with Pfizer, Acura had received a $20 million milestone payment from the company due to the marketing approval, a huge boost to the company's financial condition. It should start receiving additional payments in the form of royalties in 2013 on the net sales of OXECTA, helping not only to shore up the company's financials, but also legitimizing the company's Aversion technology for licensing out to other entities.
Pfizer had also agreed to develop three other products using Acura's Aversion platform. However, a July 17th press release by the company stated the Pfizer was exercising its right to terminate its agreement with Acura for oxycodone hydrochloride with acetaminophen, hydrocodone bitartrate and another undisclosed opioid. Acura noted that it may take up to a year for the complete transfer back to the company, thereby making the process slow and negating its chances of possibly licensing out the drugs to other companies until the transfer was complete. However, the company released a statement on September 26th noting a "letter agreement with Pfizer Inc. providing for the termination of Pfizer's license to Acura's AVERSION Technology used in three developmental opioid products as of September 26, 2012 and the transfer of those products back to Acura." Time is money, and the return of the products back much earlier than anticipated should have resulted in increased interest by investors. However, the stock was flat on the day with only an average number of shares changing hands.
Acura's shares closed down 12.3% Friday to $1.36 for no reason the author can ascertain. The company had announced on Thursday that it was releasing its Q3 earnings and company update on Wednesday, November 7th at 8:30 a.m. Trading in an "oversold" condition just above the lower Bollinger, entry now could be optimal for a long-term investment or for a speculative investment going into Wednesday's company update. Well over a month since the return of the three products from Pfizer, speculation on any updates of other interested parties for licensing could provide investor interest early in the week. Additional updates on the upcoming milestone payments from Pfizer for OXECTA, scheduled to begin accumulating in January 2013, could also provide some excitement for the company going forward depending on sales.
Another potential catalyst in waiting that could make for solid gains from the shares' currently-oversold condition may be mentioned at Wednesday's company update or in the immediate future. Apart from the company's Aversion platform, it also has a tamper resistant product for another drug, pseudoephedrine. Originally sold under the name Sudafed and now marketed under numerous generic names, pseudoephedrine (PSE) is used as an effective decongestant for colds and allergies. However, it is also easily converted into the illicit drug, methamphetamine. Over the counter purchase of the drug has been heavily regulated to help prevent abuse of the active ingredient. Acura's response to the abuse is the FDA-approved NEXAFED version developed under the company's IMPEDE technology. The technology forms a viscous, gelatinous mixture when PSE tablets are dissolved in solvents typically used in the PSE extraction or methamphetamine production processes. This helps to trap the PSE or converted methamphetamine to prevent its isolation or purification. Acura intends to start producing and making NEXAFED available to pharmacies by the end of 2012. Wednesday's corporate update could very well provide information on the specifics to the NEXAFED program, and could be a sold share price mover for the days that follow as well as through 2013 as sales updates come to light on the promising platform. To put the sales potential in perspective, investors should review Acura's website link for NEXAFED. In particular, they should note the statement "In Acura's 2012 survey of 215 chain and independent pharmacists, 164 indicated they had influence over the pharmacies' product offerings. Of such pharmacists, 70% indicated they were likely to stock or recommend stocking NEXAFED in their pharmacies. The 215 surveyed pharmacists also indicated a willingness to recommend NEXAFED to over 50% of their customers who seek a pharmacist's advice for a single ingredient nasal decongestant."
Presented above are three possibilities for investment consideration for long term, slow and steady gains. Although short term catalysts are imminent and represent ample trading opportunities, long term gains for each of these appear to outweigh the short term trade possibilities. Interested investors in each of these companies are advised to consider the effects of positive and negative outcomes for any of the upcoming catalysts. They should perform their own risk assessment to ascertain which, if any the catalysts they should hold their positions through versus selling before those catalysts for smaller potential gains but with much reduced risk. Regardless, proper entry is key to maximize the gains possible and to reduce the risk by exiting earlier than the later-entry counterpart investors.
Disclosure: I am long ACUR.