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Chief Market Strategist at www.buysellshort.net. Learn how to make a living trading small and midcap stocks Additional Disclaimer: I may buy and sell any positions mentioned in any article at any time.
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  • Discovery Laboratories is a BUY here, not a sell!

    On Thursday Discovery Laboratories received another in a long line of rejections from the FDA and its stock price paid dearly, dropping 54% on Thursday. Was the drop warranted or is there more to DSCO than the bad news says?

     

    With the business media and analysts all jumping on the same bandwagon and declaring the company dead there is opportunity for the beaten down biotech trader. If one actually reads through the DSCO press release you can see that DSCO looking to refocus on other late stage drugs, chief among them a different indication of their drug Surfaxin that was just trounced by the FDA. There is also an additional three Phase 3 drug trial underway as well as some promising clinical trials.

     

    As of March 30, 2009 DSCO had $19m in cash and based on its last year’s cash flow statement they are burning on average $4m per quarter or $16m a year. In May DSCO was able to raise an additional $11m financing giving the company a nice cash cushion of approximately $30m, which based on its average cash burn, is enough to fund it through the next two years.

     

    Trader should also remember the FDA saga Dendreon went through and their eventual FDA approval. Despite the bashings of traders and analysts alike there are many reasons to believe DSCO is a BUY down here at 50c and not a sell. Also, if we look to the trading action of DSCO after the first FDA rejection in April you will see the stock turned in these performances over the course of the last three months.

     

    71c to $1.05 for a 48% gain

    81c to $1.25 for a 54% gain

    88c to $1.47 for a 67% gain

    95c to $1.17 for a 23% gain

     

    These were just the trading gains in DSCO over the last three months! Biotech stocks are made from hope and hype and DSCO has all those ingredients. The next news event to expect from DSCO, from its Wednesday press release is a reply to the FDA, which if past stock action is any indication, will lead to a nice pop in DSCO and make for some easy gains for the patient trader!

     

    “With respect to ongoing regulatory activities for Surfaxin, Discovery Labs has submitted proposed corrections and additions to the formal FDA minutes. Following finalization of the meeting minutes, Discovery Labs will determine its next course of action, which may entail further interaction with the FDA to assess whether Surfaxin approval can be gained without additional clinical trials”

     Disclosure: Long DSCO

    Tags: DSCO, biotech
    Jul 05 1:46 PM | Link | 10 Comments
  • Axcelis Technologies Hidden Value Play?

    Axcelis Technologies recently sold their 50% interest in a Japanese Joint Venture to Somitomo Heavy Industries for a cool $122m. The company used the proceeds to pay off all their oustanding debt of $86.4 leaving them cash rich and debt free.

    ACLS now sits on a cash hoard of approximately $71m or $0.69 per share with no debt and annual revenue run-rate of $191m. In a market like this finding stocks that trade below their cash value with no debt is the prudent and usually profitabable course of action.  At its current stock price the value of its underlying assets are valued at zero and its cash value is discounted making for a very nice trading opportunity for traders in a sector that has done very well over the last few weeks.

    The stock has been trying to breakout over the last month but has held strong support at its 50-day Moving Average. As of today the stock is trading 30% BELOW its cash balance of $0.69. A bounce off the $0.46 should take the stock back to its cash value making for a nice upside potential in the near term. With its cash hoard the downside risk even in this poor economy is minimal. Look for traders to discover the hidden value in ACLS very soon!

     

    Dsiclosure: Long ACLS

    Tags: ACLS
    Jun 23 12:29 PM | Link | 4 Comments
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