It's great to see the strength of my predictive abilities are growing with regard to biotech drugs in development. Earlier in the year, I twice accurately predicted Vivus' (NASDAQ:VVUS) drug success and I played the lackey when I turned negative on Catalyst (NASDAQ:CPRX) and Zalicus (ZLCS), even though I was correct. While I've gone into cash, I accurately predicted Acadia's (NASDAQ:ACAD) Pimavanserin's phase 3 clinical trial:
- 24 September "A Reasoned Case For Pimavanserin's Success"
- 17 October "Why Acadia May Be This Year's Holiday Prize"
- 18 October "Acadia's Bubbling To Move Higher"
But this where I part company with those who think Acadia is a strong hold or a strong buy. I perceive it is a strong sell for two major reasons:
The company will need to raise more capital to move forward with the drug development of Pimavanserin.
An additional phase 3 clinical trial is forthcoming and that means time and money.
Astute intellect, internet radio personality, accomplished musician and savvy entrepeneur SA author Mr. Scott Matusow published Tuesday:
However, the company needs to conduct another Phase III trial of Pimavanserin in Parkinson's patients in order to confirm Tuesday's results. Two previous late-stage studies of the drug failed to demonstrate a significant reduction in psychotic episodes - this is why I believe it's a sure fire short-sell currently.
I agree with Mr. Matusow. It occurs to me that investors jumping in at the $5-6 range could get caught. Pimavanserin's results were a major score, but with every buyer, someone is ringing the register. If you missed the spike, then you're better to let this one play out and come back later. I think a great time to buy Acadia would be after the dust settles. This company needs money.
Speaking of spikes, I see Zalicus has jumped from a market low close at $0.43/share (12 November) to $0.71/share (27 November). That's a huge gain especially since the company has reported no new results except a news release that Z160 has been selected as a "...Top 10 Projects to Watch" at the Windhover 2012 Therapeutic Area Partnership Meeting.
What is the Windhover Conference? It is a biotech trade show. This is clearly an advertising 'pump' job. Since Synavive's failure, Zalicus shareholders have taken it on the chin because Sanofi (NYSE:SNY) has announced that it will sub-licensed Prednisporin and we continue to await Z944's multiple dose phase 1 results after the company's Z212 sodium drug disappeared off the radar screen.
Trust me, the only way to play Zalicus is to day trade it; meaning, ring the register. Because the news release is nothing more than a well-orchestrated advertisement coming out of a trade show. After tanking on the failure of Synavive, Zalicus desperately needs to confirm that Z944 will join Z160 in phase 2A clinical trials. What I see here is a situation where Zalicus could be delisted from the NASDAQ if it doesn't regain compliance by the spring 2013, so real news items will be based on science not a trade show convention. I sure hope investors who bought Zalicus in $0.40's have rung the register. Things like this are thinly veiled.
Meanwhile, keep an eye on the overall market trend. Few want to read my negative outlook, but I still think we are in bearish territory. As I reported before, I do think day trading is a real possibility, but as politicians continue to let the clock run out on the fiscal cliff, I think the market could be in for a mega-huge correction. Let's just say if you happened to be in Acadia and/or a Zalicus, I hope you rang the register, because pigs get slaughtered.
In my opinion, the only way to play high risk biotechs is to trade them as quickly as possible. This is a market hanging on a cliff and if you get caught on the wrong side of the trade, the bottom could drop out just like it did in 2008.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: Investors buy and/or sell at their own risk. This article is for entertainment purposes ONLY and offers zero individual investor advice. You are strongly warned to seek the advice of a licensed market professional.