Four Small Caps for Binary Event Investors

by: Mike Havrilla

Below is a selection of companies with stock prices below $5 per share and upcoming binary events in the form of FDA news/decisions or clinical trial results that are expected within the next three months. A common strategy used by many investors is to buy a basket of several small or micro-cap companies (generally less than $1 billion market cap stocks) with pending binary events approximately 3-6 months ahead of the expected catalyst date, and sell into the expected upward momentum in both stock price and trading volume.

Click here for a four-minute video that includes an overview of and this binary event investing strategy. Extreme trades such as those profiled below can be viewed as call option trades due to their low stock prices and high risk/reward profile. For this reason, investing in a basket of several low-priced stocks with pending binary events and following the strategy outlined above is an effective way to mitigate the risk of investment losses while participating in the potential run-up in stock price as the catalyst date approaches.

On May 10, Generex Biotech (NASDAQ:GNBT) ($0.38) ($96 million market cap) announced that it enrolled over 400 subjects in its pivotal Phase 3 clinical trial for Generex Oral-lyn, which is a novel formulation of insulin with a unique spray delivery mechanism for absorption through the cheeks (buccal delivery). GNBT expects the first interim analysis in this study will be conducted in approximately two months, which may trigger an end of study treatment period by year-end to support its planned New Drug Application (NDA) filing with the FDA.

On April 28, Neurocrine Biosciences (NASDAQ:NBIX) ($2.72) ($149 million market cap) reported quarterly financial results (see call transcript) and announced that it expects to report top-line results from the Phase 2b Daisy PETAL study by the end of May, which is evaluating ELAGOLIX (orally active non-peptide Gonadotropin-Releasing Hormone or GnRH antagonist) as a potential treatment for endometriosis.

On May 13, Neurologix (OTC:NRGX) ($0.75) ($21 million market cap) reported quarterly results and provided guidance for reporting initial efficacy results by mid-year from an ongoing Phase 2 study evaluating the transfer of a gene (glutamic acid decarbolylase or GAD) using an adeno-associated virus or AAV-based viral vector into the brain of patients with advanced Parkinson's disease (PD).

On May 4, GTx Inc. (NASDAQ:GTXI) ($3.25) ($118 million market cap) reported quarterly results and provided guidance for reporting top-line Phase 3 results this summer for toremifene 20mg in patients with high-grade prostatic intraepithelial neoplasia (HG-PIN) (precursor to prostate cancer). The pivotal study is designed to support a NDA filing and GTXI has submitted a proposed pivotal Phase 3 study (TREAT 2) protocol to the FDA for toremifene 80 mg to reduce fractures in men with prostate cancer on androgen deprivation therapy

Disclosure: No positions

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