Alexza Pharma (NASDAQ:ALXA) Yesterday's closing price: $4.66, +0.49 (11.75%). Market cap: $55.89M.
Alexza is a pharmaceutical company focused on the research, development and commercialization of products for the acute treatment of central nervous system conditions. This stock is trading up 3% to $4.30 in recent trading.
Alexza Pharmaceuticals has two potential catalysts upcoming in December 2012.
On July 5, 2012, Alexza resubmitted its drug ADASUVE for a New Drug Application (NDA) as a complete, class 2 response to the FDA's action letter, with an indicated Prescription Drug User Fee Act (PDUFA) goal date of December 21, 2012. ADASUVE is designed for the acute treatment of agitation associated with Schizophrenia or Bipolar 1 Disorder in adults.
ADASUVE is also expected to be reviewed for EU approval in December 2012 as well. This second catalyst could bring some extra attention to any potential run up.
Ampio Pharma (NASDAQ:AMPE) Yesterday's closing price: $2.92, -0.31 (-9.60%). Market cap: $108.00M.
Ampio is a developmental stage pharmaceutical company that engages in the discovery and development of pharmaceutical drugs and diagnostic products to identify, treat, and prevent metabolic disorders, eye diseases, kidney diseases, acute and chronic inflammation diseases, and male sexual dysfunction.
Ampio took a beating in yesterday's trading session with 922,873 shares traded -- mostly to the downside in a trading range between $2.85 and $3.28. Part of the selloff yesterday might be related to an article by fellow Seeking Alpha author Adam Gefvert. Adam pointed out in his article that:
Health Care Hedge Fund manager Martin Shkreli posted an AMPE bearish article: "In my opinion, it simply is not economically viable to run a new clinical development program for Zertane, which we believe would cost at least $30 million (in addition to any potential upfront payment), and risk a weak product launch."
Adam continues in his article remarking:
Furthermore, Ampio has a long road ahead with Zertane trials in the United States. As it says in its press release on 6/21, the Company will need to do not one, but two phase II trials, and two phase III trials. Not only that, it will be tough to recruit for those trials in the United States since Valeant Pharmaceuticals had to terminate an identical study due to "recruitment difficulties".
I would have to say that Adam makes a compelling bear case against Ampio, so in my opinion, investors should consider his opinions as part of their own complete due diligence. However in my opinion, with a market cap of $108.00M, Ampio might still be undervalued regardless.
Arena Pharma (ARNA). Yesterday's closing price $9.26, -0.06 (0.64%). Market cap: $2.01B
Arena engages in discovering, developing, and commercializing oral drugs that target G protein-coupled receptors in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases.
As Arena has been in rally mode lately, TheStreet.com continues to Rate Arena as a sell with a ratings score of D- . One area they are negative on is poor profit margins from the company. I find TheStreet's rating system to be insufficient at best here concerning Arena. Of course Arena is going to have poor profit margins, because still being a developmental BioPharma, the company has no profits -- yet. Arena just had its weight loss drug Belviq approved in June, which is a huge milestone for the company.
I remarked in a prior article earlier this month:
Since the approval of its weight loss drug Belviq in June the stock has fallen from a yearly high of $11.39 to $7.21--a fall of 37%. I feel long term investors have excellent value here at its current price level. The focus now on Arena should be the potential top-line growth in its strong pre-clinical pipeline. Because Arena will likely receive gobs of cash from Belviq sales, I believe it is a strong speculation bet that management will re-invest this cash into its pipeline, gaining leverage in any potential deal with a large pharma partner for any of its pre-clinical pipelined drugs. I believe Arena has a great shot at becoming the next Jazz Pharma (JAZZ).
Worth noting is that Jazz has grown in a little over 3 years from $0.52 on April 22nd, 2009, to a current stock price of $45.84 a share. Also worth noting is that during this entire period of incredible growth for the company, there has remained a large short interest in the stock.
Jazz's marketed products include Xyrem, a sodium oxybate oral solution for the treatment of cataplexy and excessive daytime sleepiness in patients with narcolepsy; FazaClo (clozapine, USP) LD and FazaClo HD products, which are orally disintegrating clozapine tablets for the treatment of resistant schizophrenia; Luvox CR extended-release capsules for the treatment of obsessive compulsive disorder; and Prialt, a non-opioid intrathecal analgesic for refractory severe chronic pain. The company also offers healthcare products for women.
In diametrical opposition to TheStreet.com, I reiterate my opinion that Arena is a strong long term speculative buy.
I have serious questions for how TheStreet.com operates its rating system. Their explanation for its ratings system seems apathetic at best to me and lacks real research that can help give investors a more complete picture of a developmental company -- pros and cons. Many times, the reason a developmental company has a lower stock price is because it is not currently bringing home massive revenues and profit. The whole idea in small cap investing is to properly pick the right companies that will potentially succeed in the future, and have the potential to bring home the big earnings -- eventually delivering on the potential. By making an investment now in a company like Arena, you are buying it at a much cheaper price than what I think it will be 3 to 5 years from now -- $25+ a share in my opinion.
This is taking a risk based on proper forecasting Arena's future growth using all available current information -- not just current fundamentals.
TheStreet issued a similar one-sided report on Antares Pharma (NASDAQ:ATRS) in July. My response to TheStreet is exactly the same as I give for Arena -- will Antares be a winner 3 to 5 years from now?
Here is an example from their report on Antares:
The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 80.6% when compared to the same quarter one year ago, falling from -$1.55 million to -$2.81 million.
Comparing a small cap developmental company against fully developed blue chip S&P 500 companies is about as absurd as it gets in my strong opinion. TheStreet's report does not give investors any explanation why Antares had a decrease in net income. However, in its Q1 2012 earnings call, Antares Vice President Jack Howarth can be heard clearly stating that its costs will be rising because the company would be reinvesting its royalty based revenue towards its top line non-royalty based $200 to $500 million dollar potential product Vibex MTX. Why would any long term small cap growth investor want Antares to deliver them a few pennies in earnings per share (NYSEARCA:EPS) now? I want Antares to reinvest that money into growing itself into a larger cap company -- where EPS is over $1 a share in 2 to 3 years, x 15 price to earnings (P.E.) = $15 a share minimum. True company growth which equates to a higher stock price cannot be realized unless money is managed correctly. In the case of Antares, money reinvested into the company's top line proprietary Vibex injector line.
There is no viable reason I can ascertain to continually compare companies like Antares and Arena to fully developed S&P 500 companies -- no different than comparing an apple to an orange.
Investors should always think clearly and logically when buying and selling stocks. My goal is to actually help inform investors how to do this with my own website coming soon designed to help educate investors invest with knowledge and confidence in their own due diligence. Nothing gives me greater satisfaction then to see an investor learn to invest smartly based on their own deep research. Serious investors should ignore this type of commentary and stick with their own logic and common sense in my strong opinion.
Disclosure: I am long ATRS. 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.
Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.