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Are There Any Safe Ports In The Speculative Biotech Hurricane?

|Includes: ACAD, BIND, CASC, CLDX, EIGR, ESPR, FBT, HALO, IBB, IDRA, IMGN, MNKD, OMER, OVAS-OLD, Precipio, Inc. (PRPO), SLS, TGTX, TTPH, XON, ZIOP

As a broad sector biotech has been slammed hard, not unlike the Gulf Coast during a bad hurricane (not to be confused with a good hurricane).

How bad has it been? Here's just a sampling of some speculative biotech companies and how they've performed over the past three months. These figures are according to my calculations using numbers from Yahoo Finance.

Do note that when I use the term "speculative" I am referring to companies that have yet to achieve profitability. And its very likely that at least some (or perhaps many) will never achieve positive earnings.

If you follow the speculative biotech space, no doubt you will recognize some familiar names here. In fact some were the absolute darlings of people's portfolios not too long ago.

Performance over the past three months:

(NASDAQ:ZIOP) down 46.55%, (NASDAQ:ESPR) down 35.75%, (NASDAQ:HALO) down 24.85%, (NASDAQ:IDRA) down 26.06%, (NASDAQ:IMGN) down 10.35%, (NASDAQ:TGTX) down 30.97% (NASDAQ:OMER) down 13.90%, (GALE) down 54.75% (OVAS) down 42.95% (NASDAQ:ACAD) down 27.90%, (NASDAQ:TTPH) down 33.45%, (NASDAQ:CLDX) down 20.67% (ONTY) down 42.47%, (NASDAQ:MNKD) down 72.01%, (NASDAQ:BIND) down 61.40% (NASDAQ:XON) down 36.24%, (CLDN) down 93.34%

Among those 17 stocks that's an average drop of almost 40%. They say a rising tide lifts all boats, and the same holds true when the tide goes out. Some of these boats have fallen so far however, even when the tide rolls back into the biotech sector, as it surely will , its hard to imagine them getting back to the lofty highs they enjoyed when they were so many peoples "must haves".

When I see stocks like OMER and IMGN performing substantially better than the average in a given sector, it makes me think they might be better risks than those that have performed the worst.

Dismally performing stocks like ESPR that has fallen from over $100 to just $14. Or CLDN, down from over $20 to just $1.14 in mere months. These massive drops happening when volumes traded are in the millions of shares daily with lots of news, hype and promotional efforts.

And lest you be thinking that these 17 stocks are not truly representative of the overall biotech sector, then look at (NYSEARCA:FBT) First Trust NYSE Arca Biotech ETF. In the past 1 month it is down 10.65% and (NASDAQ:IBB) is down 12.69% for the same period. Included in those ETFs of course are many profitable big pharma companies.

I'm going to suggest one other speculative biotech on top of the aforementioned OMER and IMGN as being worthy of some research and DD based on how its been holding up over the tumultuous last few months. Over the past 1 month this speculative biotech stock is only down 9.78%

It is Transgenomic Inc. (NASDAQ:TBIO).

Speculative biotech companies engaged in the search for a cure, or at least an effective treatment for cancer had been soaring. Who wouldn't want to be invested in a company that finds a cure for cancer? That's a holy grail that investors have been seeking for decades.

What I find intriguing about Transgenomic is that, rather than hyping a potential cure or treatment, their focus is on diagnosis. I'm not an MD and I do not have a PHD, but even a layman like me knows the key to beating any form of cancer lies in early detection.

And with U.S. President Obama calling for the US to cure cancer, in a manner similar to Kennedy's call to put a man on the moon, it seems this sector could be getting some love. Bottom line of course, you can't cure and/or treat something unless you first diagnosis it.

Another positive in my view, is that while many of the 17 companies I listed trade millions of shares a day and have been mentioned on CNBC and in mainstream media articles. TBIO by contrast is very quiet. Daily average share volume over the past 3 months isn't even 100,000.

Another point I'll make about TBIO is about the involvement of RJ Kirk. Those who follow ZIOP and XON know what an incredible run those stocks went on, and both had Kirk as a major shareholder. The man is seen as having a Midas touch, and its hard to argue after the runs XON and ZIOP had.

Investors who bought into a stock like ZIOP back in October of 2014 were paying somewhere around $2.50 when volumes were typically just a few hundred thousand per day. By the time 2015 came around ZIOP got up near $15 a couple of times and volumes were in the millions of shares traded, one day hitting over 38 million. Of course those who bought those highs and held on, they are now badly underwater.

Here's a link to the information on RJ Kirk's acquisition of over 6.7 million shares of TBIO reported Jan 6th 2016: www.conferencecalltranscripts.org/4/summary2/

I think there's a lot to like here with TBIO. In short....

  • Focus on diagnosis of cancer, you can't treat what you don't first identify
  • Only 13.92 million shares outstanding as per WSJ.com (reported previous to Kirk's acquisitions)
  • RJ Kirk involvement
  • Lightly traded and below the radar, at least for now.
  • Market cap just $11.6 million, great upside potential
  • Only 5.26% of float sold short (602K)

I'll leave the rest to those reading this, and welcome any comments you might have:

DISCLAIMER

This is strictly an opinion piece, and my opinion(s) could very well turn out to be wrong. This instablog post is intended strictly for informational and entertainment purposes and should not be used as a basis for any investment decisions. Verify all information presented, while I have endeavored to ensure accuracy I do not warrant that any or all information presented is without error.

Investing in stocks or options involves significant risks. For investment advice you should seek the input of a professional.

Disclosure: I am/we are long TBIO.

Additional disclosure: You can find me in numerous forums where I use the names krill66 (yahoo) growacet (stocktwits) and ledrog (stockhouse).