As a person specializing in technical analysis of small cap stocks, it is easy to get caught up with analysis and to take the emotion out of stock picking (sometimes preferable, too).
It is hard to do that with today's article, though. You see, I am taking a look at several diabetes biotech stocks: ECTE, MKND and ACCP. Where it gets personal is that my Dad has diabetes and I see the pain and suffering that it causes him on a daily basis. I am hopeful for a cure someday, but right now every advance in detection, monitoring and treatment is welcome. These three stocks are all on the forefront of treating and monitoring the disease.
Let's start with the statistics first. There are currently 23.6 million diabetics in the United States alone (7.8% of the total population, including 17.9 million diagnosed cases (and my Dad) and 5.7 million undiagnosed). Cases of diabetes have doubled from 1990 to 2005. Total cost of diabetes (direct and indirect) is conservatively at estimated $174 billion a year. source: DAGC.org
The market opportunity for biotech firms is immense and I have identified several interesting small cap companies to outline.
The first of the small cap stocks is Echo Therapeutics (NASDAQ:ECTE). Echo has been much in the news lately with some positive FDA results and a spike in its stock price.
The most recent positive PR involved the product development work for its Prelude SkinPrep System. Echo now has the commercially ready product to be used in final clinical trials. Echo anticipates that no further changes will be made to the Prelude SkinPrep System and that the current device will be the one used for sale, subject to FDA market clearance of the product. The final Prelude device will be tested in the near-term in a study using LMX4 lidocaine cream which should form the basis for a 510-k filing with Ferndale Pharma Group for the enhanced delivery of lidocaine. The Company believes that the addressable market for enhanced, fast acting topical lidocaine exceeds $1 billion.
Further good news is contained in last year's announcement of positive results in a clinical study for its needle-free Symphony™ Transdermal Continuous Glucose Monitoring (tCGM) System as a non-invasive, wireless, transdermal solution for monitoring blood sugar levels when used in conjunction with the needle-free Prelude SkinPrep System.
An interesting cross-pollination between the two stand-alone systems is that they can be used in tandem very effectively. Of course the Prelude SkinPrep system is a stand-alone system in its own right.
The second small cap company is MannKind Corp. (NASDAQ:MNKD). Mannkind has had a more checkered past with concerns that the FDA would not approve (or delay) its inhaled insulin product called Affreza. The company recently issued a press release quoting the company's chief executive that the FDA is expected to approve its experimental inhaled insulin device "within days" of inspecting a manufacturing plant that supplies the insulin.
It appears from the price action and the recent chart that investors are believing the company thus shares have almost doubled since late November of 2009. The question in investors' minds should be whether the good news is already "burned in" the stock price or there is further price appreciation possible.
Short sellers were rewarded by a drop on the shares from Mid-December from the high $9's down to the low $8's, but have been squeezed lately by the renewed strength in the stock. As volatile as Mannkind's stock has been, it is not for the "faint of heart".
The last small cap company is Access Pharmaceuticals (ACCP), a company that is best known for its cancer products, but has several promising diabetes-related drugs in clinical trials.
As a corollary to its cancer research, the company is working on a nano-polymer drug delivery system for the oral administration of large molecules such as insulin, human growth hormone, and erythropoietin which are typically delivered by injection. This drug delivery technology using insulin containing Cobalamin™-dextran nanoparticles as the intrinsic factor in the gut triggers greater absorption by a significant factor.
The company is also involved in the development of Pexiganan, a novel topical anti-infective for the treatment of diabetic foot infection.
Clinical trials continue for both drugs concurrently with licensing discussions with several partners. Both drugs are considered late-stage and the company is working with several bio-pharmaceutical companies to conduct pre-clinical studies.
Access Pharmaceuticals chart has been stuck in the low $3 trading range since early October of last year and volume has dropped off severely. It may take some strong positive news to get retail traders interested in Access again.
That is a short overview of three companies in the diabetes space that I believe have very interesting stories and I would highly recommend keeping them on the trading radar. These will trade as bio and pharma typically trade...on news, rumor and innuendo.
Disclosure: "No positions"