Stocks continue to be whipsawed by sudden upward, then plunging, prices, only to reverse direction again as political and economic uncertainty reigns supreme. Here are four prime examples of this phenomenon from the week of June 3, 2019 and a snapshot of this week’s two candidates for the same fate:
1) La Jolla Pharmaceutical Co. (Nasdaq:LJPC) led advancing issues last week, rocketing 139% to $12.86 after the San Diego-based biotech announced impressive results for a Phase 2 study of its hormone LJPC-401 in patients with hereditary hemochromatosis, a disease that results in iron accumulation in the body. It was only an interim analysis of the mid-stage study of 26 patients–12 patients taking the drug and 14 on placebo–but the small patient numbers were enough to show that the drug is clearly working.
Transferrin saturation, which measures the amount of a patient’s iron binding capacity that’s filled with iron, was reduced by a mean of 42% in patients taking LJPC-401 for 16 weeks compared to a mean reduction of 6% for those on placebo. The decrease in transferrin saturation led to fewer phlebotomy procedures in which blood is removed from the patient to lower iron levels; patients taking LJPC-401 had 0.06 phlebotomies per month, compared to 0.41 for patients taking placebo. This week, profit-taking sliced shares by 22% to $10.06 (as of Wednesday, June 12).
2) Elsewhere, ReWalk Robotics Ltd. (Nasdaq:RWLK) soared 92% last week to $6.83 after the Food and Drug Administration said the small-cap device company could start selling its ReStore soft exoskeleton-suit system. ReStore is meant to be used at rehabilitation centers in the US for people who are having trouble walking after a stroke. The Yokneam, Israel-based company plans to sell the system for $28,900 and will also offer leasing options.
“The current gait training reimbursement codes enable immediate penetration and sales growth as part of our pathway to become a break even and profitable company,” Larry Jasinski, ReWalk’s CEO said in a statement.
With other similar products being marketed in the US, reimbursement for ReStore will be key. The ReStore suit may get stronger reimbursement as insurers already reimburse for stroke therapy and gait training, HC Wainwright analyst Swayampakula Ramakanth said.
Time for another haircut with shares cut back 23% to $5.29.
3) And Mirati Therapeutics Inc. (Nasdaq:MRTX) raced 47% last week to $99.77 on the back of positive results reported from Amgen Inc.’s Phase 1 study using its AMG 510 to treat patients with second line non-small cell lung cancer. Amgen established proof-of-concept in patients for a class of a drug known as a KRAS inhibitor.
San Diego-based Mirati has a similar drug, Sitravatinib, targeting the same oncogene KRAS known as MRTX849. Mirati’s MRTX849 is being explored in a Phase 1/2 study with the first patient being dosed in January of 2019 and preliminary data expected by the 2nd half of 2019. Mirati’s Sitravatinib is being explored in combination with Bristol-Myers Squibb Co.’s Opdivo in a Phase 3 study to treat patients with second line non-small cell lung cancer.
Shares have slipped 4% this week to $95.31
4) But microcap AEterna Zentaris Inc. (Nasdaq:AEZS) plummeted 31% last week to $2.07 after reporting an abysmal Q1 earnings report that revealed the company only received $0.04 million in royalty revenue, which was a bit puzzling seeing that the expected revenue was over $4 million. One would think there would be a strong sell-off when a company reports 1/100th of the forecasted revenue, but the Charleston, SC-based company has been showing a slow slippage rather than a free fall. Overall, the share price has hovered around $3.00 since Aeterna announced a European approval for its adult growth hormone deficiency “GHD” drug, Macrilen (macimorelin).
Investors had been holding onto their shares due to AEZS’s recent press release announcing that the board of directors is in the process of reviewing strategic opportunities for the company with NYC-based investment bank Torreya Partners LLC, which could lead to a sale of the company. Founded in 1990, Charleston, SC-based Aeterna Zentaris develops novel treatments in oncology and endocrinology.
But this week, investors rekindled their hopes that the company was primed to be acquired at a steep premium, and a buying frenzy ensued. The share price has soared 46% to $3.03 (as of June 12, just before markets closed).
5) This week, the star of the sector is Provention Bio Inc. (Nasdaq:PRVB), which has shot up 189% to $12.07 after the Oldwick, NJ-based company’s experimental medicine appeared to delay onset of type 1 diabetes in a clinical trial. The drug, called teplizumab, was associated with a two-year difference in diagnosis with the disease, according to clinical trial results published Sunday in the New England Journal of Medicine. The study, run in people identified to be at risk of diabetes because of family members with the disease and markers in the blood, was also presented at the American Diabetes Association conference that ran Friday through Tuesday in San Francisco.
Type 1 diabetes affects more than 1 million Americans, and is the second most-common childhood disease after asthma, according to the study researchers, led by Yale University’s Dr. Kevan Herold. While it can be controlled with insulin, type 1 diabetes currently has no cure, and efforts have turned to prevention.
Steve’s Take: Analysts who cover the company give it a Strong Buy rating with a 52-week mean price target of $6.75–which is lower than today’s closing price and will no doubt be adjusted. Talk about volatility, though. Shares have a 52-week high of $22.22 and a low of $1.52. More data are needed before buying this name. If you own it already, I would Hold it.
6) On the other hand, small-cap CymaBay Therapeutics Inc. (Nasdaq:CBAY) has plunged 49% to $6.29 after the company released disappointing early trial data for the lead drug in its pipeline. Now it is time to buy, according to one analyst. In a report issued this (Wednesday) morning, Raymond James analyst Steven Seedhouse upgraded Newark, CA-based CymaBay from Outperform to Strong Buy, writing that he had never counted on the drug being used to treat the liver disease nonalcoholic steatohepatitis, the sickness for which it was being tested in the study.
“We maintain our $19 price target and upgrade to Strong Buy given the implied upside post today’s reaction,” Seedhouse wrote.
CymaBay’s lead drug, Seladelpar, is designed to treat autoimmune liver diseases. On Tuesday, CymaBay announced top-line 12-week data from a Phase 2b study of Seladelpar in patients suffering from nonalcoholic steatohepatitis, or NASH. The results were mixed. According to the company, reductions in liver fat, a key marker of success in NASH therapies, were not significantly better in patients who received the drug than in patients who received a placebo. Still, the company said that patients who received the drug did demonstrate reductions in liver injury.
With a handful of companies preparing their own NASH drugs, that result wasn’t good enough for investors and shares tanked.
Steve’s Take: The 10 analysts who cover the company give it a Strong Buy rating with a 52-week mean target price of $21. That’s a massive spread of 339% from today’s close. Need I say more? But only for the portfolio with a high risk-tolerant component.