May 15, 2017 7:47am

 

… Investors have been conditioned to think that drug development is supported by cash positions and the ability to capitalize, but the potential <of a therapy> doesn’t suppress volatility. They are also constantly reminded that share pricing is unsustainable. And then, they think the amount of cash on the balance sheets will offset the decline in share pricing as even cash value per share has recently been a negligible factor!

 

What will restore faith in the sector?

… A major shakeout to change that mindset is needed such as news of real catalysts/milestones and maybe a buy-out and maybe a CEO or two being dumped

... As ROI is non-existent while the only sustainability is excessive pay packages which increase exponentially versus share pricing movement!

 

Higher open expected

 

Companies in my headlights: six (6), 1 BUY and 5 SELLs

 

Critical information ahead of “our” universe’s open! I provide intelligence and analysis for short and near-term investment.

 

 

 

Expectation is the word for 2017 – meeting the unknowns with the soon to be exposed concerns will be the subject of investing decisions throughout this year.

 

 

Dow futures are UP +0.20% and NASDAQ futures are DOWN -0.01%

 

 

U.S. stock index futures pointed to a higher open on Monday as traders digested news of an extension of an agreement to freeze oil output.

European markets fell into mixed territory by mid-morning, hours after hitting record highs.

Asian markets closed mostly in the money despite concerns over trade protectionism during the G7 meeting in Italy and North Korea's latest missile launch at the weekend.

 

Data docket: will see the release of the empire state manufacturing data at 8:30 am ET and the national association of home builder’s survey at 10 am ET.

  • On the financial result’s front a.k.a. earnings: Capricor (ACAPR) and Fate Therapeutics (FATE)

 

 

The cell therapy sector closed POSITIVE on Friday, NEGATIVE on Thursday, POSITIVE on Wednesday, NEGATIVE on Tuesday and last Monday.

The cell therapy sector’s record after the last 5 days (of 43 covered companies):

·         Friday closed POSITIVE with 12 decliners, 30 advancers and 1 flat;

·         Thursday closed NEGATIVE with 21 decliners, 19 advancers and 3 flats;

·         Wednesday closed POSITIVE with 14 decliners, 27 advancers and 2 flats;

·         Tuesday closed NEGATIVE with 22 decliners, 18 advancers and 3 flats;

·         Last Monday closed NEGATIVE with 28 decliners, 12 advancers and 3 flats;

 

 

Remembering Friday’s closing bell newsletter, “RMi’s daily and continual “reads” of the goings-on of the SCG&RT sector can improve investor’s and trader’s odds - just because a stock underperforms the market doesn’t mean you have to lose money.”

  • What did I see on Friday, the DOW closed down -0.11% (-22.81) and The NASDAQ closed up +0.09% (+5.27) while volatility traded below 10.

The bad news is that investors are still feeling the pain.  When I feel the pain, I know that weakness is leaving my “situation” – an old militarism!

  • The good – or better –news is that such a share pricing shock is not nailed to the door – there is more than an 80% chance that the sector will turn based on speculation!

The development arena is approaching a three way junction. One road leads to higher share growth and the other turns towards to the usual instability while the last leads to downright disappointment!

  • One of my signals of trouble <in the sector> is that investors own an asset in which they could only lose money in the short and near-term while the long term is so elusive.

 

Why isn’t the sector in an uproar at the losses and uncertainties?

Capital market access isn’t ready <the fees are in the six to seven percent range including warrants> to slow down the process, with hyped the timetables as companies are squeezed into deprecating and dilutionary decisions by desperation to fund their <in some cases> too early platforms.

  • Investors are carrying ALL the risks while management’s compensation mitigates their downside!

Investors should start obsessing over “hard” and “soft” pre-clinical, P1 and P2 data and think in terms of trading or exits until the proof is in the P3 data and even then there are uncertainties <and I have been there>!

  • I am not saying, there isn’t opportunity … we are still in the “prove it” phase; the problem for investors is impatient who are starting to pay more attention than they have before.

 

Managements NEED to deliver the “package” but, they are NOT following through in reading the tea leaves of their <own> perception by investors. Thus they are NOT seeing are now seeing the limits of relying on upon the warrant-clipping funds.

 

 

You’ve made it to the office, turned on the monitor, having just gotten your coffee and it hits you - what could be today’s trades? 

Watch list:

  • The iShares Nasdaq Biotechnology (IBB) closed Friday up +0.45%, and is UP +0.04% in Monday’s pre-market;
  • The SPDR S&P Biotech ETF (XBI) closed Friday up +1.36% and is NOT indicating in Monday pre-market;
  • The Health Care Select Sector SPDR ETF (XLV) closed down -0.17% Friday and is NOT indicating in Monday’s pre-open;
  • The iShares Russell 2000 (IWM) closed down -0.53% on Friday and is indicating a positive +0.15% in Monday’s pre-open

 

 

Companies in my headlights:

AxoGen (AXGN) closed up +$0.55 to $13.15. The peak could be climaxing, May opened at $12.80 and had a high of $13.15 and a low of $11.75. April started at $10.28 with a low of $10.28 and a high of $12.20 and also ended at $12.20. I also like the $12.2 M revenue number and margin spurt, but the debt issue of $25 M and the cash position of $25.9 M keeps me wary of pricing. Repeating a run-away quarter could be a big hurdle – SELL;

Capricor (CAPR) closed down -$1.89 to $1.16. They report today and I don’t believe the bleeding has stopped; Jansen (J&J) deal is gone, I believe the Duchenne muscular dystrophy (DMD) program is still very early, while exosome program is also very early and without patent approvals at this time. The relationship between the university research provider and the CEO has always been an issue for me – SELL;

Kite Pharma (KITE) closed up +$0.38 to $75.43. I always study momentum and volume as well as the development paradyn. May started at $83.06 with a low so far of $70.99 while April started at 78.22 with a low of $74.57, a high of $82.80 and finished at $82.08 – OVERSOLD – BUY;

Intrexon (XON) closed up +$0.52 to $24.14. A similar story, May started at $21.03 with a low of $19.36 and a high of $24.14 so far while April’s song started at $19.37 hit a high note of $21.47 and a low of $18.92. While investors have been largely content with waiting for the potential represented by a robust product pipeline to be converted into real growth in the top and bottom lines, results from the most recent quarter hint that future growth may be completely dependent on selling products. I am NOT waiting for good news which is in the wind or right around the corner as said by Motley Fool. OVERBOUGHT – SELL;

Osiris (OSIR) closed up +$0.47 to $5.79. May began at $4.80 with a high of $5.95 and a low of $4.80 while April began at $4.95 with a high of $4.96, a low of $4.45 and ended at $4.74. I can’t forget that OSIR has a federal indictment against it in the Southern District of NY, no on record Qs or Ks for the last two (2) years. What are traders betting on a lower fine, start at the beginning and get a management team that stays and can close the filing divides. Another question, what is taking the accountants so long in their reviews – could there be more than some “funny” numbers – Maintaining SELL;

Sangamo (SGMO) closed up +$1.20 to $8.20. May started at $4.85 with a high of $7.00 and a low of $4.35.  Love the short-term ride but, the peak in the historical data over the past two months says the golf cart ride to the next hole could be a par 5 and only an expert golfer could sink the putt when, the putter was left at the last hole. I play it safe, 471 to 690 yards with 5 strokes is a hard one even with a 6 handicap - SELL

 

 

Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors.

Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.

Henry’s comments are for informational purposes only and are not a substitute for personalized advice. Consult your advisor about what is best for you.