Friday, December 3, 2010

Weekly Stock Watch: CTSO, CELH, PIP, SIGA

Originally posted at The New VFC's Stock House on Sunday, November 28th.

CTSO: Investors following the European sever sepsis trial for Cytosorbents’ flagship medical device, Cytosorb, received some encouraging news last week, as the company announced that it had enrolled ninety patients to date, an indicator that the pace of enrollment is on the upswing - at least for the time being.

The ‘announcement’ came in the form of an ‘Executive Summary’ posted to the company website. The trial is due to enroll 100 patients, and it’s possible that that target may be achieved early in the first quarter of 2011, while earlier estimations placed full enrollment at late first quarter, or even early second.

It should be noted, however, that the enrollment pace of this trial has been somewhat unpredictable at times, and it can’t be assumed that the recent acceleration of enrollment - while encouraging - will continue.

Cytosorbents is good for cash through the first quarter of 2011, according to recent reports, and by that time the company and investors should have a better idea of what the future holds in store for Cytorsorb.

A positive European trial will have the next cash-raising event come at a time when Cytosorbents is on the upswing and planning for commercialization of a possible breakthrough product for a hard-to-treat indication.

On the other hand, a failed trial will leave Cytosorbents vulnerable to the loan sharks who would undoubtedly prey on a company looking for a lifeline.

A failed sepsis indication for Cytosorb wouldn’t be the nail in the coffin, but all resources have been geared towards this trial and the rest of the pipeline would need to be re-invigorated, and that would take money.

With no effective or preferred treatment for severe sepsis on the market, CTSO remains an intriguing pick right now, because speculation of a positive trial and possible CE Mark approval in Europe could lead to a mighty run in price, similar to the run that saw this stock spike to over forty cents what seems like so long ago for many.

Over the long term, full commercialization in Europe, possible approval in the United States and the advancement of the remaining pipeline add even more potential value for this company, although I - as always - would be looking to take some profits on the initial spike as traders, profit takers and preferred stock conversions could temporarily limit any further potential upside.

The recent enrollment update is an encouraging event and leaves CTSO as a stock to watch, HOLD, or maybe even accumulate a few more sub-dime shares with an eye towards the first quarter.

Disclosure: Long CTSO.

CELH: If one thing has returned to shares of Celsius Holdings after the disappointing third quarter results, it’s volume and attention on the stock.

The daily average trading volume has increased very significantly since the release of results, and while much of the volume may be some impatient investors bailing out after the bad news - as well as the every-so-persistent ‘get bash crew’ playing its games - I believe that if all concerned were convinced that Celsius is a sunken ship with no hope for a future, then I think the downside would have been worse than it has been.

Of course, that’s not to say that the short term downside has been fully realized just yet, barring any significant news from the company over the next couple of months - or interest from an outside source - there‘s always the potential for further downside.

It wouldn’t hurt, however, to see some of the big players in the company pick up a few shares on the open market - after all, these prices should be considered a dollar store bargain if all the free cases handed out over the past few quarters are due to turn into the recurring reorders that the company says they will.

The product is sound, and the potential is there, but it will take another sweetheart deal from DeSantis or a major partner coming on board to keep Celsius from become cannon-fodder for the big boys before too long.

The company’s own estimates cannot be considered valid at this point, due to the drastic failure to even approach the estimated numbers.

On the other hand, we also know that the ‘get bash crew’ for the CELH stock is still persistently working overtime in cyberspace spreading fear, doubt and discontent about the company - even during the holidays when most people tend to enjoy human interaction with others - so we know that speculation continues to exist on both the long and short sides of the Celsius story.

That was apparent with the large purchase orders for the CELHW warrants the week before the earnings release and it’s also apparent now with the big bounce in trading volume.

Additional downside still exists, but any real news - not Mario combing his hair in Life & Style - could reinvigorate some confidence in the company.

Unfortunately, Celsius doesn’t have much in terms of leverage going for it right now, at a time when it needs cash.

As a speculative pick looking towards the future, the risk/reward at this point is - needless to say - better than it has been since the CSUH traded for a couple of pennies.

Maybe even more than during that run from a couple of pennies to nearly seven dimes, CELH is a stock to watch right now.

Volume is up - and up big from where it's been for the better part of the year. Granted, that's all that is up with CELH lately, but it shows interest.

Disclosure: Long CELH.

PIP: Shares of PharmaThene were on the move last week after it was announced that the company’s breach of contract lawsuit against Siga Technologies would see the light of trial, commencing on January 3rd, 2011.

Siga had filed a motion for a partial summary judgment in the case, a move which was denied by the Delaware Court of Chancery.

The suit stems from a failed merger between the two companies in 2006. When the merger was cancelled, the two quarreled about the marketing and distribution rights to ST-246, a small-pox vaccine for which Siga was just awarded a potential multi-billion dollar government contract.

Shareholders of PIP may be excited that Siga’s motion was denied, but any exuberance regarding this news should be tempered, as it only means that the trial will move forward, it doesn’t mean that PharmaThene has any better a chance at winning than it did before.

Regardless, the recent turn of events leaves PIP - and SIGA - as stocks to watch for the short term.

Disclosure: No positions.

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