Wednesday, February 23, 2011

Readers Respond: Short Term Prospects for Cytosorbents, Clinical Data's Buyout

"Readers Respond" is a forum where VFC interacts with the readers of VFC's Stock House.  Readers can leave comments on posted material at either of the blog sites, through Seeking Alpha or via email, vfc@vfcsstockhouse.com.  All stock opinions, tips and questions are welcomed, whether agreeable with VFC's opinions or not.  Thanks for the comments, because without interaction - this wouldn't be fun.

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A comment from relikwie in response my Cytosorbents Stockpiling Cash post:

Keeping the lights on at HQ for some more months isn't ambitious. Personally I do think they've a lot up their sleeves.
Furthermore, Chan seems extremely busy lately.

Oh, and "trial making excellent progress" doesn't tell anything on the success of the trial.
It is IMO "We're finishing trial" in cryptic words.


VFC's Take:  I partly agree with the above statements.  Let me start by saying that I am a long time investor in this company and have enjoyed adding shares each time the price dropped to six cents, and enjoyed even more the run to over forty cents when the stock still traded as MSBT. 

That said, the only thing certain in the biotech investing world is that nothing is certain, so I believe it's wise and imperative to respect both sides of the story.  It is possible to believe that a company has "a lot up their sleeves," as you state, and still believe that maybe they don't.

If the trial is a failure and CytoSorb does not work, there's no immediate fallback option, as the remainder of the Cytosorbents pipeline has been on hold.  With that in mind, for the company to move forward - and by "keep the lights on" I mean maintain operations and restart clinical trials - that would be an ambitious task, because the company would be essentially starting from scratch, with a share price that would most likely be in the toilet.

You've got to have ambition to get up again after being knocked down, and it's entirely possible that this could occur with Cytosorbents.

Additionally, Chan being extremely busy doesn't give us a clue as to why he is busy.  He could be busy lining up alternative options if the CytoSorb trial fails; he could be making the rounds looking for more financing, or he could be buying early Mother's Day cards. 

Lastly, "cryptic" comments in PRs from speculative companies should not be interpreted as positive.  Companies will spin PRs to their liking, and the goal of "cryptic" comments in company releases is to cover their behinds in case things go south and lawsuits start flying, not to give investors a hint as to what they really mean.

I say this because the company's job is to look after THEM first, not you.

I think that we both agree that we hope the trial is winding down, will be successful and that the share price will appreciate in significant fashion.

That said, hope is not a strategy, so I'm entertaining both potential outcomes.  The comments and recent activities can be spun to the positive or negative, so it's still a waiting game until we see the facts and we no longer have to speculate.

Thanks for the comment.

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A comment posted in regards to the same article:

Vinny,

What type of timeline are you thinking in terms of months, when you mention your short term & long term price expectations in regards to ctso?

I am curious as to what your gut is telling you about this stock?

As well as what do you think would be a good entry point into ctso at this time?


VFC's Take:  In general, I consider 'short term' to be 0-6 months, 'mid term' to be 6-24 months, and 'long term' to be beyond two years.  That's only my personal standard, not by any means should that be considered the accepted opinion.

I'll be honest - my gut was telling me good things about the stock before, but I always get cautious when a company starts issuing press releases that are not pertinent to the big news that everyone is expecting.  Biovest International did just that before announcing 'luke warm' trial results that really indicated a failed trial, and Celsius Holdings did it last year, having investors concentrate on new products before issuing terrible quarterly results. 

I also assumed that Cytosorbents would wait until after announcing positive results - if the results were positive - before raising cash, because they could do so at a higher price, so the fact that they did it now does make my Spidey Sense tingle, although not much because they'll still need to raise funds on the back end of the results.

I've already made quite a few bucks on this one - and realized it by selling shares into previous spikes - so I'm holding through news.  I'm still positive on CTSO for its risk/reward profile, but as should be the case with all investments, I'm not sold on the fact that it's going to work out as planned.

Unfortunately, to answer the question, is my gut is telling me that the results are not going to be positive enough to warrant approval, but will be spun in a way that the door is open for approval once certain criteria are met. 

I hope I'm wrong, but that's what the gut is saying.

Don't interpret that fact as me bailing out, because I'm still holding long. 

Entry point - if you're looking for pure speculation on the upcoming news, then I'd say buying a few shares at the current prices would get you in, and then pick up a few more on any dips - but expect to lose it if the trial goes south.

I picked up just a few shares at around fifteen cents recently, but like I said - I'm well on house money here now, so I'm just playing it as a hold.

Consider it 'night on the town' money if you're getting in now; enough to make some money if it pans out, but not enough to lose sleep that night if it doesn't. 

Thanks for the comment.

Disclosure:  Long CTSO.

Wiser Advisor

From Michael, in an email to my Seeking Alpha page:

Who will buy CLDA? Any ideas?

VFC's Take:  Looks like we got this question answered before I had a chance to respond.  I will say, that I'd heard Pfizer and Merck rumored to be involved, but I would not have guessed Forest Labs.  It makes perfect sense for them, however, especially since they bought for a discount, not a premium as is usually the case in this sector.

Read my full response HERE.

Disclosure:  No position.

vfc@vfcsstockhouse.com


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