A week of solid gains held up well into Friday's close last week as a last minute deal averted the implementation of the 'fiscal cliff' that could have put the US economy into another recession, according to many analysts. With those fears behind us, investors took advantage of recently-depressed stock prices to position for the new trading year. The good mood may not last long, however, as numerous headlines from over the weekend tell a cautionary tale regarding the earnings season that kicks off this week, not to mention the fact that political negotiations regarding the debt ceiling are also likely to start gaining steam during the coming days. Even President Barack Obama has warned that the US cannot afford any more of the heated battles that surrounded the cliff talks, but to expect anything less may be wishful thinking as the crew in Washington is having difficulties just agreeing on an aid package for the battered northeastern states following the devastation of Hurricane Sandy. On the other hand, most in the Congress and Senate have shown that a deal can get done when their respective backs are against the wall, so it's highly likely that a deal will get done on this one, too, as anything else could leave the US credit rating at risk.
We're likely to start experiencing some volatility regarding those talks over the near term as the media plays the headlines game on a daily basis. As always, taking emotion out of the equation and sticking to pre-conceived entry and exit strategy could help return traders and investors hefty rewards as the peaks and valleys are played. Adding to the volatility is earnings season. No one expects blockbuster numbers for the just-completed fourth quarter, but as we saw last quarter's reporting season when Google (GOOG) missed, one surprise report can send the markets south in a hurry - while a few better-than-expected reports could accomplish the reverse. In these uncertain times, it's best to be prepared for either eventuality. Of note, Alcoa (AA) and Wells Fargo and Company (WFC), among others, are slated to report this week, but neither is likely to set the tone for the season one way or the other.
Jobs and unemployment numbers for last month were in-line with expectations, so that should be considered a non-factor for the coming week, especially with so much other news priming to heat up.
With all that going on, here's a few stocks and stories to keep an eye on this week...
Google Begins Year With A Regulatory Win
The US Federal Trade Commission (FTC) last week awarded Google a notable win in an ongoing investigation into the company's search practices, which were said to favor Google's own properties, products and services. The FTC, according to reports circulating last week, decided that Google's practices were not intended to hinder honest competition, rather they were intended to increase consumer ease and experience. With that in mind, Google agreed to a couple of compromises that will give advertisers and competitors more control over their information, rather than being forced to undertake a dramatic overhaul of its practices, as was previously suspected could be the outcome. GOOG shares jumped by two percent on the news as investor confidence was given a boost by the fact that Internet search giant escaped relatively unscathed from the investigation. Some concerns still exist, however, that European regulators may not be so kind in their assessment of the situation. Those concerns may hamper the ability of the company's to enjoy any sustained rally, but GOOG is more likely to trade based on its next earnings report, set for January 22nd, than anything else. Although search competitors such as Microsoft (MSFT) and Yahoo! (YHOO) may gain slightly from Google's new stipulations, this outcome will not threaten Google's status as the dominant player in search.
JP Morgan Healthcare Conference In Full Swing
The world of biotech and healthcare investing steals the show this week as the 31st Annual JP Morgan (JPM) Healthcare Conference achieves full throttle on Monday. Many of the sector's high-flyers, relative unknowns and predominant players will be featured in various presentations all through the week geared towards the investing community. There's sure to be more than a fair share of updates, data and numbers set forth for investors large and small to digest and set the tone for the new year.
Of note, Amarin Corporation (AMRN) will be presenting at 11:30AM Monday morning. Amarin investors will be keying in on any comments from the CEO regarding a potential buyout or partnership as well as any additional insight into the status of discussions with the FDA over Vascepa's New Chemical Entity (NCE) status. An update offered early last month when the company announced its intention to go-it-alone with the Vascepa launch indicated that all strategic options were still on the table, with or without a finalized NCE decision. It could also be surmised, however, that any deal would not be finalized until the NCE resolution was known, leading Amarin to choose the path that it did for the time being.
Without any renewed buyout talk and/or a positive NCE decision over the near term, AMRN is likely to hang out at or near its current levels, but this one has been known to fly quickly when the right speculation hits. Investors long and short are likely to keep their fingers close to the trigger this week, especially on Monday when the company is scheduled to present. Already Teva Pharmaceuticals (TEV) and AstraZeneca (AZN) have been linked to Amarin buyout talk and Pfizer (PFE) has also been recently added to the discussion. Still a hot story to watch and one to take a look at on any pullbacks. A solid start to the Vascepa launch could spark a rebound, if news doesn't warrant such action beforehand, although any indications that Vascepa will not turn into the ultimate blockbuster that many predict it will become would hurt. All eyes on Amarin to open the week.
Other hot players presenting on Monday are Celgene (CELG) and Onyx Pharmaceuticals (ONXX). Celgene is coming off a very solid 2012 and investors will be looking for signs that the run can continue through 2013 while Onyx will look to convince investors that Krypolis can still build on the momentum of its recent commercial launch and that the four percent gain on Friday - which followed a stellar 52-week period of significant gains - is for real moving forward.
Dendreon (DNDN) is another one to keep a hot eye on Monday the conference. As previously noted, many believe that this could be a turnaround year for Dendreon and it's prostate cancer immunotherapy treatment, Provenge. Early signs of such are encouraging as DNDN has already jumped about fifteen percent this year on high volume and closed the week at the six dollar mark. Although competition by Medivation's (MDVN) Xtandi and Johnson & Johnson's (JNJ) Zytiga may thwart some of Dendreon's rebound momentum, evidence exists that positive results could be had when Provenge is used in combination with such drugs, providing a basis for positive co-existence between the brands. Investors will also be looking for additional confirmation that the cost-cutting measures put into effect last year are working.
Other companies followed by VFC's Stock House presenting later in the week worth watching are:
Spectrum Pharmaceuticals (SPPI): Spectrum is still the target of short sellers who are increasingly convinced that a boost in the generic manufacturing of leucovorin will eat away at FUSILEV revenue. Investors will look for evidence to the contrary as well as developments surrounding Zevalin and other developmental pipeline candidates.
Keryx Biopharmaceuticals (KERX): Keryx has gained about thirty percent since lat-summer and returned a rough double since the Perifisone collapse of last spring. Investors are also awaiting results from a Zerenex trial that could lead to an eventual approval of the product. Although some are skeptical that this product could succeed in a market already saturated with generics, a strong case can also be made that Zerenex could become a market leader, should it make it that far.
Mannkind Corp. (MNKD): Representatives of Mannkind will present later in the week, too, and investors will be seeking an update on the Afrezza trials. Afrezza is being developed as an inhaled insulin alternative to needle-delivered insulin and was last denied an FDA approval two years ago when the FDA demanded new trials be conducted utilizing the company's next-generation inhaler. Founder Al Mann recently injected new cash into the company but a partner is still being sought. MNKD has gained about twenty five percent since Thanksgiving, although recent history has shown that this stock's volatile peaks and valleys are best to play as trades, even if still holding onto a core group of long-term shares for the future. Should be a relatively hot one to watch this year.
Healthcare, Biotech, Pharmaceutical:
MRI Interventions Looks To Set The Tone For 2013
Although not attending the JP Morgan event this week, MRI Interventions will be presenting at the 2013 Biotech Showcase on the 9th, an event also held in San Fransisco. With this presentation MRIC will look to set the tone for 2013, following the demonstrated swift developmental progress and revenue growth of 2012. MRIC is positioned to take full advantage of the current trends in healthcare, which have medical professionals looking for less-intrusive and more accurate (which together means less-costly) methods of conducting complicated procedures.
In combining those qualities, MRIC has developed the ClearPoint and ClearTrace MRI-enhancing systems that provide real-time imagery during complicated procedures on the brain and heart, respectively. With the assistance of partners such as Boston Scientific Corporation (BSX) and Brainlab, MRIC has successfully infiltrated the market for Brain surgery and a recent boost in the sales force, as announced during the last quarter of 2012, positions the company to infiltrate that market even further this year. Already MRI is registering notable growth.
Accordingly to the latest-filed quarterly report, revenue generated by the "disposable items" associated with the use of ClearPoint roughly tripled, when compared to the same quarter of the previous year, a key indication that the technology is catching on, or at least is being used more often.
As the ClearPoint equipment and procedures are used more often, revenue from those "disposables" will continue to grow, since those items need to be replaced before the machine can be used again. That's a key point to note when considering an investment in this stock - not only is revenue based on the number of systems sold, but the company is also essentially banking revenue each time it's used.
MRI last year moved into the European market, too, with some collaboration by Brainlab and was also named the "2012 Global Company of the Year" in November for "Image-Guided Neural Interventions" by Frost & Sullivan, a global business research and consulting firm.
Shares have steadied over the past couple of months following a summer full of volatility that returned a triple to investors, but a modest volume boost during the opening week of the new year could be an indication that positions are consolidating ahead of what could be a milestone year for MRIC. While MRIC is one to consider for long term accumulation on any dips as the ClearPoint and ClearTrace technology develops, recent history has also proven that shares picked up at or near the current levels have proven to turn into decent trades when the stock approaches two bucks.
TrovaGene Jumps Another Ten Percent
TrovaGene Inc (TROV) shares closed Friday on another high note when double-the-average volume resulted in a ten percent gain for the stock. Although TROV has been steadily climbing since last summer and has already returned a clean triple in price based on the progress and pending commercialization of its pipeline of diagnostics that have proven to be able to detect some cancer types with simple urine samples, last week's run is likely related to the announcement on Thursday that TROV will work in conjunction with the University of Texas MD Anderson Cancer Center to detect transrenal BRAF mutations in the urine of patients with advanced or metastatic cancers. As noted here last week, this announcement is significant because it could drastically broaden the scope of the cancers detected by TROV's diagnostics, but it's also a huge sign of validation from the medical community as the MD Anderson Cancer Center is a big player and highly respected in the field of cancer research and treatment.
2012 was a year of milestone development for TrovaGene as the scientific team was strengthened, new partnerships were signed and the pipeline moved towards commercialization, but 2013 could prove an even more fruitful year for the company after commercialization hits and the collaboration with MD Anderson progresses.
As noted last week, pullbacks and consolidation are not unusual when stocks in this sector move so quickly, but TROV has numerous main acts and side stories going for it right now that new interest could continue to flow in. Although volume has beaten the daily averages of late, there's still not enough to indicate overwhelming widespread interest just yet.
Inovio Primed For A Boost
Inovio Pharmaceuticals (INO) has already been discussed discussed as a hot, but still speculative stock to watch for 2013 based on its growing trading volume and a deep pipeline of synthetic vaccines derived from the company's proprietary SynCon platform. Through SynCon Inovio has produced numerous synthetic vaccines intended to treat or prevent various infectious diseases and cancer types. Maybe most notably - at least for the time being - the company has developed a universal flu vaccine that is currently being tested in clinical trials. This flu vaccine may have the company positioned to receive a significant amount of attention over the near term due to factors external of the market.
For those following the news these days, a widespread flu outbreak has hit forty one states and the number of those affected is growing rapidly. This year's outbreak has already surpassed last year's numbers and - as can always be expected in these instances - the CDC, government leaders and the general public are calling for a vaccine. Every few years (remember H1N1) or so an outbreak becomes large and widespread enough that any company developing a universal flu vaccine - or even one that treats the individual strand in question - gets thrust to into the spotlight, not only because a potential marketable solution could turn into a very lucrative proposition for a given company, but also because government money often starts flowing in the form of grants to help find a cure. This grant money can be hugely beneficial to still-developmental companies and it's quite possible that Inovio may be primed to receive a boost in investor and/or financial media interest, given the early successes of its universal flu technology and the speculation that often follows these outbreaks.
A few years ago Cel-Sci Corp (CVM), for example, a company known for developing an immunotherapeutic treatment for head and neck cancer, about quadrupled in price due - in part - to speculation surrounding its LEAPS application as a potential treatment for the swine flu.
If Inovio does in fact become a recipient of increased media and/or investor attention, the recent volume boost discussed during the closing days of 2012 could be justified and shares may be in a position to move higher now. Increased scrutiny of the SynCon technology could also lead investors to look more closely at the rest of the SynCon-based pipeline, which includes nine programs in development, three of which are currently in Phase II and six of which are already being funded by third parties, according to documents contained on the Inovio website. While companies still in the Phase II stages of development are considered highly speculative options, investing in such plays early on could prove very lucrative for both long term investors and short term traders as some of the most impressive gains these stocks can achieve often develop in lieu of a transition from Phase II to Phase III and in conjunction with positive trial results. As often discussed here, it's a good idea, in my opinion, to play the trading opportunities with each significant catalyst along the way while still holding onto a group of core shares for the long term play, if one so chooses to hang around for the long haul. This strategy could have an investor on house money - or even better - in the green long before the entire story is played out and help alleviate the risk of remaining 'all-in' through dilutive financing events that may take place along the way, as is common for still-developing companies.
With or without increased attention from the ongoing flu outbreak, INO is one to keep an eye on this year. As proven recently with Organovo Holdings (ONVO), volume often precedes price and INO has already seen a volume boost. There are also several interim and actual trial results that could play out during the cost of 2013 that, if positive, provide significant catalysts for the stock.
Also of note, Inovio is slated to present at the Biotech Showcase 2013 investor conference in San Fransisco this week. This event could also attract new interest to the company.
Inovio Expands Collaborative Effort To Develop Malaria Vaccine
Just in time for Inovio's presentation at the Biotech Showcase, a new collaborative effort was announced early Monday morning that will combine existing technology of the PATH Malaria Vaccine Initiative (MVI) with Inovio's proprietary electroporation vaccine-delivery technology. Electroporation, as previously discussed, uses small, targeted electrical pulses to inject therapeutic treatments directly into damaged or infected cells. This method allows for more precise delivery of a therapy - which increases effectiveness - without damaging surrounding tissue, as does other current standards of care. This collaborative effort between PATH MVI and Inovio expands on a previous agreement singed in 2010 and follows early successes of the initial deal.
The expansion of the agreements not only provides huge potential in treating malaria, but it also provides another validation of the electroporation technology, which has already been put to test with other developmental therapies and procedures. A Phase I/IIa clinical trial based on Monday's news is roughly a year away, according to information contained in the press release, and provides another potential price and development catalyst later on down the road.
Given the death and devastation caused annually by malaria, PATH MVI is on a mission to develop the means and methods to eradicate the disease. It's collaborative efforts with Inovio provides significant validation to the electroporation delivery methods and also helps to validate INO as a speculative play with growing potential in the sector.
Technology, Products and Services:
SiriusXM Bursts Through Three
Shares of Sirius XM Radio Inc. (SIRI) had been trucking towards the three dollar mark for the better part of the last half of last year and finally hit that point in December before closing the year at just below that mark. They didn't stay there for long as heavy volume flowed in at the new year and enabled SIRI set a new 52-week of $3.15 on Friday and, given the encouraging subscriber and revenue growth trends of 2012, there's reason to believe that shares could still continue to rise. Also influencing the price and volume action, however, is the green light that Liberty Media (LMCA) received from the FCC to gain effective control of SIRI by boosting its stake in the company to over fifty percent. Liberty gave itself sixty days to accomplish that task and it's probable that the increased volume could last until it's a done deal. It's also arguable the share price will continue to inch higher, given the amount of positive press surrounding SIRI right now and the optimistic outlook for the future.
The only serious concerns expressed by investors these days, aside from routine pullbacks and consolidation that can occur following nice price spikes, is what Liberty will do with SiriusXM once it has control. Former CEO Mel Karmazin has already departed for reasons most likely due to personality conflicts with Liberty's John Malone, who helped SIRI stave off bankruptcy in 2009 when shares traded for a nickel, and it's questionable as to how much autonomy the replacement CEO will have once Malone has control. James Meyer, a Sirius insider, is currently holding down the fort as a "search committee" seeks a permanent replacement. Some investors are also worried about dilution that could occur following Liberty's takeover as the company looks to reward its own shareholders through the acquisition, but those concerns could be unfounded.
The future value of the SiriusXM and its stock undoubtedly lies in the hands of Malone and once control is complete, investors will be listening closely to his vision for the company's future. At some point subscriber growth will slow in the US, so other avenues of growth may have to be entertained, whether it's expanding or combining existing technologies or platforms or even taking the business international - which - of course - would mean more satellites and an up-front cash investment. With the unique content and quality provided by SiriusXM, it's likely there would be demand for the services internationally, even without having to add too much local content for international subscribers.
With the Liberty takeover in full swing and the SIRI share price bursting through three on high volume, this is a hot story to watch this week. The only immediate negative that could materialize, aside from a surprising earnings disappointment, would be if some investors play the 'sell the news' game since it's now a done deal that Liberty will achieve takeover.
Roundup: International markets opened the new week on a down note, fueling worries that the early-year rally in the US could come to a swift end. In the absence of immediate financial and/or political drama to play up in Washington, Europe's financial woes are making headlines again and keeping investors jittery, although banks rallied on some easing of the rules on European banks by international banking regulators. With the negative tone making the rounds early on this week, and with an uncertain earnings season ahead of us, it's likely that the good-spirited rally of early 2013 may quickly fade. At least this week we have the JP Morgan conference and the health care sector to concentrate on while the bigger picture plays out in the headlines. Regardless of it all, there's always a few individual stocks and stories playing out in the background that make trading and investing fun and interesting - that's what we try to look for.
Disclosure: ONVO, INO, AMRN, YUM.
Contact VFC's Stock House: vfc@vfcsstockhouse.
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