Bottoms up!
July 29, 2011
– Comments (12) |
RELATED TICKERS: ANAC
, CUR
Is the long-awaited serpent's egg finally hatching? Or is this another summer doldrum soon to be reversed and new highs achieved? I've watched with amazement as the markets shook off the housing crisis, the financial crisis, the European crisis, and the tsunami/nuclear crisis despite the continuing dependence of our fragile economic recovery on rampant deficit spending. I benefited to a large degree but also waved goodbye to tens of thousands in hedges. Now of course, with my hedges wiped out, we can finally revisit the disaster of early 2009. But all is not lost - I've been liquidating heavily over the last month and I have a substantial cash hoard to attack with should valuations once again become absurdly low. Towards that end I've identified two new stocks for the GBMB watchlist.
Anacor (ANAC) - market cap 164M, share price 5.84. Cash 77M, debt 9M, quarterly burn 8-14M. This company only IPO'd eight months ago which makes them a little easier to analyze, yet more difficult to predict. I liked what I saw the first time I checked out the pipeline of novel boron-based small molecule drugs, but the stock has flailed while IPO peers Pacira, Endocyte, and Ventrus have soared. Compounds in clinical trials include topical PDE4 inhibitors AN2728 and AN2898 for plaque psoriasis and atopic dermatitis, fungal tRNA inhibitors AN2690 and AN2718 for onchomycosis, and GSK2251052 anti-Gram negative antibiotic. Upcoming catalysts include phase II data for AN2728 and AN2898 in mild-to-moderate atopic dermatitis and completion of enrollment in two phase III trials of AN2690 in onchomycosis in H2 2011. Meanwhile, Glaxo has initiated phase IIb trials of GSK2251052 in UTI and intra-abdominal infections. I expect the most recent weakness in the stock relates to unimpressive phase IIb data for AN2728 in psoriasis, which was discouraging but not a death blow for the compound. The Glaxo compound alone would seem to justify the 100M enterprise value I expect to see when earnings are next reported. I would consider a GBMB buy below 5.5, as long as we're also seeing stabilization in the share price and the broad market.
Neuralstem (CUR) - market cap 56M, share price 1.15. Cash 9M, debt 0, quarterly burn 3-5M. Stinky bottom alert! This stock could go to 0 someday. Neuralstem has now come full circle to the share price it traded at two years ago, after a steady run over 3 and a steady march back downward. The peak came after the company initiated dosing in a clinical trial of spinal stem cells in ALS, but the downward spiral has come despite respectable progress in the trial. Having completed lumbar stem cell injections in 12 patients, the company is now seeking FDA authorization for cervical cord injections. Meanwhile, the company plans a new trial of spinal stem cells in spinal cord injury and has initiated phase I trials of hippocampal neurogenesis inducer NS-189 for major depression. All the stem cell stocks are sketchy, but Neuralstem seems to be the most reasonably priced since they haven't actually failed at anything yet and they're still in the early, optimistic stage of development. This is a higher risk and therefore lower priority GBMB buy below 1.1.
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