Novogen Limited (ADR) (NVGN)

I originally red-thumbed Novogen back in April 2008, after a similar inexplicable upward run which eventually led to a resounding crash. The stock has now erupted once again with no apparent catalyst, jumping as much as 150% yesterday. Thanks to CAPS idiosyncrasies, I missed the top but I'm still happy to get in at this level.

The upcoming catalyst for Novogen is data from the OVATURE phase III trial of phenoxodiol in ovarian cancer. This trial began recruitment almost two years ago, but by April of 2009 had only accrued 141 of the 340 patients in the trial design approved by the FDA. At that point, Novogen and subsidiary Marshall Edwards decided to pull the plug on further enrollment, apparently for financial reasons. It's not hard to see that the trial would have taken another five or more years to completely enroll at the current rate, if ever. Marshall Edwards announced that the primary endpoint of progression free survival would be assessed within three months, that is by mid-July 2009.

The early termination of enrollment is unquestionably a strongly negative development. Phenoxodiol was a long shot from the beginning, as plant flavonoid signal transduction regulators have a limited anti-neoplastic track record. The slow enrollment was an indication that oncologists didn't have much trust in Novogen or phenoxodiol. And the curtailed patient population clearly violates the SPA, so the FDA is under no obligation to recognize trial results as positive no matter how they are spun. I suspect the company knows that OVATURE will tank and decided to end the trial before expending all their resources. They'll take the hit, drop sub-1, and try and use their remaining cash to push forward with their remaining flavonoid pipeline.

The looming recession that bernanke and the whole federal reserve gang have set this country towards will send alot of investors into the pharmaceutical's sector--being the traditional recessionary savior to say the least. Plus, most pharmaceutical stocks have been beaten down this past winter, and I see a reversal across the entire sector. Also, those companies already on a run will continue due to the upward momentum this summer from key reversals and upgrades throughout the sector.