MediciNova, Inc. (NASDAQ:MNOV)

So far in 2016, MediciNova has been proving that hope is not dead for the small cap biopharma sector. Or, in 2016, MediciNova has been proving that the sector downturn hasn't made it impossible to manipulate low float stocks upward to facilitate a dilutive financing.

I'm going to bet that the latter version is closer to the truth. The stock's behavior over the last three months has followed the classic parabolic pattern despite a long history of futility and an absence of significant catalysts. No one reliable seems to have a very strong opinion regarding the reason for the stock's ascent, although most attention seems to be focused on the placebo-controlled phase II trial of ibudilast for ALS. The problem with the ALS theory is that dozens of small cap biopharmas are running longshot midstage trials or even phase III trials for important indications and their share prices have been declining towards cash and below. I might have bought that premise in mid 2015, but not now.

Regarding the ibudilast ALS trial, the interim data released in December had very weak indicators regarding efficacy. Since the placebo-controlled trial is blinded, the company could only claim that the combined active and placebo groups seemed to be showing signs of slower deterioration than would be expected historically. Trying to divine a benefit in the active group by looking at the numbers from combined active and placebo groups has turned out be a canard time and time again, but I guess traders will never learn. Ibudilast is a phosphodiesterase inhibitor originally designated as a treatment for substance addiction, but that line of development seems to be going nowhere. Now it's been repurposed for ALS and multiple sclerosis, popular targets for small cap biopharmas like Neuralstem and Opexa that are more concerned with selling stock than developing real drugs. Speaking of MS, enrollment in the SPRINT-MS phase IIb trial of ibudilast for multiple sclerosis was completed in June 2015. No word on when we can expect to see topline data.

It's difficult to see where MediciNova stands in their development timeline since they've stopped releasing quarterly earnings PR. I'm not sure if they hold conference calls, but I haven't seen any links to them. Their 8K's are very light on detail as well. Absence of quarterly PR is a huge red flag regarding the legitimacy of drug development efforts.

Bottom line, I don't think there's anything to MediciNova's run. It will reach its peak and then either dribble back to baseline slowly or crash, depending on the price they can raise at and whether they decide to bite the bullet on a trial failure or keep muddying the waters. In the meantime, MediciNova has rocketed straight to the top of my short watchlist.