While the cure rates on fidaxomicin matched that of vancocin, the company has claimed that its real benefit lies in its ability to reducing the recurrence rate. In the two Phase 3 trials, among subjects who had experienced a prior CDI episode and recurred within three months of entering the study, treatment with fidaxomicin resulted in a 47% reduction in repeat CDI recurrence compared to Vancocin (p=0.045). The data also indicated that treatment with fidaxomicin significantly improved the recurrence rate and global cure rate in CDI patients requiring concomitant antibiotics compared to Vancocin. Fidaxomicin was well tolerated in both studies with no adverse side-effects (See safety data here) and safety data. Information courtesy of Optimer’s fact sheet.

This hype has led to its stock gaining more than 40% within the last six months, helping its stock price rise from $9.50 to a new 52-week high of $14.20, yet despite the bubbly sentiment, serious problems are lurking beneath the surface. First and foremost is the fact that the product’s only advantage is its ability to reduce the risk of recurrence among CDI patients. On April, 4, 2011 the FDA panel met to discuss a few issues and whether or not fidaxomicin was all it’s cracked up to be.  Unlike many other previous panels, this one was fairly straight forward with only two questions to be answered. First, “Has the applicant demonstrated the safety and effectiveness of fidaxomicin for the requested indication, treatment of Clostridium difficile-associated diarrhea (CDAD)?” The panel, as expected with no surprises voted very highly on this with a 13-0 vote in favour of the drug’s approval, leading to many singing praises thereafter, yet, there was one more question to be answered, albeit the most important as well.

Negative FDA Panel Outcome of Recurrence Benefit

Perhaps the climax of the panel’s session was the answer to, “Is the finding of lower recurrence of CDAD at Day 31 in the fidaxomicin-treated subjects of clinical significance?” An important thing to note, before even answering the question, some panel members were already discussing their interest in disregarding the recurrence data. The vote ended up being 6 yes, 7 no. Some of the comments for voting negatively on this question by the panel members were:

• Did not like recurrence endpoint because it was not a comparison of 2 randomized groups
• Swayed by statistical arguments of relative weakness of recurrence analyses conducted by FDA, while also encouraged by the results of the “30 day resolution rate” clearly favored with superiority fida.
• Given the study examined recurrence at 30 days, the information should be placed on the the label, a “30-day response” should be in the label
• One member stated that the design of the trial was not geared towards showing a recurrence benefit
• Lastly, the data only addresses recurrence but not treatment of patients with CDI recurrence. The study did not specifically address or enroll patients who experienced CDI relapse.

Now then, the real question becomes, “Will it matter from a marketing/commercial standpoint if the label includes a claim of 30-day disease recurrence rather than a broader claim about reduction in risk of recurrence?” Apparently the market seems to think so as the stock dropped immediately from $13.80 to $12.99, and as far as $11.98 a month later. Based on this, we can now assume that Optimer, will in fact not obtain the indication that it wants in “prevention of recurrences” on its label, and more likely that of 30 day recurrence benefit. It is also important to acknowledge that Optimer only had 30-day post treatment results to showcase to the FDA, which further emphasizes that the drug may see labeling and script use that differs from that of the market’s expectations.

From this we can safely assume that this panel’s decision and Optimer’s trial designs and results may not affect approval, but now do place a very important question mark on its recurrence benefit label. This is very important for commercial marketing purposes as the “superiority” of fidaxomicin over vanco is supposed to be lower CDI recurrence.

Rising Short Interest

Short interest has been rising heavily over the last three months, nearly doubling in value as institutions and large funds begin to hedge and bet against its approval. Short interest as a percentage of float now stands at 10.90%, or 4.07M shares out of a total 37.37M float.

Double Top Technical Chart

Another drawback comes from its “Double Top” at the $14 resistance, which the stock seems to be having a lot of trouble breaching and remaining above. Just like back in early December, the upper bollinger band has been pierced more than 4 times which has always led to a correction, and may also foreshadow negative price action to come. Relative strength index (RSI) also dictates an overbought stock, with full stochastic and MACD divergence all about to turn negative. Volume has been light during the last two weeks of accumulation in anticipation of the binary event.

There is also the wild card possibility of a fast approaching generic vanco approval by ViroPharma (NASDAQ:VPHM). In fact, Piper Jaffray said ViroPharma has been weaker on increased speculation regarding Vanococin competition, yet the firm recommends buying ViroPharma on any weakness from a generic vanco approval and they continue to expect strong growth. Shares are Overweight rated with a $23 price target.

In conclusion, Optimer is a company that could have up to $500M in sales annually should the recurrence benefit hold on its label, yet this scenario seems less and less probable the more closer we get to the decision date. Of course, there is also the drawback of its recently signed partnership with Astellas, where it entered into an exclusive collaboration and licensing agreement thus lowering its potential revenue and profits. With shares trading at $14, the stock seems to be at full value with foolish investors discounting the possibility of a negative surprise outcome. Sure, approval is likely, but what kind of label fidaxomicin (Dificid) will get, on the other hand, is still a bit of a mystery.

Disclosure: Short OPTR

First up on the list is Oxigene, Inc. (NASDAQ:OXGN), whom has experienced nothing short of a meteoric rise from the $1.5 price per share level to the now $5.24 in a matter of three weeks following our report discussing their nearing of marketing approval of the first anaplastic thyroid cancer drug. While early technical analysis showed clear evidence of the oversold and undervalued condition, the stock has now begun trading at 10 times average volume in each of the past few days during this run, which often signals that a few hedge funds and institutions have begun to take a controlling stake in its low float, which sources list at 5.61 million.

While some argue that this could be due to a potential hostile takeover attempt, this is highly unlikely, and more so a elaborate scheme to control the price of the shares to their liking. More worrisome is the fact that fundamentals or significant changes to the outlook for the cancer drugs in its pipeline have nothing to do with the recent momentum, according to an analyst at TheStreet. Investors are looking forward to the ASCO meeting which will provide updates for two studies in the company’s flagship product, Zybrestat. Last September, researchers stated the company’s drug (FACT study) had a median overall survival of 5.1 months compared to 4.1 months in ATC patients, one which was not statistically significant by any means. This caused a spike in the share price from $5 to $8 in just a few hours which, in the end, resulted in a move back down and erasing all of the gains posted during that trading session.

The second set of results will come from the (FALCON study) for the company’s advanced non-small cell lung cancer treatment, though it is not clear it will be ready for this year’s ASCO meeting. The last update in November showed patients treated with the drug had survival of 9.5 months compared to that of 8.8 months control arm, which was not statistically significant nor clinically meaningful. Again, despite bad results, the stock had a spike from $4 to $5.5 on the news, which would eventually come crashing back down to even par two months later.

From the above technical and fundamental analysis, it becomes evidently clear that should history repeat itself, a swift move downward to the $3.5 support favours the short side into the upcoming ASCO meeting when compared to previous occurrences and expectations. There is also a lot of speculation that the company will take this opportunity and look to dilute shares in order to fund its less than stellar fund its balance sheet, which is now estimated to hold $5 to 8 million in cash, of that $3 million being used to fund clinical trials per quarter. A new phase 1 clinical trial was also announced last Thursday, and while the market took this as a positive at first glance, it should be noted that this places further emphasis on this need to raise capital principle, especially considering that these trials cost upwards of $150 million from start to finish.

Next up on the board is Sunesis Pharmaceuticals (NASDAQ:SNSS) whom will be presenting the abstract for its VALOR study, a phase III trial of vosaroxin for patients with first relapsed or refractory acute myeloid leukemia. The company expects 450 patients at multiple global sites to be enrolled, with results potentially being out during 1st quarter 2013. Additionally, the company received FDA fast track status on 2/23/11. Unlike many other small cap biotechs, Sunesis is well funded with close to $15 million in cash, and should do well going forward as it just reported 1st quarter profit after getting a $4 million dollar payment from new partner, Millennium Pharmaceuticals.

The stock has made a tremendous rebound from the $1.8 price in mid March to settle at the current $2.87 resistance, which marks an inflection point. From the chart, we see a black doji candlestick printed which dictates that there is indecision between buyers and sellers, thus we can look to the ASCO meeting for further direction once the fundamentals are out of the way. Traders can look for the 200-day moving average of $2.33 to provide strong support, with $3 being resistance directly ahead. Unfortunately, pressure will be on the downside, as a simple clinical trial design is not significant enough to drive momentum in the stock considering no results will be provided.

Last, but not least on the list is Cyclacel Pharmaceuticals (NASDAQ:CYCC) whose phase I/II data for sapacitabine (anti-cancer agent) is expected to be presented at the ASCO. Non small cell lung cancer (NSCLC) will be $13 billion dollar market in 2015, according to Zacks, therefore, given that they receive favourable results, Cyclacel could see significant share price appreciation due to its currently low market valuation at 79.2M. With a healthy $29.5 million in cash, the company looks ready to make a move higher, though in the short-term strong resistance from a technical standpoint could prove to be a strong barrier.

Making predictions based on the chart pattern for Cyclacel has been a relatively easy task, and should be one going forward as well. With the Relative Stregth Index (RSI) now showing an overbought stock that gained strong momentum into the ASCO conference, it is expected thata pullback will now occur as the “buy the rumour, sell the news” principle comes into play. Below, the stock finds strong support at the 200-day moving average of $1.52, with strong resistance directly ahead at the $2 mark.

Disclosure: Short OXGN, No other positions

At a market cap of only 10M, Oxigene remains the cheapest and most undervalued of all phase 3 late-stage oncology companies worldwide, with its flagship product, ZYBRESTAT targeting Tanaplastic Thyroid Cancer. The company has stated that they will be presenting the final phase 2/3 (FACT study) data for the drug at the ASCO, and many experts seem to be leaning towards highly positive results based on its previous clinical trials. Currently there exists no treatments available for this form of cancer other than radiation therapy and surgery which is usually combined with chemotherapy.

Just a few months ago, the company reported positive data from the FACT study of ZYBRESTAT plus chemotherapy in patients with Anaplastic thyroid cancer (ATC). At the 14th International Thyroid Congress,  the company’s investigators reported that patients receiving ZYBRESTAT had a median overall survival (OS) time of 5.1 months, compared with a median survival time of 4.1 months for patients receiving chemotherapy alone. Furthermore, 48% of patients treated with ZYBRESTAT and chemotherapy were alive at six months, compared with 37% percent of patients treated with only chemotherapy and at one year, 23% of patients treated with ZYBRESTAT and chemotherapy were alive compared to 9% of patients treated with chemotherapy alone. These are some of the best results of any late-stage Aanaplastic thyroid cancer drugs seen worldwide, and this improvement in OS is meaningful, both clinically and on a personal level for patients. With no currently approved drugs in the market for treatment, the doors are wide open for Oxigene to step in and dominate it. The company also reported on March 21st that they had spoken with the FDA and received very positive type C meeting minutes stating that the trial data was highly suggestive of regulatory approval given an additional clinical trial with a suvival endpoint.

The Thyroid cancer market was estimated to be worth $55M in 2010, and is expected to grow at a CAGR (Compound Annual Growth Rate) of 27.34% to reach $298M by 2017.

Oxigene will also be presenting their additional phase 2 (FALCON study) data also for ZYBRESTAT for the treatment of Non-small cell lung cancer at the ASCO. The FALCON study is the first randomized, controlled study of a vascular disrupting agent (VDA) in combination with an anti-angiogenic agent, and combined both bevacizumab and chemotherapy. In mid-2010, the company reported that to date, the drug was well-tolerated, and the clinical activity they are seeing  indicates a trend toward clinical benefit. These data are still interim; and the final overall survival data from this study will be presented at the ASCO.

According to a new report by Global Industry Analysts, the global Non-small cell lung cancer therapeutics market is slated to reach $13.3 billion by 2015. This is largely fueled by rising incidence of lung cancer, improved understanding of non-small cell lung cancer, and the development of new treatments targeted at growth factor pathways.

Additionally, the company features a diverse pipeline with a total of 7 indications, potentially targetting a market of $5 billion or more, should a few of these meet FDA marketing approval. With mergers and acquisitions being a hot topic within the biotech industry as larger companies look to strengthen their portfolios, the expectation of a partnership also remains highly probable in 2011, and according to the CEO’s open letter, Mr. Langecker, “The feedback we’ve gathered from potential partners is that we now have a stronger collection of data validating proof of concept. We believe that there is meaningful interest among potential partners in pursuing a possible collaboration.”

The recent decline in price can be attributed to and equity offering agreement with McNicoll, Lewis & Vlak LLC, or MLV, that saw the company raise approximately $8,776,000 in order to strengthen its balance sheet from July 21, 2010 to date. The company has stated that as the current ongoing trials proceed to completion, they expect the per quarter cash requirement to continue to decline to the $2,500,000 to $3,000,000 range over the course of 2011, thus it can be assumed that based on the previous financing, a healthy state on its balance sheet has now been achieved for the time being. All information per the 10-K filing as of 3/16/2011.

Technical Analysis

Since the start of 2011, Oxigene’s shares have been stuck in a constant downtrend that saw a minor attempt and failure to breakout during early February and late March. Despite positive clinial developments, shares were hit by the financing news which took the stock down from the mid $5 range all the way to the present mid $1, presenting a highly favourable risk versus reward ratio. The stock seems to be basing as the downtrend looks to finish, and a break past the $2.25 resistance could mark a reversal of the price action towards the upside.

The first resistance lies at the 50-day moving average of $2.25, which also incidentally conicides with a previous basing attempt, and should this be broken, there is clear break to the $4-4.50 level which is also the 200-day moving average. The RSI seems to be gaining momentum as buying pressure once again resumes in the equity, which is also supported by a positive MACD divergence currently engaged in a bullish cross. Look for stock to gain momentum as anticipation builds in the coming weeks ahead of  highly anticipated positive developments during ASCO conference.

Disclosure: Long OXGN

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As always, do your own homework to see if you agree.  Good luck out there.

Mike

At the time of publication, Kudrna was Long EXEL but positions may change at any time.

Cheniere Energy (AMEX:LNG) Bounce Trade Opportunity

Updates to Exelixis (NASDAQ:EXEL) Biotech Trade

Exelixis (NASDAQ:EXEL) has been resting near support lines at the bottom of the trading range that was established in early March. If after hours action Monday night is any indicator of the pre-market action Tuesday, we can expect EXEL to open up between $12 and $12.40, which is just below the first key resistance at $12.50 and the next being about $12.82 (52-week high).  If this does indeed happen, I will look to book some early profits by reducing some of my position and watch the action to determine my next move.  If bullish volume seems strong, I’ll look to add on a breakout above resistance and peel off near resistance in case we struggle to break levels.  The key is moving fast, according to the plan, which reduces risk.  As of March 31st, Nasdaq.com has short interest of 10.5 million shares, which is about 5 day cover at current average volume.  This gap-up could force short covering, helping fuel a surge of volume fueling EXEL past resistance levels.  Look for the pre-market volume to help dictate whether that will take place or not on Tuesday.  The earlier the volume starts, the better chance we have at attracting more market players.  See the chart below for further analysis.

Daily Chart

Intraday Chart Showing Bullish Divergence – Accumulation

EXEL BIOTECH TRADING STRATEGY ON FORUMS W/CHART AND DISCUSSION

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As always, do your own homework to see if you agree.  Good luck out there.

Mike

At the time of publication, Kudrna was Long EXEL but positions may change at any time.

• Gran Tierra (GTE) Long Trade

• Magellan Petro (MPET) Long Trade

• Star Scientific (CIGX) Long Trade

• Apple (AAPL)  Options Earnings Trade

• BGC Partners (BGCP) Long Trade

• Exelixis (EXEL) Long Trade

• Cheniere Energy (LNG) Long Trade

• Kodiak Oil (KOG) Long Trade

Stock Talk When I entered the trade

BGCP recently broke north from its trading range and is finding support off its 20-day SMA for a push higher.  The first key resistance level is $9.50, which is already showing it is tough to break. A move above that should create favorable odds we can test 52-week highs again.  The more we can test a resistance level, the more likely we will break it and another test of 52-week highs could break higher for much more upside potential.

After we created the last 52-week high, BGCP sold off over the next week and found support at the bottom of the trading range detailed in the chart below.  A bounce from the bottom of the trading range continued to find buyers reloading and a higher low was created.  The key resistance is best to be broken here else a move below the 20-day SMA would see some stop losses triggered and a trend back towards the bottom of the trading range.  While, this shouldn’t be devastating for BGCP, it could take some time to rebuild after losing some of the bulls. You can now get an idea where my stop losses will be placed and what I will be watching for in this trade. The strategy is to use tight stop losses in case this move up fails to break resistance and instead breaks support.  With the uptrending chart still intact, we have good odds resistance will be broken, barring a financial sector sell-off which is always possible these days.  This sector is so very news driven that I tend to stay away from it.  BGCP has a chart that is too good to pass up though.  See the chart below for more details.

Daily

Intraday Chart

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As always, do your own homework to see if you agree.  Good luck out there.

Mike

At the time of publication, Kudrna was long BGCP but positions may change at any time

Continuing with the overall energy theme today, Magellan Petro (NASDAQ:MPET) is a very speculative oil and natural gas play with a base forming to run up from.  The current setup is near two support levels, with the key level being $2.35, so you know where to place your stop losses.  Above that, we have significant upside potential and already cracked two resistance levels earlier before volume slowed down and settled us near even on the day.  Since the drop was due to bids being lowered, not sellers pushing down the bulls, that is a bullish theme for a low volume speculative stock as MPET is.

MPET and its subsidiaries engage in the exploration for, and development, production, and sale of oil and gas reserves in Australia, North America, and the United Kingdom. Its assets include the Mereenie, Palm Valley, and Dingo fields in Australia; the East Poplar and Northwest Poplar fields in Montana; and a series of licenses (Markwells Wood / Havant) in the onshore southern United Kingdom. The company was founded in 1957 and is based in Portland, Maine.  Yahoo finance has MPET having $32 million in cash and only $1 million in debt.  The low debt is great, but $32 million is not much for an oil and natural gas exploration company.  This creates a concern over a share offering that could be unfavorable to current investors if the pricing is significantly lower than current levels.  With my experience, I don’t anticipate MPET should have too hard of a time raising capital at current pricing levels, but if we appreciate in price, that is all the more reason to take some profits.  Yahoo also has April 15th as the next earnings release, but it is unconfirmed on my trading screen.  I anticipate that date will be moved and May will be when earnings are released.  Keep an eye on this though.  My style of trading does not allow me to hold much, if any, into an earnings release as we lose an edge in knowing what will be said and how investors will react to that uncertain news.  See the charts below for more analysis.

Daily

Intraday Showing Accumulation

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As always, do your own homework to see if you agree.  Good luck out there.

Mike

At the time of publication, Kudrna was long MPET, but positions may change at any time.

Energy, specifically oil and natural gas, continues to be a favorite sector of many, including myself.  In looking to capitalize on that strength, I have entered a trade in Gran Tierra Energy (AMEX:GTE).  A successful trade in Exelixis (NASDAQ:EXEL) has been sold down significantly as the support was showing weakness.  EXEL was profitable but not nearly as profitable as anticipated.  With the ASCO conference coming up in June, it should regain support soon and if healthy, I will reload my position and revisit the upside trade.  For now, it is time to look elsewhere until that chart shows more clarity to the upside.  It is important not to become emotionally attached or loyal to a stock which has zero emotional attachment or loyalty to you.  When the chart starts to break down, I will get out and focus my efforts elsewhere.  If I was wrong, that’s fine as I can always buy back.  If I was right, I just ensured I don’t take damage to my portfolio.  Back to the trade at hand.

GTE is an independent energy company that engages in the exploration, development, and production of oil and gas in Colombia, Argentina, and Peru. As the end of 2009, GTE had estimated proved reserves of 22.1 million barrels of oil and 1.9 billion cubic feet of gas. The company was founded in 2005 and is headquartered in Calgary, Canada.  GTE has a forward PE of less than 14, $355 million in cash and no debt according to yahoo finance.  GTE has a projected 250% EPS growth this year and if current oil prices prove to be low, that growth percentage has solid odds of being significantly beaten.

The trade setup is showing strong intraday accumulation over the past few days while the daily chart is trending near the bottom of a possibly newly established trading range.  If this is true, the accumulation is pointing to some sort of upside momentum about to be established providing solid odds of at least one strong push north towards multiple resistance levels.  The concern is all the resistance levels that shouldn’t be overly strong, but enough of them to pose a challenge.  The strong the bullish volume is, the easier it will be to push past those resistance levels for even more gains.  The trade is to buy near the bottom of the trading range with a tight stop loss somewhere around $7.90 as once it hits that level, the chart starts to show too many cracks that the upside odds are not as strong.  See the chart below for more analysis.

Daily Chart

Intraday Chart showing accumulation

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As always, do your own homework to see if you agree.  Good luck out there.

Mike

At the time of publication, Kudrna was long GTE  and EXEL but positions may change at any time.