Given the massive BioTech sector rally last week with LABU closing up 40%+ and IBB closing 6%+ for the week, Let's take a look at two biotech ideas that I'm bullish on.
FLXN - Flexion Therapeutics
Flexion has had an interesting year so far. Initially soaring up 36%+ on a buyout rumor from pharma giant Sanofi (SNY) for around $1 billion in cash. The management instead opted to issue an offering to raise $125 million+ through a private convertible senior notes that matures 2024. This indicates that the management thinks the company is worth more than a billion dollar. Perhaps, it was all rumor, regardless management swiftly made it's move to secure additional funding for a longer run way. Actions speak louder than words which is proved by recent insiders buying in July 2017. In addition to that, FLXN seems very bullish on Zilretta (FX006) approval which can happen on or before PDUFA date of October 6, 2017 followed by a recent announcement where the company said that it 'derisked' its pipeline considerably. With plenty of cash to last few years and to build a salesforce to push the product to the market, I believe FLXN is currently undervalued and the stock has more upside to follow.
Technically, price has currently broken through the first major resistance of $20 and it's making a nice saucer formation on the daily. As rising tide lifts all boats, FLXN has definitely benefited a bit from the recent Bio sector run up. If it can hold $20 for next week or two and grind up, it can very well fill the gap to $25 or $26 in a month or so. Assuming no major hiccups on Zilretta approval, $30 - $35 seems very possible. You have to remember that the company still has to be able to go out and sell the drug in the market like any other BioTech company along with properly incentivizing doctors and hospitals to increase adoption.
Market cap is around 650 Million and float is less than 30 million, FLXN trades $.50 - $1 intraday. Lot of opportunities to swing or day trade. Stronger demand leading up to PDUFA date followed with timely and positive news from management on progress will cause price to move higher quickly. Not to mention the FLXN currently has roughly 20% short interest which can possibly cause a squeeze.
I have multiple position (short/long term) on FLXN with different price targets.
Most recently, based on the SEC filings, management has strengthened executive severance pay ("CIC Severance Plan") which hints that if there is a buyout everyone in the executive team is well covered.
In addition to that FLXN recently hired M&A expert Mark Levine as SVP & General Counsel and issue him good chunk of stock options with $21 and change as strike.
All of this moves by management points to a potential Buyout that could happen in the future.
Let's take a quick look at the chart. Notice Elasticity has turned positive and is sustaining. As long as the story doesn't change and price slowly grinds higher, FLXN is a strong Buy leading up to Approval and a hold after that for next year assuming approval.
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TGTX - TG Therapeutics
TGTX got in my radar in march when it soared 80%+ after reporting positive results from its phase 3 clinical trial of its ublituximab TG-1101 treatment for patients with chronic lymphocytic leukemia in mid March.
Given the magnitude of Berserker Spike along with a strong Elasticity move, I decided to go long buying $10 strike call option and flipped in 5 days later for a cool 75% return.
Unfortunately, I haven't been keeping tab on TGTX until recently where it's been trading on a range between $10 - $15. Simply playing support/resistance on this stock could have netted anywhere from 30% - 50%. As they say, hindsight is always 20/20.
As you can notice from the chart below, Elasticity has been holding nicely and the company has been releasing positive news recently presenting data from cancer trials.
I think stock can test $15 again in coming weeks or months barring any issues with the trials. To give myself more time, I've bought January calls at $10 strike late last week with initial price target of $15 and my risk is around high $9.
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That's it for now folks. I hope you found this blog post informational. Happy and Profitable trading for next week.
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Additional Disclosure: I own shares in both FLXN and TGTX and this article isn't a solicitation to buy either of these securities but strictly for educational/entertainment purpose only. I or BuySellShortCover assume no responsibility if readers plan to buy any of the aforementioned securities. Readers bear responsibility for his/her own investment decision. Stock trading/investment can cause loss in capital and you should always consult a professional financial advisor.