Is Sunesis The Next 10-Bagger? (SNSS, DNDN, JAZZ, TRGT, VNDA, HGSI)
Sunesis Pharmaceuticals, Inc. (NASDAQ: SNSS) has become the next small cap and low-prices biotech craze this week. We have seen this occur this year in other stocks, and now it seems that investors and traders are ready to jump into many of these small-cap biotech stocks with the hope of catching the next 10-bagger (1,000% return on investment). When you look at the amazing performance of many stocks in the sector, you probably won’t be too shocked to see why traders and speculating investors pile in:
- Dendreon Corp. (NASDAQ: DNDN) is up 900% from its lows over the last year.
- Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) has jumped about 1,400% from lows.
- Targacept, Inc. (NASDAQ: TRGT) has jumped over 1,000% from lows.
- Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA) has popped over 2,000% from its lows.
- And the biggie…. Human Genome Sciences, Inc. (NASDAQ: HGSI) was under $0.50 in March, making those fortunate few who bought after the March price tank have a gain of 50-fold if had they still held on today.
Today’s action dwarfs what was seen on Tuesday after Sunesis announced positive data from its two Phase II clinical trials of its lead drug candidate called voreloxin. The company said that the results showed strong efficacy and safety profile when used as a single agent or in combination with chemotherapy in patients with difficult to treat acute myeloid leukemia.
This data was presented at the 51st American Society Hematology Annual Meeting in New Orleans, LA. Sunesis showed that the high rates of remission in both trials have translated into durable effects with meaningful preliminary overall survival results.
With an anticipated median survival of three and a half to six months on currently available therapies, primary refractory and first relapse AML patients are particularly in desperate need of more effective treatment options. The company said that it plans to discuss the data with the FDA in End-of-Phase 2 meeting scheduled for the first quarter of 2010.
This stock closed at $0.44 on Monday before the data was released. But then on December 8 it had trading volume of 10,042,800 and closed up at $0.53. Yesterday it closed up at $0.60 on 4.1 million shares. The 52-week trading range was $0.05 to $0.90, which shows how this was a dormant stock. But then this morning traders began piling into the stock. And piled and piled. At 2:00 PM EST the stock is up a whopping 120% at $1.32 on 23 million shares having traded, but the stock traded as high as $1.84 on the day.
If you smooth out the most recent trading action and if you smooth out the exact lows you have an average share price of probably $0.30 or $0.35. If we see one more day of this action, a 10-bagger is more than just theory.
Even after the run this week, this is a mere $45.4 million market cap stock. At the end of September, it held $3.87 million in cash. Always keep in mind that there is a nasty side to major price gains in small speculative biotech stocks that release positive study data. That is the “news selling” where companies raise cash in private placements. Don’t be too shocked if you see the company use the gains to raise cash.
JON C. OGG
